DOCUMENT RESUME

ED 373 219 CE 067 053

TITLE Business Opportunities. Unit 3. Level 2. InstructorGuide. PACE: Program for Acquiring Competence inEntrepreneurship. Third Edition. Research &Development Series No. 302-3.

INSTITUTION Ohio State Univ., Columbus. Center on Education andTraining for Employment.

PUB DATE 94

NOTE 24p.; For the complete set, i.e., 21 units, each doneat three levels, see CE 067 029-092. Supported by theInternational Consortium for EntrepreneurshipEducation, the Coleman Foundation, and the Center forEntrepreneurial Leadership Inc.

AVAILABLE FROM Center on Education and Training for Employment, 1900Kenny Road, Columbus, OH 43210-1090 (order no.RD302-03 IG, instructor guide $4.50; RD302-03 M,student module, $3; student module sets, level1--RD301M, level 2--RD302M, level 3--RD303M, $45each; instructor guide sets, level 1--RD301G, level2--RD302G, level 3--RD303G, $75 each; 3 levels andresource guide, RD300G, $175).

PUB TYPE Guides Classroom Use Teaching Guides (For

Teacher) (052) Guides Classroom UseInstructional Materials (For Learner) (051)

EDRS PRICE MFO1 /PCO1 Plus Postage.

DESCRIPTORS Administrators; Behavioral Objectives; BusinessAdministration; Business Education; Change;*Competency Based Education; *Creative Thinking;Creativity; Decision Making; *EmploymentOpportunities; Entrepreneurship; LearningActivities; Managerial Occupations; PostsecondaryEducation; Risk; Secondary Education; SelfEmployment; Small Businesses; Teaching Guides

IDENTIFIERS *Program for Acquiring Competence Entrepreneurship

ABSTRACTThis instructor guide for a unit on business

opportunities in the PACE (Program for Acquiring Competence inEntrepreneurship) curriculum includes the full text of the studentmodule and lesson plans, instructional suggestions, and other teacher

resources. The competencies that are incorporated into this module

are at Level 2 of learning--planning for a business in one's future.

Included in the instructor's guide are the following: unit

objectives, guidelines for using PACE, lists of teaching suggestions

for each unit objective/subobjective, model assessment responses, and

overview of the three levels of the PACE program. The student module

includes the following: specific objectives, questions supporting the

objectives, complete content in the form of answers to the questions,

case studies, individual activities, group activities, discussion

questions, assessment questions, and list of 10 references. Model

assessment responses are provided in the instructor materials. These

five objectives are addressed: analyze changes and trends as a sourceof new business ideas; profile the business composition of the

community; discuss major business decisions such as competitiveadvantages and ownership options; and apply creative thinking to

expand options for one's business ideas. (YLB)

UNIT 3LEVEL 2

PACETHIRD EDITION.

Program for AcquiringCompetence inEntrepreneurship

CUM ON EDUCATIONAND TRAM FON ENPLOYNINT

COLLEGE OF EDUCATIONC44.0 STAR LVIVIIITI

Objectives:

Rmearrh & Ileelopment Series No. 102.1

Analyze changes and trends as a source of new busi-ness ideas.

Profile the business composition of the community.

Discuss major business decisions such as competitiveadvantages and ownership options.

Determine opportunities for a business of your choice.

Apply creative thinking to expand options for yourbusiness ideas.

..0U 5 DEPARTMENT OF EDUCATION

(./Mee of Educational Reseacm and Improvement

EDUCATIONAL RE SOURCES INFORMATIONCENTER IERICI

ITMe document has been reproduced asreceived Iron- the DerSOn or °rot...ration

.1

C` M,nor changes nave teen made to ,rnprovereproduction quality

Points of view or opinions stated in this dccument do not necessarily represent officialOE RI position or policy

INSTRUCTOR GUIDE;

Unit 3

BusinessOpportunitiesLevel 2

-PERMISSION TO REPRODUCE THISMATERIAL HAS BEEN GRANTED BY

TO THE EDUCATIONAL RESOURCESINFORMATION CENTER (ERICI

HOW TO USE PACE

Use the objectives as a pretest. If a studentis able to meet the objectives, ask him orher to read and respond to the assessmentquestions in the back of the module.

Duplicate the glossary from the ResourceGuide to use as a handout.

Use the teaching outlines provided in theInstructor Guide for assistance in focusingyour teaching delivery. The left side ofeach outline page lists objectives with thecorresponding headings (margin questions)from the unit. Space is provided for you toadd your own suggestions. Try to increasestudent involvement in as many ways aspossible to foster an interactive learningprocess.

When your students are ready to do theActivities, assist them in selecting thosethat you feel would be the most beneficialto their growth in entrepreneurship.

Assess your students on the unit contentwhen they indicate they are ready. Youmay choose written or verbal assessmentsaccording to the situation. Model re-sponses are provided for each module ofeach unit. While these are suggestedresponses, others may be equally valid.

2

BEST COPY AVAILABLEwormallhasimaaimill-.,'

Objectives Teaching Suggestions

1. ANALYZE CHANGES ANDTRENDS AS A SOURCE OFNEW BUSINESS IDEAS

How do trends in the business en-vironment create business oppor-tunities?

2. PROFILE THE BUSINESSCOMPOSITION OF THECOMMUNITY

What is the business compositionof your community?

What do you need to know aboutyour community?

3. DISCUSS MAJOR BUSINESSDECISIONS SUCH ASCOMPETITIVE ADVANTAGEAND OWNERSHIP OPTIONS

What are some of the importantdecisions I must make when start-ing a new business?

What is your competitive advan-tage?

How can I reduce my businessownership risk?

What are some of the legal formsa new business might take?

4. DETERMINE OPPORTUNITIESFOR A BUSINESS OF YOURCHOICE

How do you conduct a customeranalysis?

Ask the class to identify new business opportunities of todaywhich did not exist forty to fifty years ago. Discuss marketchanges.

Ask a local radio station marketing manager or newspaper salesrepresentative to talk to the class about their target market.

Put together several sets of written material about the localcommunity. information may be obtained from the Chamber ofCommerce and county offices. Divide the class into smallgroups and give each group a set of materials. Ask the teammembers to answer questions under an area of particular interestin this section. Teams should report their findings to the class.

Briefly, review the considerations of starting a business.

Name a number of successful local businesses, and ask studentsto identify their competitive advantages.

Ask a local franchise manager to talk to the class about startinga franchise business. Be sure they discuss the relationship be-tween the franchisee and the franchisor.

Describe various business situations and ask the class to explainwhich form of ownership would be best in each of the situations.

Ask students to identify the target markets for several successfullocal businesses. You may want to tie this discussion to theabove discussion on competitive advantages.

Identify a fictitious new business and have students use materialsfrom the Chamber of Commerce, etc. to determine the size ofthe market.

3

Objectives Teaching Suggestions

How do you conduct a competitiveanalysis?

How do you do a SWOT analysis?

5. APPLY CREATIVE THINKINGTO EXPAND OPTIONS FORYOUR BUSINESS IDEAS

How can you use creative thinkingto generate new business ideas?

How can you stretch your creativeimagination?

Discuss a competitive market in your area. Identify major com-petitors, their target markets, and their competitive advantages.Can you identify any target markets in this field with unmetneeds?

Do a SWOT artlysis for a local business.

Do a SWOT analysis for a new business proposed by students.

Discuss the steps of creative thinking.

Conduct the dictionary word exercise involves the entire class.Write key free association words on the board. Generate a newbusiness idea.

Conduct the product/service attribute exercise. Write primaryattributes and their suggested variations on the board. Generatea new business idea.

MODEL ASSESSMENT RESPONSES

1. An increased number of dual career families has created a demand for numerous services such as day care,elder care, lawn care, and housekeeping services.

2. Population demographics age and income brackets for the population

Employment major employers, unemployment rate

Real Estate anticipated new developments, average cost of housing

Transportation anticipated changes in the transportation system, access to and service routes of publictransportation

Leisure common leisure activities

3. Target market a group of individuals for whom a product or service uniquely satisfies their needs. Theindividuals in a target market share certain demographic and/or psychographic characteristics. The targetmarket for Leaps and Bounds, a family entertainment center, is middle and upper middle class families withyoung children.

Competitive Advantage the way in which a product or service is superior for a particular target market.McDonald restaurants that have play yards have a competitive advantage for families with young childrenover fast food restaurants which do not have play yards.

4. Sole Proprietor A - easy to start, maximum controlD - maximum liability

Partnership A involves two or more people, more expertise and financial resourcesD - partners are liable for each other

Limited Partnership A - Financial resources of two or more partners, limit liability for limited partnerD - Only protect limited partner from liability, limited partner does not contribute

expertise to the business

Incorporation A Greatly reduces personal liability of entrepreneursD Greatly increases taxation and record keeping

S corporation A Reduces taxation over incorporationD - Number of stock holders is restricted

5. Customer Analysis review demographic information to determine target market size. Interviewcustomers who are representative of the target market to determine usage rates and desirable features andbenefits.

Competitive Analysis discuss with customers who represent the target market the competitors strengthsand weaknesses. Visit competitor and evaluate their strengths and weaknesses.

6. S Strengths of companyW Weaknesses of company0 Opportunities in the environmentT Threats in the environment

(r` Program for Acquiring3 Competence in

EntreprtaeurshipIncorporates the needed competencies for creating and operating a small business at three levels of learning, with experiences andoutcomes becoming progressively more advanced.

Level 1 Understanding the creation and operation of a business.Level 2 Planning for a business in your future.Level 3 Starting and managing your own business.

Self-contained Student Modules include: specific objectives, questions supporting the objectives. complete content in form of answersto the questions, case studies, individual activities, group activities, module assessment references. InstructorGuides include the full textof each student module and lesson plans, instructional suggestions, and other resources. PACE,Third Edition, Resource Guide includesteaching strategies, references, glossary of terms, and a directory of entrepreneurship assistance organizations.

For information on PACE or to order, contact the Publications Department at theCenter on Education and Training for Employment, 1900 Kenny Road, Columbus, Ohio 43210 -1090

(614) 292-4353, (800) 848-4815.

Support Ianr PACE,'third Edition pro\ ided in \ hole or in pan 11:

International Consortium for Entrepreneurship Educationand

International Enterprise AcademyCenter on Education and Training for Employment

The Ohio State University

5

The Coleman Foundation

Center for Entrepreneurial Leadership Inc.Ewing Marion Kauffman Foundation

UNIT 3Business LEVEL 2

Opportunities

Your Potentialas an

Entrepreneur

Help forthe

Entrepreneur

Nature ofSmall Business Global Markets

TheBusiness Plan

Types of

OwnershipMarketingAnalysis

LocationPricingStrategy

Financingthe Business

LegalIssues

Business Human

Management ResourcesPromotion Selling

Record FinancialKeeping Analysis

CustomerCredit

RiskManagement

Operations

Program for Acquiringk Competence in

EntrepreneurshipP

CENTER ON EDUCATIONAND TRAINING FOR EMPLOYMENT

.,COLLEGE OF EDUCATIONTHE OHIO STATE UNIVERSITY

6

A

Research & Development Series No. 302-3

BUSINESS OPPORTUNITEES

BEFORE YOU BEGIN . .

1. Consult the Resource Guide for instructions if this is your first PACE unit.

2. Read What are the Objectives of this Unit on the following page. If you thinkyou can meet these objectives now, consult your instructor.

3. These objectives were met in Level 1:

Describe the factors that should be considered when starting a business.

Identify the trends and changes occurring in the business environment.

Discuss new technological changes that are occurring in potential careerareas.

Define the process of creativity.

Complete a list of small business ideas related to a career area.

Create a new business idea.

4. Look for these business terms as you read this unit. If you need help with themeanings, ask your instructor for a copy of the PACE Glossary contained in theResource Guide.

Competitive advantageFranchiseIncorporationInventiveLimited partnershipPartnership

Copyright © 1994, Center on Education and Training for Employment,The Ohio State University. All rights reserved.

S -corporationSole proprietorSWOTValue addedVirtual officesWindow of opportunity

3

BUSINESS OPPORTUNITIES

WHAT ARE THE OBJECTIVES OF THIS UNIT?

Upon completion of this unit you will be able to

analyze changes and trends as a source of new business ideas,

profile the business composition of the community,

discuss major business decisions such as competitive advantage andownership options,

determine opportunities for a business of your choice, and

apply creative thinking to expand options for your business ideas.

WHAT IS THIS UNIT ABOUT?

Where are the business opportunities?What kinds of new businesses does yourcommunity need? What are some of the op-tions for starting a new business? How doyou determine whether a new business willbe successful? How can you generate newbusiness ideas? This unit will help youanswer these and many other questionsrelated to new business opportunities.

HOW DO TRENDS IN THEBUSINESS ENVIRONMENTCREATE BUSINESSOPPORTUNITIES?

The only thing that is certain in the businessenvironment is change itself. Shifts in themarketplace create unmet consumer needs.New businesses spring up to fill these unmetconsumer needs. Let's think about some ofthe new products and services that werecreated to meet consumer needs.

Think about middle class family life whenyour parents were children. When womenhad young children, they usually did notwork outside the home. This meant that

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they had time to bake from scratch and doall of the housekeeping themselves. Ofcourse, they did not need day-care services.Many families got by with just one car be-cause two people weren't driving to work.

Since only one income was supporting theentire family, there was not much money forluxury items. Family entertainment meant avisit with relatives or a visit to the park.The family rarely ate at a restaurant. Yourparents' mother and father were more likelyto mend and repair their clothing, cars, ap-pliances, and their home themselves.

Today., most married women work outsidethe home. In the average middle classhousehold, most meals include frozen orprepared foods. Day care, housekeepingservices, lawn care services are all indemand. Dual career families usually main-tain two cars. The we-nan takes her car tothe gas station and to the service stationherself.

Two income families have more money tospend, and less time to spend it in. Themodern family eats out more often. Eatingout is not a big event. Since they have lesstime together, families want to maximizetheir fun time. Hence, the advent of thefamily entertainment center. Parents, whohave more money than time are likely tospend more on their children.

Now, think about changes in the office set-ting. The very existence of many businessesdepends on increasingly efficient communi-cation and information systems. The manualtypewriter has been replaced by a personalcomputer. Personal computers now handleas much information as room size computersdid in the 1940s. Even a small businessowner can accurately track sales, inventory

and employee benefits/wages. Fax machinesmake it possible to send written material inminutes rather than in days by mail. Cel-lular phones make it possible to access cus-tomers and suppliers anytime, any place.

Another major change in the office place isthe diversity in the work force. Officeswhich were once the domain of caucasianmales are now multicultural. In an effort tostay in touch with their employees, firmshave expanded their human resource depart-ments. As women enter the work force,there is increased demand for time flexibil-ity. Due to the diversity of the backgroundof the employees and the increasing techni-cal nature of many jobs, on-the-job trainingis very important.

Our market is no longer an American marketbut a world market. Americans want moreselection and higher quality for less money.The first Ford automobiles were all Ameri-can except for the tires. Ford was frustratedby the fact that he had to import rubbe'. So,he tried to grow rubber trees in Florida; thisexperiment failed. However, a 100 percentAmerican Ford was manufactured with theadvent of synthetic rubber. The last 100percent American Ford rolled off the assem-bly line in 1960. Ford changed their policyto buying auto parts from the country thatoffered the best value. Today, most Ameri-can automobiles are truly world cars. Theyhave parts from Taiwan, China, and LatinAmerica. This trend is reflected in manydifferent kinds of consumer goods such asclothing, computers, and microwaves.

Changes in technology can cause changes inmarket demand. Easy access to computersis expected to lead to a change in the officestructure itself. More employees will workat home. Liquid crystals are now used in

thermometers and jewelry. The VCR markethas grown rapidly and matured since the1980s. Compact Disc (CD) players havetaken over the stereo market.

To take advantage of these shifts in themarket, the entrepreneur must first note thechange in consumer demand. Then, he orshe must develop services or products thatmeet these needs.

><1><><><X

WHAT IS THE BUSINESSCOMPOSITION OF YOURCOMMUNITY?

Your community is unique. The businessenvironment in your community may or maynot reflect national trends. To be successfulas an entrepreneur, you must completelyunderstand the unmet consumer needs inyour market.

How do you find out more about your localcommunity? There are a number of sourcesof information. Start by contacting yourlocal Chamber of Commerce and countyzoning, real estate assessment, and auditor'soffices. You may also want to contact local

5

radio stations and newspapers. These mediaagencies often have a lot of demographicinformation about their subscribers and thearea they serve.

40

oe th. eee e

WHAT DO YOU NEEDTO KNOW ABOUT YOURCOMMUNITY?

The answer to this question really dependson the kind of business in which you areinterested. Here is a list of some of basicquestions you might want to answer.

Population demographics. Has the totalpopulation increased or decreased in the lastfew years? Has the racial mix changed.?What is the age distribution of the popula-tion? What is the average family income?Has the average family income increased ordecreased? What percentage of the popula-tion is in each of the income brackets? Has

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this changed recently? What is the educa-tional level of the population? What is theaverage family size? Has family size in-creased or decreased?

Employment. What is the average annualrate of unemployment? Who are the top 10or 20 employers in the area? What do theyproduce? How many employees do theyhave, and what is their annual payroll?Where are these major employers located?Have there been any significant changes(losses or additions) to this list of majoremployers? In terms of percentages, howdoes the work force fit into the followingsectors: agriculture/forestry/mining, con-struction, manufacturing, transportation andpublic utilities, wholesale trade, retail trade,ilnuce, insurance and real estate and ser-vice. What percentage of the women work?Has this changed in the last few years?

Real estate. What percentage of the popula-tion own their own home? What percentageof the population live in multiple familyunits verses single family units? What is theaverage cost of a 1,800 square foot (or typi-cal) home? Where will the new housingunits be built? (Hint: look at buildingpermits). What is the average cost of thehousing by zip code or geographic area?

Transportation. How does transportationhelp or hinder local business? How goodare the highways? How well does your localairport service the community? Are anychanges in local transportation anticipated?What is the availability and routing for busesand other forms of public transportation?

Leisure. What do people in the area like todo with their leisure time? What types orrecreational facilities are available? Whathobbies seem to be popular in the area?

General. Where do people shop in yourcommunity? How does the cost of living inyour community compare to the cost of liv-ing in other communities? What is the totalland area of your community?

After answering these questions, ask yourselfwhat do the residents of my communitywant that they don't have now? Why isn'tthis product or service available? Could Iprovide this product or service?

WHAT DECISIONS DOESTHE ENTREPRENEURMAKE WHEN STARTINGA BUSINESS?

There are almost as many ways to start abusiness as businesses themselves. How-

er, there are a few basic decisions thatevery new business owner must make.

In level 1 of Business Opportunities, someof the factors that should be consideredwhen starting a new business were dis-cussed. These included interests and abil-ities, as well as market demand. In addition,you need to consider what your time and fi-nancial resource commitment will be. Doyou want to work full-time or part-time? Inaddition, you need to consider the staffingand equipment needs. Who do you plan tohire, and what salary/benefits package willyou offer? Will you have to purchase anymajor pieces of equipment? If so, howmuch will equipment cost? Location isanother important factor. Do you need to belocated near your target market, or a majorfreeway? Will you buy or rent the facility?

These are some of the basic factors to con-sider when starting a business. Now, let'sgo a step further and consider some othermajor decisions.

WHAT IS YOURCOMPETITIVEADVANTAGE?

If you are starting a new business in a com-petitive market, it is not good enough to belike everyone else. You must have a com-petitive advantage. Your competitive ad-vantage is what you do better than yourcompetitors. This competitive advantageshould appeal to your particular market. Forexample, McDonalds appeals to familieswith young children by offering kids mealsand play yards. Note, that a business mayhave a number of competitive advantages.Referring back to McDonalds, competitiveadvantages also include fast-food, consistentquality, and clean facilities. There arenumerous ways to differentiate a product orservice. The key is to end up with theproduct or service that is most desired bythe target market.

You may offer value added to an existingproduct or service. For example, you mightoffer a product in a multitude of colors, or ina more convenient package. Other possibleways of differentiating your product with avalue-added strategy include unusual decor,improved services, or a superior location.

Taking a more inventive approach, you mayoffer an entirely new product or service.This innovative product or service might bea combination of existing products or ser-vices. For example, the telephone and tape

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recorder were combined to make an auto-matic answering machine. Your inventionmight be a new and unusual application ofan old product. The "Slinky" was inventedby Richare Ind Betty James. Richard, amarine engineer, observed a torsion springfall or "walk" down a shelf to the floor. Hespent the next 2 years developing the righttension to allow the spring to walk everytime. The James' patented their new toy andnamed it "Slinky" because it aptly describedits motion. The "Slinky" has become a clas-sic toy, easily identified by almost everyAmerican child.

IKIW CAN I REDUCE MYBUSINESS OWNERSHIPRISKS?

Starting a new business always involvessubstantial risk. If your product or service isvery innovative, there may be no other simi-lar businesses. In this case, you are forcedto start from scratch to develop your busi-ness. However, if your product or service issimilar to others on the market, you may beable to purchase a business and modify it tomeet your needs. If you purchase an exist-ing successful be :ess, you may be able tobuild on their former customer base. In ad-ditio, the former business will have estab-lished tried-and-tested business practices.

Purchasing a franchise is another way to re-duce risk. Franchises exist in many differentindustries, from printing to fast-food. Thefranchisee purchases the right to operate afranchise from the parent corporation. Thefranchisee agrees to follow corporate policiesand procedures. In exchange, the franchiseeis given the right to use the corporate name.

S

Often, they also receive training and promo-tional assistance. Since the parent corpora-tion has a well-established name and opera-tional policies and procedures, the franchiseeis able to reduce their start-up risk.

Having more than one person involved in thebusiness offers a larger capital and technicalresource pool from which a business canoperate. The disadvantage is that the part-ners are liable for each other. If one partner

WHAT ARE SOME OF THELEGAL FORMS A NEWBUSINESS MIGHT TAKE?

There are a number of legal forms a busi-ness may take. Your choice may depend onthe amount or risk you wish to assume andyour tax structure.

Sole proprietor. This is the easiest type ofbusiness to start. It is easy to go into andout of business under this form of businessownership. The disadvantage of this busi-ness type is that you are responsible andliable for everything.

Partnership. In a general partnership, twoor more individuals will start a business.

makes a financial mistake, the other partneris equally responsible for the mistake.

Limited partnership. This is a partnershipwhere one or more partner is investing in thebusiness but is totally removed from thedaily operation or responsibilities of thebusiness. If a problem should arise, thelimited partner is not legally responsible aslong as he or she does not participate in thebusiness.

Incorporation. This form of business own-ership limits the liability of the owner. Theowner's personal property is somewhat pro-tected from legal liability. The corporationwill continue to exist after the death of theowner. It becomes a legal entity. It isusually easier to acquire capital in this formof business. Some of the disadvantages are

that incorporated businesses are closely regu-lated as well as expensive to organize. Theymust have a charter and keep extensive rec-ords. A major disadvantage is that incomefrom an incorporated business is taxed onceas business income and again as the owner'sincome.

S-corporation. The main advantage of thisform of incorporation is that the profits arepassed through to the individual. The actualannual IRS tax form is merely an informa-tive form that shows that the amount thatwill be transposed to the individuals 1040tax form. The limitation to this type ofownership is that the number of stock hold-ers is restricted.

HOW CAN YOU DETERMINEOPPORTUNITIES FOR ABUSINESS OF YOUR CHOICE?

Once you have decided what type of busi-ness you want to go into, you need to deter-mine the potential for that business. Youneed to find out who your customers andcompetitors are. Then, you can analyze yourbusiness opportunities using SWOT analysis(to be explained later).

HOW DO YOU CONDUCTA CUSTOMER ANALYSIS

First, define your target market. The mar-ket for your product or service is everybodywho might buy it. Certainly, no entrepre-neur is going to turn away a paying custom-er. On the other hand, a specialized productor service can not be designed to satisfy

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everyone's needs. A target market is thatgroup of individuals for whom your productor service uniquely satisfies their needs. Theindividuals within a target market share cer-tain demographic and/or psychographic char-acteristics. These days even milk is sold toparticular target markets. Skim milk is soldto dieters, chocolate and whole milk are soldto families with children, and lactate freemilk is sold to those who are allergic tolactate.

Next, try to get a feeling for how large yourtarget market is. You will need to refer tosome of the demographic data gathered whenanalyzing your local community. If you areusing some psychological variables to defineyour target market, you may need to "guess-timate" some percentages.

For example, supposing you want to open aboutique to sell high fashion clothing toyoung career women. First, you might de-termine what percentage of the population isbetween the ages of 18 and 24. Supposethis is 15 percent. Divide this number inhalf (7.5 percent) because you are only inter-ested in the female population. Since yourline of clothing will be moderately expen-sive, you may next note what percentage ofthe population has a family income above$20,000. Suppose this is 75 percent.Multiplying 7.5 percent times 75 percent,you find that approximately 5.6 percent ofthe population have the right age and in-come. Now, ask yourself what percentage ofthe career women age 18 to 24 are interestedin high fashion? If you guesstimate 50 per-cent, then your target market population is2.8 percent of the total population. If youhave a total population of 200,000, you havea target population of 5,600. But, not all ofyour target population will buy at your store.Let's guess 50 percent of the population

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might spend $50.00 or more per year at yourstore. Would your store be successful if itgrossed $140,000? That depends on whatyour costs are.

Once you have defined your target market,interview a number of people who representthe target market. Discuss your businessidea with them. Ask if they would purchaseyour product or service. If they indicatethey would purchase from you, ask how fre-quently they would purchase from you andhow much would they spend per visit. Youmay want to revise your estimates of the tar-get market size if your frequency and dollarguesstimates differ significantly from theresponses of your interviewees. Be sure tofind out what features and benefits yourinterviewees want. Get a feeling for the ap-propriate price range. Ask how you shouldpromote your business. Finally, ask whoyour competitors are, and what are theirstrengths and weaknesses.

HOW DO YOU CONDUCT ACOMPETITIVE ANALYSIS?

To determine what percentage of the targetmarket you can capture, you need to have athorough knowledge of your competitors.With this knowledge, you will be able toidentify your own competitive advantages.To gain an understanding of your competi-tors, gather all the printed material you canabout their businesses. This may includebrochures, advertisements, and newspaperarticles. If possible, visit your competitors'businesses and evaluate their products or ser-vices. What can you do better than yourcompetitors? What do they do best? Doyou need to modify your product or service?

Remember, its not good enough to be just asgood as you competitorsyou must be bet-ter than your competitors.

HOW DO YOU DO ASWOT ANALYSIS?

Now, you are ready to do a SWOT anal-ysis. SWOT stands for strengths, weak-nesses, opportunities, threats. The strengthsand weaknesses refer to the business'strengths and weaknesses. The opportunitiesand threats refer to conditions in the busi-ness environment. A window of opportun-ity refers to a limited period of time inwhich an opportunity in the business envir-onment exists that may be met by a businessstrength.

Let's consider Joe Murphy's new business.Joe wants to open a dry cleaning servicenear a new subdivision in Hometown. Hehas worked at a dry cleaning facility forseven years and knows the ropes. Unfor-tunately, he has never managed a business,however, he has studied business manage-ment in school.

When studying his community, he found thatmany of the residents of this subdivisionwere dual career families. Usually, both thehusband and wife work at professionalwhite-collar jobs. Family income is rela-tively high, but time is limited. Currently,there are no dry cleaning facilities within 5miles of this new subdivision.

Joe has big plans for his new business. Heplans to promote a special dry cleaning ser-vice of "in by 9 a.m. out by 4 p.m." Joewants to locate in a relatively inexpensive

5

space in a strip mall. This mall is just offthe freeway and two miles from the subdivi-sion. He is worried that if he doesn't movefast, a competitive dry cleaning companywill move in on his target market.

Joe's SWOT analysis is displayed in

Figure 1.

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think about our lives and the opportunitiesaround us.

Creative thinkers spend time identifyingquestions or problems and then searching foranswers. They are open to new informationand new ideas. The creative process re-quires some time for incubation. During this

POSITIVE NEGATIVE

I Seven years of experience in dry cleaning No management experience

NTER Management courses in schoolNAL "in by 9 a.m.; out by 4 p.m."

STRENGTHS WEAKNESSES

OPPORTUNITIES THREATS

EX

Dual career families, high family income,time limited

Competitors may enter market

TER No dry cleaning facilities within 5 milesNAL Available space in convenient strip mall

Figure 1.

HOW CAN YOU USECREATIVE THINKINGTO GENERATE NEWBUSINESS IDEAS?

Sample SWOT Analysis

incubation period the subconscious mindsearches for an answer. Then, almost unex-pectedly the solution becomes clear.

Creativity is a mind set. We all have thepotential to be creative, but not all of usknow how to use our creativity. Creativethinking is a choice we make in the way we

G

The last stage of the creative process in-volves evaluating the feasibility of thesolution. It often takes a number of tries toarrive at the right creative solution. ThomasEdison failed 2,000 times before successful-ly creating the light bulb. His comment onthe 2,000 failures was that they were not

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failures, just 2,000 ways that electricitycould not be developed. Persistence isdefinitely a part of developing a new productor service opportunity.

1. Close your eyes and flip through thepages of a dictionary at random. Pointto a word on the page and open your

HOW CAN YOU STRETCHYOUR CREATIVEIMAGINATION?

The more you use your creativity, the morec:eative you will become. Here are someideas to help you stretch your creativity.

Start by expecting to be creative. Set acreativity quota. Thomas Edison's personalinvention quota was a minor invention every10 days, a major invention every 6 months.Could you suggest a minor service or pro-duct improvement every week? How aboutan entirely new business idea every 3months? Set creativity goals for yourself.Write down your ideas as they occur to you.Check every month to see if you have metyour idea quota.

If you want to come up with a new businessidea, try the following random word tech-nique.

eyes. Do not allow yourself to choosemore than one word per day, or youmight not maximize the business poten-tial of each word.

2. Free associate with your chosen word.Supposing your chosen word was condi-ment. You might free associate ketchup,mustard, relish. Add to something. Addto what? Hot dogs? Hamburgers? Icecream? Candy and ice cream? Cookiesand ice cream?

3. Now, force the connection between yourchosen word and your challenge to finda new business idea. Ask yourself, "Inwhat vays could I create a new businessidea from this free association?" Youranswer might be, "How about selling aprepackaged set of ice cream condimentsin the grocery store?" Consider a dis-penser containing not just chocolatesyrup, but crushed cookies, nuts, candies,and so on.

Flower Shop

Barber Shop

Pizza Shop

Gift Shop

4. List your ideas. You may come up withseveral different business ideas.

5. At a later date, review your businessideas and screen them. Do not screenyour ideas immediately! If you screenyour ideas immediately, you may limityour creative potential.

Here is another approach to generating acreative idea. First, choose a product, ser-vice or business of interest. Next, make alist of all of the important properties of thatproduct, service, or business. Now, takeeach attribute of the product or service to bestudied and change it in as many ways aspossible. Don't be afraid to be a little wild.Finally, look for a likely new combination ofthese properties.

13

Beauty Salon

Deli

For example, if you wish to study a pizzarestaurant, you might identify the followingbusiness attributes: pizza, drinks, chairs,tables, music, decor, and servers. Under theattribute of pizza, you might consider mak-ing them square or spherical, changing thetomato sauce to chocolate sauce and addingcandy or fruit. Or, consider replacing thewaiters and waitresses with robots, then puta robot at every table. You might end upwith something like a triangular pizza, withfruit and vegetable toppings, served in aspace ship decor by robots.

A successful new business idea starts withyour creative imagination and market de-mand for a new product or service. It mustbe built around your own skills and abilities.The idea is then filled in with numerous de-tailed business decisions.

14

ACTIVITIES

The following activities are designed to helpyou apply what you have learned in thisunit.

INDIVIDUAL ACTIVITIES

A.

Make a list of innovative products and/orservices that have been introduced in the last5 years:

Example:

Flavored water

Telephone wake-up services on col-lege campuses

Air-bags for cars

B.

Randomly pick a word from the dictionaryand free associate from that word. Then,generate a new business idea from your freeassociations.

GROUP ACTIVITIES

A.

Form small teams. Each team should re-search one of the areas of interest in thecommunity, such as population demograph-ics, employment, real estate, transportation,and leisure. Groups should present theirfindings to the class.

B.

Each small group should select an existingbusiness it wishes to study. Team membersshould identify the major attributes of thebusiness. Then, in a small group brain-storming session, all possible modificationsfor each of these business attributes shouldbe identified.

Record the group discussion as follows.Divide a piece of paper into columns. Headeach column with one of the attributes to bestudied. Then, record possible modificationsunderneath this heading. Now combinethese suggested modifications to create anew business.

Small groups should elect a representative toreport back to the class.

C.

As a small group or entire class activity,develop a SWOT analysis about a new busi-ness in your town. Use the form on the nextpage.

STRENGTHS

OPPORTUNITIES

16

CASE STUDY

John Alexander loves computers. He is a

whiz at programming personal computersand understands the strengths and weak-nesses of different software packages. Johnhas worked in the high school computer labfor about 2 years. The computer lab instruc-tor admits that John is better at fixing thecomputers than he is.

On Saturdays, John works at one of the threecomputer stores in his community. Hemakes $6.00 an Lima setting up and main-taining personal computer demonstrations.

DISCUSSION QUESTIONS

He likes working with thu computers and thecustomers. However, he does not want towork as a salesperson.

Next year John plans to go to State Univer-sity and major in computer science. StateUniversity is located about 10 miles from hishome town. In order to pay his tuition andexpenses, John needs a good part-time job.Since he must work around his class sched-ule, the hours must be flexible. He wants towork 15-20 hours a week and make a mini-mum of $10 an hour.

1. Can you think of any business opportunities for John?

2. What does John need to know about his community before starting his new business?

3. Who would be John's target market? Are there several different target markets John mightserve? What competitive advantages could John's business have?

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ASSESSMENT

Read the following questions to check your knowledge of the topics presented in this unit.When you feel prepared, ask your instructor to assess your competency on them.

1. Give an example of how market trends create business opportunities.

2. Identify some of the key questions you would like to answer to know more about yourcommunity in the following areas: population demographics, employment, real estate,transportation, and leisure.

3. Define target market and competitive advantage. Give examples.

4. What are the advantages and disadvantages of the following forms of business ownership:sole proprietor, partnership, limited partnership, incorporation, S-corporation?

5. How do you conduct a customer and competitive analysis?

6. What does SWOT mean?

REFERENCES

Engel, J. F., et al. Consumer Behavior, 7th ed. Orlando, FL: The Dryden Press, 1993.

Greenfield, W. M. Calculated Risk, A Guide to Entrepreneurship. Lexington, MA: D.C. Heathand Company, 1986.

Lipper, Arthur, III. "If Constructively Creative Divergent Thinking Equals Entrepreneurs: HowCan We Help Create More of Them." The Journal of Creative Behavior 21, no. 3 (1987):214-218.

Michalko, M. Thinkertoys, A Handbook of Business Creativity for the ' 90s. Berkeley, CA: TenSpeed Press, 1991.

Snook, Robert L. Why Didn't I think of That! New York: New American Library, 1982.

Sublette, Guen. "The 15 Hottest Businesses for 1994." Entrepreneur 21, no. 12 (December1993): 71-84.

Travela, John. Can You Make Money with Your Idea or Invention? Denver, CO: ManagementPublications, U.S. Small Business Administration, 1988.

Weckesser, Ernest. The $12,000 Housewife, A Practical Guide to Making Extra Money at Home.Dunkirk, NY: The Green Tree Press, 1984.

White, Richard M. The Entrepreneur's Manual. Radnor, PA: Chilton Book Company, 1977.

Udell, Gerald G. Ideas into Dollars. Denver, CO: Business Development, U.S. Small BusinessAdministration, 1988.

Level 2

PACE

Unit 1. Your Potential as An Entrepreneur

Unit 2. The Nature of the Small Business

g> Unit 3. Business Opportunities

Unit 4. Global Markets

Unit 5. The Business Plan

Unit 6. Help for the Entrepreneur

Unit 7. Types of Ownership

Unit 8. Marketing Analysis

Unit 9. Location

Unit 10. Pricing Strategy

Unit 11. Financing the Business

Unit 12. Legal Issues

Unit 13. Business Management

Unit 14. Humar Resources

Unit 15. Promotion

Unit 16. Selling

Unit 17. Record Keeping

Unit 18. Financial Analysis

Unit 19. Customer Credit

Unit 20. Risk Management

Unit 21. Operations

Resource Guide

Instructor's Guide

snits on the above entrepreneurship topics are available at the following levels:

Level 1 helps you understand the creation and operation of a businessLevel 2 prepares you to plan for a business in your futureLevel 3 guides you in starting and managing your own business