CLASS 12 ENTREPRENEURSHIP CH 1 NOTES
BUSINESS OPPURTINITY – A business opportunity may be defined as an economic idea which can be implemented create business enterprise and ear profits. So before selecting the opportunity one has to ensure two things
- There is a good market for the product he is going to produce.
- The rate of return on the investment is attractive to be accepted by him
Elements of a business opportunity
A business opportunity has five elements which are as follows:
- Assured market scope
- An attractive and acceptable rate of return on investment
- Practicability of the idea
- Competence of the entrepreneur to encash it
- Potential of future growthFactors involved in sensing opportunities
To sense the entrepreneurial opportunities an entrepreneur has to use his / her sharpened skills for the keen observation , analysis and combination to identify an opening for the business. The important facts are :
Ability to perceive and preserve basic ideas
Spotting an idea often triggers the process of sensing an opportunity. The following are the various sources which lead to the emergence of basic ideas
- a) Problems: When a problem exists, an idea leads to a solution to resolve that problem, it emerges as a business opportunity.
- b) Change: A change in social, legal, technological aspects etc. leads to new opportunities to start a business.
- c) Inventions: New products or services leads to new business opportunities.
- d) Competition: Competition often results in emergence of new and better ideas that result in new business opportunities
- e) Innovation: Creating new things of value as well as new and creative processes that add value to the existing products or services. For example, computers to tablets.Ability to harness different sources of informationThere are many sources like magazines , journals , books , seminars , trade shows trade fairs. You should gather information from you family members friends relatives neighbours that results in evolution of basic ideas. Bringing together various sources of information and knowledge, and one should analyze ir to the best possible extent . This analysis helps in the identification of the right opportunity to start a new business.
Vision and creativity
Creativity is one of the key elements in making an opportunity more viable. The entrepreneur should be able to identify an opportunity and convert that into a viable plan or solution to problem. Once the solution is identified their vision to convert the solution into business opportunity helps them to move forward, overcoming all the obstacles. They constantly
- a) overcome adversity
- b) exercise control over the business
- c) make a significant difference.
Careful monitoring of an organization’s internal and external environment for detecting early signs of opportunities and threats that may influence its current and future plans. The right information, combined with the right adaptations, can determine an organization’s future viability.
Importance of environment
I] Identification of opportunities to get first mover advantage: By keeping in touch with the changes in the external environment, an enterprise can identify opportunities and find strategies to capitalise on the opportunities at the earliest. For example, Volvo, the Swedish brand, has 74% share in the luxury bus segment as it had entered India earlier.
- ii) Formulation of strategies and policies: It helps in identifying threats and opportunities in the market. These can serve as the basis of formulation of strategies to counter threats and capitalise on opportunities in the market.
iii) Tapping useful resources: If the company has a thorough knowledge of the external environment, it can tap raw materials, technology and even financial resources from the market at economical prices, at the right time
- iv) Better performance: Proper understanding of the various elements of the external environment is necessary to take timely action to deal with threats and avail opportunities for the purpose of improvement in the performance of the firm.
- v) Sensitisation of entrepreneurs to cope up with rapid changes: A keen watch on the trends in the environment would help sensitise the entrepreneur to changing technology, competition, government policies and changing needs of the customers. For example, trends in clothing.
- i) Image building: If a company is sensitive to the external environment, it will come out with new products and services to meet the requirements of the customers. This would build the image or reputation of the firm in the eyes of the general public. For example, call–radio taxis with additional features like GPS systems, online booking etc.
Information for environmental scanning can be collected from several sources. These include
- a) verbal information from customers, wholesalers, retailers, distributors, consultants, etc.
- b) records of companies
- c) government publications
- d) publications by various financial institutions e) formal studies conducted by strategic planners
Environmental factors [ so from these factors in exams you get the case studies in your exams ]
Entrepreneurship environment refers to the various forces within which various small, medium and large enterprises operate. These factors exert influence upon each other and do not operate in isolation. Business environment consists of two levels, i.e., micro environment and macro environment.
The PESTEL Model
Political: The political environment includes taxation policy, government stability and foreign trade regulations.
Economic: The economic environment includes interest rates, inflation, business cycles, unemployment, disposable, income, energy, availability and cost.
Social: The social/cultural environment includes population demographics, social mobility, income distribution, lifestyle changes, attitudes to work and leisure, levels of education and consumerism.
Technological: It is influenced by government spending on research, new discoveries and development, government and industry focus of technological effort, speed of technological transfer and rates of obsolescence
. Ecological: It considers the ways in which the organisation can produce its goods or services with minimum environmental damage.
Legal: It covers areas such as taxation, employment, law, monopoly, legislation and environmental protection laws.
Some of the case studies as follows
Q1 North western Airlines started their operations from India to various parts of the country in the year 2015. The company had been successful in it’s operations as more people preferred to travel by air due to change in the lifestyle and attitude towards work and leisure. Which factor of pestel model is there ?
Q2 Ecobrick is a company manufacturing bricks using recycled plastics. They have collection centers in various strategic locations all over the city and citizens are encouraged to sell their waste plastic products in these centres. This will save the environment in the long run. Also,it will promote ideology of swatch bharat. It will generate good revenue for the company as it sources its raw materials from the general public for whom the used plastic products are a scrap. Identify and state any two macro factors affecting the environment in the above case.
Q3 Dristi ltd. Decided to manufacture mobile phones with a new feature. It will have an inbuilt button which when pressed will extend into a selfic stick enabling the customers to click selfies easily without the need to carry a separate selfie stick. Identify two pestel factors which enabled dristi ltd. To bring out this new feature?
Q4 What is meant by sensing entrepreneurial opportunities ?
Q5 Give the meaning of an entrepreneur
Q6 Bhoomika started a pottery unit employing differently abled people to
make and sell sculptures made of clay. She also made sure that the
material she used is easily decomposable. During the months of
September and October she increased the scale of production as the
festival of Diwali was round the corner.
Identify the component of business environment at a macro level that is
reflected in the above situation. Also identify any two values
communicated by Bhoomika through her working.