Beruflich Dokumente
Kultur Dokumente
BUSINESS
Entrepreneurship Education
in Schools and Technical Vocational Training Institutions and Higher Education
International Labour Office, Geneva International Training Centre of the ILO, Turin
This publication enjoys copyright under Protocol 2 of the Universal Copyright Convention. Applications for authorization to reproduce, translate or adapt part or all of its contents should be addressed to the International Training Centre of the ILO. The Centre welcomes such applications. Nevertheless, short excerpts may be reproduced without authorization, on condition that the source is indicated.
First published 1996 Second edition 2000 Third edition 2002 Fourth edition 2004 Revised edition 2005 Revised edition 2007 Revised edition 2008
The designations employed in the publications of the International Training Centre of the ILO, which are in conformity with United Nations practice, and the presentation of material therein do not imply the expression of any opinion whatsoever on the part of the Centre concerning i.a. the legal status of any country, area or territory or of its authorities, or concerning the delimitation of its frontiers. The responsibility for opinions expressed in signed articles, studies and other contributions rests solely with their authors, and publication does not constitute an endorsement by the Centre of the opinions expressed in them. Publications of the Centre, as well as a catalogue or list of new publications, can be obtained from the following address:
Publications International Training Centre of the ILO Viale Maestri del Lavoro 10 10127 Turin, Italy Tel: +39 11 693-6693 Fax: +39 11 693-6352 E-mail: publications@itcilo.org http://www.itcilo.org
MODULE 5
Module coverage:
Page 1. Creativity and Innovation........................................... 4 2. Generating Ideas .................................................... 18 3. Identifying and Assessing Business Opportunities ....... 31
I II
TOPIC 1:
SUGGESTED DURATION:
1 hour/session
III
OBJECTIVE:
By being involved in a variety of class activities, learners will have the opportunity to become aware of their own creative potential. By thinking of ways to change an existing situation or object, learners will learn to apply techniques for developing their creative ability.
IV
RATIONALE:
To develop their creative ability, learners need an opportunity to assess their own creative behaviour. They can then begin to practice creative thinking. Creativity is another area where entrepreneurs have various opportunities to use their creative talents. Although employees are often not required to think creatively, they can be excellent sources of new ideas. Because the entrepreneur has such a broad range of responsibilities, creativity by both entrepreneur and employees can be extremely useful to develop ideas to solve a wide variety of business-related problems. Entrepreneurs have a great deal of freedom to implement creative ideas. One way to help learners develop their creative ability is to begin with existing ideas. These ideas may be changed in various ways to produce new and original ideas. The technique of changing existing ideas has many useful applications in work situations.
ACTIVITIES:
1. Have learners complete WORKSHEET 1. Explain to learners that the worksheet is designed to help them assess their creative potential. 2. Distribute WORKSHEET 2: Three Descriptions. Have learners read the three descriptions and decide which one best describes them. 3. The following Scoring Key will help learners score their worksheets. Read the scores for each response to each question. Instruct learners to write the number of points they scored for their responses beside each statement on the worksheet. For example, if a learner checked Uncertain for statement A, the learner should write 1 beside the statement; if a learner checked yes for statement A, the learner should write 2 beside the statement.
TRUE A B C D E F G H I J K L M N O 2 2 0 0 0 3 0 0 2 3 2 3 2 3 2
FALSE 0 0 3 2 3 0 3 3 0 0 0 0 0 2 0
UNCERTAIN 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1
After all statements have been scored, have learners add up the points for all statements. Have learners refer to Worksheet 1. Tell them that they may interpret their scores as follows: Description I applies to persons who scored 23 points or more. Description II applies to persons who scored between 11 and 22 points. Description III applies to persons who scored 10 points or less.
4. Use the following questions to discuss the results of the scoring. Were you surprised at the results of the scoring? Why or why not? What do you like about the description from scoring the worksheet? What about the description would you like to change or improve? In what ways are the descriptions similar/different? What advantages might a person of each description have as a self-employed person? Disadvantages? 5. Have learners read and discuss Handout 1 on Creativity. 6. Discuss the technique of changing existing ideas in order to develop new and original ideas. Existing ideas give us a starting point. By changing
one or more parts of an idea, we can develop useful new ideas. Discuss the following ways of changing an idea. Have learners give examples of each. Make it bigger or add new parts. Two examples are giant economy sizes of products and increasing the size of a business to include more products or to serve a larger area. Make it smaller or eliminate parts. Examples are transistor radios, pocket calculators, digital cameras etc. Modify parts or ideas. Examples are changing colors, tastes, odors and styles. Soaps are often changed in their color and odor. Automobile styles are changed yearly. Rearrange parts. Some examples of rearranging parts are in designing buildings, parks, and machines. Reverse parts. One example of reversing parts is in automobiles in which the trunk and the engine are reversed in location. Another example is reversing roles of persons, such as a husband assuming homemaking responsibilities while a wife assumes the role of breadwinner. Substitute different materials, parts, or methods. A common example is the substitution of plastic for wood and metal. Another example is the substitution of an electric motor for an internal combustion engine in a car. Combine parts or ideas. One example is the home entertainment unit, which combines a television, radio, tape player, and record player. Another example is the motor home, which combines a home with a vehicle.
7. Have Learners complete WORKSHEET 3. Ask all learners to share their ideas. Have them explain how their ideas can be useful in work situations. Ask the class to consider combining two or more ideas of individual learners. Emphasize that the technique used in this activity can be used to develop new ideas and processes as well as new objects. Have learners apply the same technique to a service instead of an object. Have learners imagine that the class has decided to form a company to offer a service (for example, lawn mowing or dog walking). Working as a group, have the learners use the same technique they used on the worksheet to develop a creative marketing approach which would attract customers.
8. Have learners complete WORKSHEET 4. Have the class discuss innovative entrepreneurial responses to the changes in business. 9. Show TRANSPARENCY 1 and have the class discuss ways they can become more creative. 10. Using TRANSPARENCY 2, introduce the concept of creativity and explain its importance in generating a good business idea. Then do the nine dot exercise. Draw nine dots on the black board like shown on the top of TRANSPARENCY 2 and ask the learners to connect the 9 dots by means of 4 straight, continuous lines. The pencil should not be lifted off the paper.
Ask each individual to write down their solution. Ask those who managed to do it to explain how before revealing the answer on the bottom half of TRANSPARENCY 2. Explain that the solution requires going outside the square of dots, and that we needed to stretch our imagination and mind beyond the apparent problem in order to solve the problem. 11. Do the creative squares exercise to provide another example of creativity in action. Show TRANSPARENCY 3 and ask each individual to count the total number of squares in the figure. Emphasize that a square is a rectangle with sides of equal length. Discuss the answers and the process used in solving the puzzle. Highlight the need for creativity. After the exercise, in order to illustrate how to come up with all the squares there are, you may: a) number each square or box in the main diagram; (b) combine various boxes to form squares, i.e. four equal-sided boxes; (c) add up the possible combinations to arrive at a total of 30. As a follow-up activity, ask how many rectangles (different lengths of the two sides) can be identified in the same overall square (52). 12. Divide the class into small groups and have them count the number of triangles portrayed in TRANSPARENCY 4. The correct number is 47: ACE; BFD; AEB; AED, AEH, AFC, AFH; AFD, AFB, ACH; ACD, AGF, AGB, ABH, ABD, CEB, CEF, CEH, CDH, CDF, CDB, CID, CIB, CBH, CFB, EDH; EBD, EDF, EJF; EJD, EFH; EFB; HBG; HBI; HFG; HFJ; HDI; HDJ; HFB, HDB; HFD; FIB; FID; DGB; DGF; BJD; BJF Ask learners if working in a group helped them to see things from different angles? Did any of the groups count the triangles originating on a single side, then multiply that by two and then add one for the overall triangle?
MODULE 5: Topic 1
WORKSHEET 1
MODULE 5: Topic 1
WORKSHEET 2
Three Descriptions
Below are descriptions of three different types of people. Read all three descriptions carefully. Mark an X beside the description you believe most closely describes you.
Description I You are not bound by ordinary ways of thinking. You can develop and recognize ways to combine ideas in new ways. You are willing to experiment even when you are not sure your work will be rewarded. Because you seldom depend on others, you can provide yourself with the time, energy and isolation that are necessary for creative activities. You are not likely to be distracted or discouraged by others once you become interested in a challenging task.
Description II You can recognize and appreciate a creative idea, although you usually do not produce these ideas by yourself. You probably engage in creative activities which involve using your hands or which involve objects you can see and touch. You start creative projects sometimes, but you may lose patience and interest when a project requires you to work for a long time by yourself.
Description III You are usually more interested in practical down-to-earth matters than in chasing dreams. Since you tend to be very realistic in your thinking, you may not be aware of unusual ideas that are necessary for creative problem solving. Because you prefer to work with other people, you rarely set aside time to work by yourself on your ideas. You are more likely to engage in activities which give you immediate results and which may be shared with others.
MODULE 5: Topic 1
HANDOUT 1
Creativity
Most people can think of several occupations which require creativity - artist, musician, dancer, designer and scientist. However the need for creativity is not limited to these occupations. Creative ideas are needed anywhere there are problems with unknown solutions. In the business world, entrepreneurs use creativity to solve everyday problems, promote products and services, update products and services, and make use of limited resources. Some people believe that they are not creative. They may overlook situations in which they have good ideas, or they may avoid sharing their ideas with others. By recognizing and sharing their ideas, people can begin to develop their creative ability. Because people become accustomed to thinking in certain ways, they may have difficulty thinking of original ideas. People can develop their creative potential through learning and practice. Several techniques can be used to develop more creative thinking habits. Some of these techniques are: increasing awareness of ones environment, brainstorming and changing existing ideas. Increasing awareness of ones environment means learning to pay attention to sights and sounds we ordinarily ignore. Most people are in the habit of blocking out certain sights and sounds in order to concentrate on one thing at a time. By paying attention to what we usually ignore, we can open our minds to new ways of thinking. Brainstorming is a technique in which persons generate a large number of ideas. Unusual ideas are encouraged. Ideas are never judged or criticized during brainstorming. Participants may combine and improve ideas during brainstorming. New and original ideas can be developed by using existing ideas as a starting point. Parts of existing ideas can be changed in many ways. They can be: made bigger, made smaller, modified in color, taste or style, rearranged, reversed, substituted or combined. Products and services are often changed to make them more attractive by using this simple technique. This method could also be used to help entrepreneurs make their working situations more pleasant and efficient. By developing and using their creativity, entrepreneurs can increase their potential for success. The appreciation of creativity has been more important for entrepreneurs in the past several years. It is increasingly accepted that intellect and credentials take a back seat to the ability to respond creatively to challenging situations.
10
Here are seven steps to expanding your creative potential: 1. Examine how you perceive creativity and creative people. Our results-oriented culture has tended to look at those whose creativity produces a product a book, painting or cake as officially creative. We have been less able to recognize people who identify new ways of thinking and behaving, especially in everyday and business life, as just as creative. 2. Spend time with creative people. Observe how they act, think, relax and respond. Ask them to talk about what events in their lives influenced their creativity. 3. Learn your own warm-up process. This warm-up process increases your ability to ready yourself to develop a creative idea and take positive risks in making changes, even small ones. What events and settings seem to encourage your creative actions? 4. Move, dance, exercise, bicycle, walk and stretch. Try yoga or tai chi. These physical activities get us out of our thinking brain and allow us to truly inhabit all of our body. As the body moves, the right and left parts of the brain; both the imaginative side and the cognitive side are able to work together more efficiently. 5. Listen to music and experiment with improvisational exercises. Notice how different types of music promote various levels of energy within you. Theater and drama exercises will help you practice different ways of responding, apart from your habitual roles. 6. Keep a notebook of interesting or creative ideas and observations. Paste a few pictures from magazines that interest or intrigue you, even if you dont know why. Scribble and doodle. Whatever you do, dont censor yourself. See what happens. 7. Find a mentor or coach who can help you develop your creativity to a higher level.
11
MODULE 5: Topic 1
WORKSHEET 3
12
MODULE 5: Topic 1
WORKSHEET 4
Fill in an innovative action an entrepreneur could take to respond to the identified change.
POSSIBLE ENTREPRENEURIAL RESPONSE
CHANGE Structure of population changes Values and lifestyles change Incomes and purchasing power decrease Government policies on gender reviewed Natural resources getting exhausted Ownership of factors of production changing hands Banks advertise availability of loans Use of computers increases Use of mobile phones increases Use of computers and internet facilities in homes increase New advanced equipment bought by business competitor New strategies for accommodating people living with HIV
13
MODULE 5: Topic 1
TRANSPARENCY 1
Meaning of Creativity
Creativity is the ability to design, form, make or do something in a new or different way. Creativity is the ability to come up with innovative solutions to needs/problems and to market them. An entrepreneurs creativity is often the difference between success and failure in business. Creativity often distinguishes high-growth or dynamic businesses from ordinary, average firms. To be creative, entrepreneurs need to keep their mind and eyes open to their environment.
14
MODULE 5: Topic 1
TRANSPARENCY 2
15
MODULE 5: Topic 1
TRANSPARENCY 3
Creative Squares
16
MODULE 5: Topic 1
TRANSPARENCY 4
G H
17
I II
TOPIC 2:
Generating Ideas
SUGGESTED TIME:
4 hours/sessions
III
OBJECTIVE:
To enable learners to: (a) appreciate the importance of having a good business idea as a prerequisite for successful business start-up and for an existing business. (b) know how to generate business ideas.
IV
RATIONALE:
A good business idea is essential for starting a successful venture and for staying competitive afterwards. Good business ideas, however, do not usually just occur to an entrepreneur. Rather, they are the result of hard work, effort and often creativity on the part of the entrepreneur.
ACTIVITIES:
1. Ask the learners to define a business idea. Jot down their answers on the board or flipchart. Show TRANSPARENCY 1 and discuss any aspects not covered to arrive at a common understanding of the term. 2. Ask the learners to indicate why it is important to generate ideas. List responses on a board or flipchart. Show TRANSPARENCY 2 and compare the learners list with the points suggested on TRANSPARENCY 2. Tell the students that women and men should select business ideas on the basis of their skills and interest, irrespective of what people say about certain business sectors being more suitable for women or for men. Discuss key issues including the fact that the development of business ideas is necessary both before and after a business has been set up. Have learners read HANDOUT 1. 3. Have learners give examples of people or firms in their community or elsewhere that have come up with good business ideas, and explain their reasons for considering these ideas as being good. 4. Ask learners to suggest ways in which business ideas can be generated. List these on a board or flipchart. Show TRANSPARENCY 3 and compare it with the learners responses. Lead a discussion on the main points, giving examples and illustrations. Have learners read HANDOUT 2 and use it for the class discussion.
18
5.
Use TRANSPARENCY 2 to remind learners of the concept and principles of brainstorming. To give some practical experience of using the technique, tell learners that they have just 5 minutes to come up with at least a dozen uses for one of the following (choose one item only): old newspapers, bricks, old clothes, boxes (made of cardboard or wood), poles/sticks, any other object of your choosing.
6. Divide learners into small groups of 4 or 5 and tell them that they are going to do an exercise to give them practice in using the concepts and techniques discussed so far. Use WORKSHEET 1. You may hold a competition to determine the best business idea. Gender tip: Teachers should take note if girls and boys cluster in any particular group or focus on any particular type of business idea. Do girls and boys within the groups have equal voice and participate in the same way in the brainstorming exercise? Teachers should be ready to address differences and highlight how women and men can benefit from each others ideas. 7. Bring sufficient newspapers by different publishers (outdated recent newspapers) to the class. Let learners use the newspapers as they work in groups of three to four on the WORKSHEET 2.
19
MODULE 5: Topic 2
TRANSPARENCY 1
20
MODULE 5: Topic 2
TRANSPARENCY 2
21
MODULE 5: Topic 2
HANDOUT 1
22
MODULE 5: Topic 2
TRANSPARENCY 3
23
MODULE 5: Topic 2
HANDOUT 2
What is Creativity?
Creativity is the ability to design, form, make or do something in a new or different way. The ability to come up with creative solutions to needs/problems and to market them often marks the difference between success and failure in business. It also distinguishes high-growth or dynamic businesses from ordinary, average firms. Real, successful entrepreneurs are creative in identifying a new product, service or business idea and turning it into a business opportunity. To be creative, you need to keep your mind and eyes open as you work through the sources of business ideas explained below, and apply the techniques.
Hobbies/Interests
A hobby is a favorite leisure-time activity or occupation. Many people, in pursuit of their hobbies or interests, have founded businesses. If, for example, you enjoy playing with computers, cooking, music, traveling, sport or performing (to name but a
24
few), you may be able to develop this hobby/interest into a business. To illustrate this, if you enjoy traveling, performing and/or hospitality, you may consider going into tourism, which is one of the biggest industries in the world.
Franchises
A franchise is an arrangement whereby the manufacturer or sole distributor of a trademark, product or service gives exclusive rights for local distribution to independent retailers in return for their payment of royalties and their willingness to conform to standardized operating procedures. Franchising may take several forms, but the ones of interest to potential entrepreneurs are the types that offer a name, image and method of doing business and operating procedures. In the 1990s franchising experienced tremendous growth, becoming a much-used method of going into business for the millions of enterprises that were starting up in the USA and Europe. In the 1990s, there were over 2,000 types of franchise businesses, accounting for over US$300 billion in annual sales revenue and about a third of all retail sales in the United States. There are many directories and handbooks as well as associations, including the International Franchise Association, which can provide further information.
Mass Media
The mass media is a great source of information, ideas and often opportunity. Newspapers, magazines, television, and the Internet are all examples of mass media. Take a careful look, for example, at the commercial advertisements in a newspaper or magazine and you may well find businesses for sale. One way to become an entrepreneur is to buy an existing business. Articles in the printed press or on the Internet or documentaries on television may report on changes in fashions or specific consumer needs. For example, you may read or hear that people are now increasingly interested in healthy eating or maintaining their physical fitness. You may also find advertisements calling for the provision of certain services based on skills, for example accounting, catering or security. Or you may discover a new business concept, but investors would be needed.
Exhibitions
Another way to find ideas for a business is to attend exhibitions and trade fairs. These are usually advertised on the radio or in newspapers. By visiting such events
25
regularly, you will not only discover new products and services, but you will also meet sales representatives, manufacturers, wholesalers, distributors and franchisers. These are often excellent sources of business ideas, information and help you in getting your business started. Some of them may also be looking for someone just like you to be a business partner.
Surveys
The focal point for a new business idea should be the customer. The needs and wants of the customer, which provide the rationale for a new product or service, can be ascertained through a survey. Such a survey might be conducted informally or formally by talking to people. Surveys may be conducted using a questionnaire, through interviews or through observation. You may start by talking to your family and friends to find out what product or service they think is needed or wanted but is not available in the market. Or, for example, whether they are dissatisfied with an existing product or service and what improvements or changes they would like to see. You can then talk to people who are part of the distribution chain, that is manufacturers, wholesalers, distributors, agents and retailers. It would be useful to prepare a set of questions which might be put on a questionnaire or used in an interview. Given their close contact with customers, these people have a good sense of what is required and what will sell and what will not sell. Finally, you should talk to as many customers as possible (both existing and potential customers). The more information you can get from them, the better. Besides talking to people, you could also get information through observation. For example, in deciding whether to open a shop on a particular street, you can observe and count the number of people going past on given days and compare these numbers to other sites. Or, if you are interested in an area frequented by tourists, you might sell products from a craft business. Or you may have noticed that there is no decent restaurant or hotel on a tourist route or in a given town. One way of ensuring that you are not negligent in identifying new business ideas is to be alert at all times to customer needs. One entrepreneur apparently went round at every cocktail party asking if anyone was using a product that did not adequately fulfil its intended purpose. Another monitored the toys of a relatives children looking for ideas for a market niche.
Complaints
Complaints and frustrations on the part of customers have led to many a new product or service. Whenever consumers or customers complain bitterly about a product or service, or when you hear someone say I wish there was ..... or If only there were a product/service that could ...., you have the potential for a business idea. The idea could be to set up a rival firm offering a better product or service, or it might be a new product or service which could be sold to the firm in question and/or to others.
26
Change
The world is constantly changing. Change can be a threat; however, most entrepreneurs consider change as a challenge and opportunity to trigger new needs for products and services. An innovative entrepreneur always responds to changes in a positive manner.
Brainstorming
Brainstorming is a technique for creative problem-solving as well as for generating ideas. The objective is to come up with as many ideas as possible.
27
MODULE 5: Topic 2
TRANSPARENCY 4
Brainstorming
Brainstorming is a technique for creative problem solving and for generating ideas. The objective is to come up with as many ideas as possible. Brainstorming usually starts with a key question or problem statement. Each idea leads to one or more additional ideas. As a result, you will have in a good number of business ideas. FOUR RULES FOR BRAINSTORMING: Dont criticize or judge the ideas of others Freewheeling is encouraged ideas that seem to be wild or crazy are welcome Quantity is desirable the greater the number of ideas, the better Try to combine and improve upon the ideas of others
28
MODULE 5: Topic 2
WORKSHEET 1
Activity 1
Each learner should write down the skills, experience, training and background that they have to start a business. Examples could include: catering, welding, computer programming, secretarial experience, etc.
Activity 2
Divide the class into small groups based on the common hobbies/interests listed by the group members. Each group of learners must now choose one idea they wish to develop into a business. Group members are to negotiate this themselves. On a separate sheet of paper, the group should describe their best business idea, including the product or service in detail as well as who the likely customers might be. Each group would have 15 minutes for this task, after which each group will be given 5 minutes to present their idea to the entire class.
29
MODULE 5: Topic 2
WORKSHEET 2
Your group should identify 7 business ideas from the articles as well as the commercial opportunities section of a newspaper or magazine. The commercial section may contain advertisements for businesses or machines on sale whilst articles may describe new types of businesses or announce changes in fashion or consumer needs. Then, for each idea chosen, give reasons as to why you are interested in it. You have 20 minutes for this task.
Business idea 1.
2.
3.
4.
5.
6.
7.
30
TOPIC 3:
II
SUGGESTED TIME:
3 hours/sessions
III
OBJECTIVE:
To enable learners to appreciate the importance of, and possess techniques for identifying and assessing business opportunities.
IV
RATIONALE:
The recognition of a business opportunity coupled with the ability to respond effectively is the basis for starting and maintaining successful ventures. It is also a characteristic of successful entrepreneurs. It involves not only generating ideas or identifying opportunities but also screening and evaluating them to determine the most viable, attractive propositions to be selected.
ACTIVITIES:
1. Have the learners define the term `business opportunity. Show TRANSPARENCY 1 to clarify. In the process, draw a distinction between an idea and an opportunity. 2. Ask learners to list the factors involved in the identification and assessment of a business opportunity. Compare the list with TRANSPARENCY 2. Have learners read HANDOUT 1 as the basis for the discussion. 3. Invite an entrepreneur to talk to the learners about how he or she found a business idea/opportunity and transformed it into a successful venture. 4. Ask someone from the local community or a regional/national organization such as an investment promotion centre, an employers organization, the regional/local economic development board, a business promotion agency, the university or polytechnic, the business community or a consultancy firm to come and talk about business opportunities. 5. Divide the learners into groups. Ask them to draw up a simple questionnaire to use in interviewing an entrepreneur. Then, have each group visit and speak to a successful entrepreneur. The interview should focus on how the entrepreneur generated the business idea, how he or she identified or recognized the business opportunity,
31
how he or she assessed the opportunity and how he or she transformed it into a successful business.
During this interview, each group should also collect some basic background information about the entrepreneur and his/her firm, such as the type of business, number of employees, how long ago the business was established etc. Group members must negotiate and arrange the whole process by themselves, although the facilitator may provide some assistance where required. When they have completed the exercise, each group would prepare a report and presents it to the entire class. 6. Finally, draw some conclusions from the exercise and reinforce the key learning points: A. The recognition of a business opportunity coupled with the ability to respond effectively is the basis for starting and maintaining successful ventures. This involves not only generating ideas or identifying opportunities, but also screening and evaluating them to determine the most viable, attractive opportunity to be pursued. B. A business opportunity may be defined as an attractive investment idea or proposition that provides the possibility of a financial return for the person taking the risk. Such opportunities are reactions to customer needs and lead to the development of a product or service that creates added value for its buyers or end-users. C. A good idea is not necessarily a good business opportunity. Consider, for example, that over 80% of all new products fail. It is therefore important for all ideas and opportunities to be well screened and assessed. D. Identifying and assessing business opportunities is not an easy task. However, it is necessary to minimize the risk of failure. It involves, in essence, determining potential risks against potential rewards.
32
MODULE 5: Topic 3
TRANSPARENCY 1
33
MODULE 5: Topic 3
HANDOUT 1
34
35
Management team
In many ventures, particularly those involving a large amount of capital, high risk, sophisticated markets and high competition, the management team is usually the most important dimension in determining the success of a business. The experience and skills that the team possess in relation to the same or a similar industry often determine success or failure of a new business. This explains why venture capitalists, or those people who provide finance for businesses, put so much emphasis on the management factor. Investors often say that they would rather have good management with an average idea/product/service than a brilliant idea/product/service with bad management.
Competition
To be attractive, an opportunity must have a unique competitive advantage. For example, a business may have a competitive advantage by lowering costs in terms of production and marketing. Or better, a business may offer better quality. In addition, the availability of entry barriers which could take the form of high amounts of capital required, protection such as patents or regulatory requirements, contractual advantage such as exclusive rights to a market or with a supplier can make the crucial difference between a go and a no go investment decision. If a business cannot keep most would-be competitors out of its market, or if it faces existing entry barriers, then the opportunity may not be very attractive.
Business environment
The environment within which the business will operate has a great influence on the attractiveness of any opportunity. By business environment, we are referring not only to the physical environment, which is important and increasingly so, but also the political, economic, geographical, legal and regulatory contexts. Political instability, for example, renders business opportunities unattractive in many countries, especially for those ventures requiring high investment with a long payback period. Similarly, inflation and exchange rate fluctuations, or a weak judiciary system, are not a good environment to start a business, even if the potential returns are high. The lack of infrastructure and services (such as roads, electricity, water supply, telecommunications, transportation, and even schools and hospitals) also affect the attractiveness of an opportunity in a given environment.
Business Plan
The process of examining the factors discussed above is often the initial step in developing a business plan. Investors and lenders may require these issues to be considered and set out in the form of a business plan.
37
MODULE 5: Topic 3
TRANSPARENCY 2
38