ENTREPRENEURSHIP

Creating Business from
Opportunity
Learning Objectives
1. Define your business.
2. Articulate your core beliefs, mission,
and vision.
3. Analyze your competitive advantage.
4. Perform viability testing using “the
economics of one unit.”
Market
a group of people or organizations that
may be interested in buying a given
product or service, has the resources to
purchase it, and is permitted by law and
regulation to do so.
Business Definition
•the offer - What will you sell to your

customers?
•target market - Which segment of the
consumer market are you aiming to serve?
•product and delivery capability - How will
you provide your offer to your targeted
customers?
Three basic types of product businesses
•manufacturing making or producing a

tangible product.
•wholesale buying in bulk from
manufacturers and selling smaller
quantities to retailers.
•retail selling individual items to
consumers.
What Sort of Organization Do You Want?
•Each organization has the opportunity

to create a unique mission, vision, and
culture that will be supported by its core
values.
Your Company’s Core Values
•core values the fundamental, ethical, and

moral philosophy and beliefs that form the
foundation of the organization and provide
broad guidance for all decision making.
Your Company’s Mission Is to Satisfy
Customers
•The mission of your business, expressed in a
mission statement, is a concise
communication of your purpose, business
definition, and values.
Your Company’s Vision Is the Broader
Perspective
•The vision for your business is broader
and more comprehensive than its
mission, painting a picture of the overall
view of what you want your
organization to become in the future,
not what it is at the moment.
Your Company’s Culture Defines the
Work Environment
•Culture is composed of the core values
in action.
The Decision Process
• The entrepreneur looks for business opportunities
through a process of identification and selection,
beginning with self-developed (or group-developed)
ideas.
• The entrepreneur uses essentially the same
process but starts with research on hot businesses,
trends, or growth areas.
• The entrepreneur has an idea for a product or
service and searches for a market.
Your Competitive Advantage
•competitive advantage, or core competency.
It is whatever you can do better than the
competition that will attract a sufficient
number of customers to your business so it
can succeed.
•direct (selling the same or similar products to
the same market) or;
•indirect (selling different products that
compete for the same share of customer
spending
Find Your Competitive Advantage by
Determining What Consumers Need and Want
•Remember, as you identify environmental

trends and search for productor service-
opportunity gaps, there will be outside forces
at work regarding the effectiveness of the idea.
You Have Unique Knowledge of Your
Market
•Your market may well be composed of your
friends, neighbors, classmates, relatives, and
colleagues. You already have the most
important knowledge that you need to
succeed.
The Six Factors of Competitive Advantage
1. Quality. Can you provide higher quality than competing

businesses?
2. Price. Can you offer a lower price on a sustained basis than your
competition, or does your higher price reflect quality and/or
uniqueness?
3. Location. Can you find a more convenient location for
customers?
4. Selection. Can you provide a wider range of choices than your
competitors can?
5. Service. Can you provide better, more personalized customer
service?
6. Speed/turnaround. Can you deliver your product/service more
quickly than the competition?
Is Your Competitive Advantage Strong
Enough?
• Sell to a market that is large and growing.
• Sell to a market where the competition is able to
make a profit.
• Sell to a market where the competition is
succeeding but is not so powerful as to make it
impossible for a new entrepreneur to enter.
• Sell a product or service that solves problems
consumers may have with the competition.
• Sell a product or service at a competitive price that
will attract customers.
•barriers to entry the factors that
contribute to the ease or difficulty of a
new competitor joining an established
market.
Checking Out the Competition
•One useful exercise is to learn
everything you can about particular
competitors, especially those that have
earned the respect of the marketplace.
Determining whether you have a
competitive advantage
• Competitive offers.
• unique selling proposition (USP) the distinctive
feature and benefit that sets a company apart from
its competition.
• Cost structure.
•Competitive Analysis Another approach to
the analysis is to compare your business
concept with the competitors that you have
identified through your research.
Competitive Strategy: Business
Definition and Competitive Advantage
• competitive strategy the combination of the
business definition with its competitive advantage.
Strategy versus Tactics
•strategy a plan for how an organization or
individual intends to outdo competitors.
•tactics the specific ways in which a business
carries out its strategy.
•gross profit total sales revenue minus total
cost of goods sold.
•economics of one unit of sale (EOU) the
amount of gross profit that is earned on each
unit of the product or service a business sells.
•unit of sale the basic unit of the product or
service sold by the business.
Defining the Unit of Sale
•Manufacturing.
•Wholesale.
•Retail.
•Service.
Cost of Goods Sold and Gross
Profit
•cost of goods sold (COGS) the cost
of selling one additional unit of a
tangible item.
•cost of services sold (COSS) the cost
of selling one additional unit of a
service.
Your Business and the Economics
of One Unit
•Total Revenue − Total Cost of Goods Sold
= Total Gross Profit
•direct labor Employees that actively

produce or deliver a product or service.
The Cost of Direct Labor in the EOU—
An Example
• She sells 40 bookmarkers per week to a bookstore
in her neighborhood.
• Her selling price is $4.50 each, including an
envelope.
• Her costs are 80¢ per card for materials
(construction paper, glue, and paint) and 20¢ each
for the envelopes, for a total of $1.00 each.
• On average, it takes her one hour to make six
bookmarkers.
• Labor incurs $ 1.50.
Going for Volume
1. Can I produce the 2,000-unit order in the required time frame?

2. If I lower the price to $3.50 for each bookmarker (instead of
$4.50), will I still make an acceptable gross profit per unit?
3. How much in total gross profit will I make from the order?
Five breakthrough steps entrepreneurs can take
to understand preliminary feasibility are:
1. calculating the unit of sale,

2. determining the economics of one unit
of sale,
3. substituting someone else’s labor,
4. selling in volume, and
5. creating jobs and operating at a profit.
•currency a term for money when it is
exchanged internationally.
•foreign exchange (FX) rate the relative
value of one currency to another.

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Creating Business from

•the offer - What will you sell to your

•manufacturing making or producing a

•Each organization has the opportunity

•core values the fundamental, ethical, and

•Remember, as you identify environmental

1. Quality. Can you provide higher quality than competing

•direct labor Employees that actively

1. Can I produce the 2,000-unit order in the required time frame?

1. calculating the unit of sale,

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