BUSINESS SIMULATION

Business Concepts and Opportunities

What is Business idea and opportunity?
Business Idea- is a business concept that results in profits if it is turned into a tangible and
intangible product or service.
Opportunity- is defined as a situation that enables an entrepreneur to offer marketable products
or services to interested buyers or end users.
Opportunity Identification- it is same as opportunity recognition or discovery of business
opportunities.
Approach to opportunity Identification
1. Observe Changes in the environment- Changes in the environment give rise to needs,
wants or problems of an individual and lead to opportunity emerge.

Important environment forces to observe include:

a. Economic forces
b. Social Forces
c. Technological advances
d. Political and regulatory statues

Examples of how Changes in the Environment provides Opening for New Product and Service
Opportunities.

Forces Changes in the Environment New Product/Service

Opportunities
Economic Forces (Income and Number of teenagers higher Cyber cafés,
population) than number of elderly and Karaoke/recording studio
children
Social Increase interest in fitness Dancing class, Fitness center,
health food store, In-house
exercise
Technological Advances Development of the internet E-commerce, Online selling,
improved communication
Government Policies and Increase driving standards Smoke emission control,
Regulations helmet, seatbelt

2. Recognize a need that customers have that is not being satisfied - Opportunity occurs
whenever there is a need and wants to fulfil. The term “needs” refer to basic needs that
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the consumer must have in order to live while the term “wants” refer to the personal
desire for something that is more than the basic need.

3. Recognize problem and find solution- Problems can be recognized by observing the
challenges that people encounter in their daily lives. Solution to the problem represented
a business opportunity.

Opportunity Identification Process

-SEARCH FOR CHANGES IN THE ENVIRONMENT
-RECOGNIZE; NEEDS WANTS AND SOLUTION
-DISCOVERY OF OPORTUNITY

What are the other sources of ideas and opportunities?

1. Primary sources- refers to firsthand data or information gathered directly through observation,
interviews, experiments, survey.
a. Observation- data is gathered by observing and recording the respondent’s actions.
b. Interviews-Field research covers interviews with customers, suppliers, competitors,
and industry experts.
c. Surveys- Refers to the development of a short questionnaire with respect to the
targeted product. The questions should be very specific.
d. Experiments- Experiments or product sampling is another option to test the
acceptability in the market.

2. Secondary sources- involved gathering data that have already been compiled and are available.
It is initially conducted for one purpose using existing data which is reliable, available references
and mass media and electronic media.
a. Reliable existing data-Information obtained from annual report of companies.
b. References- An entrepreneur can use reference such as publish information from the
library, internet and so on.
c. Mass Media and Electronic media- advertisement and information in the newspaper,
magazines and internet can be a source of business opportunity of an entrepreneur.
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Here are indicators of Strengths, Weaknesses, Opportunities and Threats or also known
as SWOT.

Internal Factors
1. Strengths – These are the strong points of the business products or services. These are
referred to as the strong points or good attributes of the project or the business. Analysing
and evaluating these strong points will be very beneficial, most especially in determining
the feasibility of the business. It includes:
● cheap and abundant raw materials
● sufficient and available working capital
● availability of skilled workers
● Less operating expenses
● technical expertise of an entrepreneur (workers or owners)
● strong consumer demand for the product or services
● easy to manage
● small working capital

2. Weaknesses – These are the set of problems that the business is facing at present from
the time the business was established. Your weaknesses may include:
● poor quality of product/service
● poor management control
● mismanagement of capital
● lack of skilled workers
● lack of advertisements
● lack of technical skill of the owner/manager
● poor design
● inappropriate size
● poor packaging’
● poor marketing strategies
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● expensive
● low production at a time of peak of popularity of the product

External Factors
3. Opportunities – These are good chances for future advancement which the business
should take advantage. Since your goal is to operate a business in your locality your
prospect includes:
● your products should include those that are not yet available in the market
● presence of favourable government policy/support for such products/services
● scarcity of the products
● poor quality of existing products in the locality or location of the business
● increasing consumer demands for the product/services offered
● continued product development

4. Threats – These are obstacles that prevent the business from achieving its financial
objectives which may totally damage the venture causes its downfall and the progress of
your business or they can be external conditions that may work against you beyond your
control. The threats may include:
● shortage of raw materials
● rising costs of materials
● presence of too many competitors
●unfavorable government support and legislation
● new taxation schemes

The other two perspectives of analysis are the internal and external perspectives. These
can offer more detailed information which the company may act upon.
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Internal Factors External Factors

(Strengths and Weaknesses) (Opportunities and Threats)
This is an evaluation of the internal These make up the factors that can affect a
environment which include the following: company’s performance from the outside:
● Company culture and image ● The customers
● Staff ● Market trends
● Resources ● Competitors
● Abilities ● Technology
● Market share ● Politics and other regulatory boards
● Identity ● Environment

What is Market research survey?

New product market research surveys are used to collect consumer feedback about a new
product or a new product concept. The product can be anything from a household item such as
food or a toy, to larger item such as a kitchen appliance or television. If the product is large or
small still the process of managing the new product market research survey will stay the same
from the start to end.

Process of managing a new product market research survey

1. Select your preferred survey method. Always keep your target respondents in mind and
maybe some consumers may not have computer or mobile device access. This time you
have to
2. assess and choose the survey method such as online survey, paper survey, mobile survey,
phone survey, face-to-face interview, etc. Online surveys and mobile surveys can be more
cost effective.
3. Create the new product market research survey. It is best to ask as many closed-ended
questions, preferably at the beginning of the questionnaire. There are several types of
closed-ended question types such as multiple-choice questions, rating scale questions,
and ranking questions.
4. Allow other to review and test the survey. Adjust as needed.
5. Obtain your target respondent panel. Gather the consumer feedback and make the
respondent sample size as representative of the total consumer base. Survey must be a
mixture of current and potential consumers.
6. Manage results. To gather and managing the effective result, you’re not limited to design
and conduct it just online the survey but also in other preferred survey method.
7. And finally, process and analyze results. Before analyzing the results, the questionnaires
must be organized and well-arrange orderly. The data must be presented in a form of
tables, charts, graphs, and cross tabulations.
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What is a sampling technique?

Sampling is a process used in statistical analysis in which a group of observations are

extracted from a larger population.

In getting a sample size of the survey, used a simple formula of slovin 𝑛 = . 𝑁 /( 1+𝑁𝑒)
2(SQUARED TO) Let N be the population size and the margin of error e denotes the allowed
probability of committing an error in selecting a small representation of the population.

Example: Let us assume that the size of your population is 10,000. What is the size of your
sample if you allow 2% margin error? Using above formula, the sample size could be computed
as follows:

𝑛 = 10,000 / (1+10,000 (.02) 2

= 10,000 / (1+10,000 (.0004)
= 10,000/ 1+4
= 10,000 /5

Answer n=2,000(Therefore, your representative sample size is 2,000 out of 10,000)

The Business Plan

A business plan is the blueprint of individuals, organizations, or groups who would like to
engage in business. To some, the business plan is considered as their bible. The business plan can
be checked from time to time to guide them in carrying out their business ideas. The intrapreneur
can you refer to this document as frequent as he can to ensure that the activities are a line to the
business purpose.
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Purposes of a business plan

• Presents a general picture of the enterprise.

• Provides guidance for investment decisions and capital expenditures.
• Serves as guide in the implementation of the plan for business including the marketing
producing organizational and financial aspect of the enterprise.
• Serves as selling tool for encouraging investment and financing.

Parts of a business plan

a. Executive summary
This contains a brief description of each part of the business plan.
b. Introduction
It covers the compelling reason for selecting a particular project being proposed. It directs the
reader to the main contents of the business plan. This should include the idea, the rationale of
the business, and the potential benefits to would be fine answers who may be interested to
commit their money to this particular undertaking.
c. Product or service description
This segment tackles the characteristic and the details of the proposed idea. The name of the
product or service should be described first.
d. Industry analysis
An industry is a group of firms producing similar products or offering similar services. This part
of the business plan shows a situational presentation, at least three to five years of current data,
trends, and latest updates of the industry where the proposed business idea the belongs.
e. Market analysis
A market analysis involves the search for, the analysis of, data that can be used to identify,
isolate, describe, and quantity a given market or group of customers.
f. Marketing plan
It is a comprehensive document or blueprint that outlines a business advertising and
marketing efforts for the coming year.
g. Production or operational plan
The production or operational plan lays down the specifics of offering or running the business,
and if the marketing plan as the P's that make up the marketing mix, the production or operation
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plan has the four m's that comprise the production or operation of a business: materials,
machines, men (and women), and money.

h. Organizational plan
These details the human resources complement of the business. It also describes the legal
form that the business will take sole proprietorship, partnership, or corporation.
i. Financial plan
Lastly, the financial plans show the financial or funding requirements of the business.
j. Appendices
This portion is intended for miscellaneous items which may not be put in the main part of the
business plan such as photos, contracts, forms, certificates, permits, and other papers related to
the business.

Marketing Mix

The marketing mix refers to the set of actions, or tactics, that a company uses to promote
its brand of product in the market. They are a combination of factors that can be controlled by a
company to influence consumers to purchase its products.

The four Ps that typically make up the marketing mix are: Price, Product, Promotion
and Place Three more Ps-People, Packaging Positioning

Ps of marketing
A. Product
To begin, develop the habit of looking at your product as though you were an outside
marketing consultant brought in to help your company decide whether or not it's in the right
business at this time Ask critical questions such as, "Is your current product or service, or mix of
products and services, appropriate and suitable for the market and the customers of today?"
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Whenever you're having difficulty selling as much of your products or services as you'd
like, you need to develop the habit of assessing your business honestly and asking. "Are these the
right products or services for our customers today?"
Is there any product or service you're offering today that, knowing what you now know,
you would not bring out again today? Compared to your competitors, is your product or service
superior in some significant way to anything else available? If so, what is it? If not, could you
develop an area of superiority? Should you be offering this product or service at all in the current
marketplace?

B Price
The second P in the formula is price. Develop the habit of continually examining and
reexamining the prices of the products and services you sell to make sure they're still appropriate
to the realities of the current market. Sometimes you need to lower your prices. At other times,
it may be appropriate to raise your prices. Many companies have found that the profitability of
certain products or services doesn't justify the amount of effort and resources that go into
producing them. By raising their prices, they may lose a percentage of their customers, but the
remaining percentage generates a profit on every sale Could this be appropriate for you.
Sometimes you need to change your terms and conditions of sale Sometimes, by
spreading your price over a series of months or years, you can sell far more than you are today,
and the interest you can charge will more than make up for the delay in cash receipts Sometimes
you can combine products and services together with special offers and special promotions.
Sometimes you can include free additional items that cost you very little to produce but make
your prices appear for more attractive to your customers.
Pricing methods
Product costs and consumer perceptions of the product's value set the extreme points at
which you should set prices When you set prices below product cost, do not expect earn profits
no matter how many units you sell on the other hand, if you set prices too high, customer will
hesitate to buy because they perceive your product to be overvalued. Be sure to set prices
between these extreme points with due considerations of both the internal and external factors.
Three basic pricing methods
Cost-based pricing-most businesses set their prices on the basis of how much went into
the cost of producing the product. All costs are added and divided by the number of units
produced (the markup is added as well) However, this pricing method fails to address
demand and the competitor's price.
Cost-plus pricing- this is the simplest of all the pricing methods. All costs are added up
and then divided by the number of units produced A certain percentage, commonly
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known as the markup, which represents the desired return on the sale, is added to arrive
at the selling price. This method may be the easiest, but it fails to take into consideration
other factors such as demand and the competitor's price.
Break-even pricing - minimum price is determined at the level where total sales equal
total cost. The break-even selling price, volume, and sales can be determined using the
general equation.
C. Place
Because services generally are purchased and used at the same time, the location. where the
service is delivered plays a role in the promotion, price and product. Part of the reason plumbers
and other home-repair professionals charge so much is that they must deliver their service one
customer at a time away from their office or shop A barber can service customers one after
another, but he must consider his shop's appearance and location in his placement decisions.

D. Promotion
Promotion is how a business markets its services Promotion strategy includes developing
branding slogans and logos that convey the intangible benefits the service provides.
Types of promotion.
Discounted products - Customers of all types of love to buy discounted or bargain products.
Sometimes even those who don't have any plan of buying are forced to buy to avail of the offer.
A business usually considers this type of strategy to generate sales especially during lean months.
Sometimes the same is being done to let go of some inventories. The business however must
refrain from doing this too often as this will be interpreted as the norm and the business model
might suffer Thus, to make discounts as effective promotion strategies the following must be
observed.

• Make sure that your offer can really lure your customer.
• There is an effect in your profitability.
Free delivery and acknowledge return-This tactic attracts customer which holds the idea that
products purchased are guaranteed to be of good quality and as an assurance return is welcomed.
Flash sales-A flash sale is basically an offer that only lasts for a limited time and it's a great way
to create a sense of urgency for the customer to buy. Many retailers are now adopting this
strategy as a way to sell more products and get rid of surplus stock.
Buy more, save more - This move entices the customer to purchase more even those whose
budget is limited only A value for your money seems hard to resist. The promotion attracts a
repeat purchase concept.
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Product giveaways or branded gifts - Filipinos love to have samples first before they buy the
product Giveaways must be properly planned as this may backfire to the business, especially if
the giveaways are of poor quality. Customers might create the impression attached to your
product or service. That's why a business must be very careful in making a promotion like this
one, especially where the items are bought from unknown suppliers.

E. People
The most important resource of any organization is its people. Much of how customers
rate the service experience hinges on the person delivering it. Professionalism and courtesy go a
long way in any service business. Other attributes become critical depending on what services are
being offered - discretion in a psychiatric practice or tact in funeral services, for instance.
Oftentimes, a company's reputation can be seen on the way their people behave. A company full
of happy, courteous, and loyal people is a very good indication that they are satisfied with the
way they are treated and therefore a plus factor for the company's reputation.

F. Packaging
The fifth element in the marketing mix is the packaging. Develop the habit of standing
back and looking at every visual element in the packaging of your product or service through the
eyes of a critical prospect. Remember, people form their first impression about you within the
first 30 seconds of seeing you or some element of your company small improvements in the
packaging or external appearance of your product or service can often lead to completely
different reactions from your customers.
With regard to the packaging of your business, your product or service, you should think
in terms of everything that the customer sees from the first moment of contact with your
company all the way through the purchasing process Packaging refers to the way your product or
service appears from the outside.
Packaging also refers to your people and how they dress and groom. It refers to your
offices, your waiting rooms, your brochures, your correspondence and every single visual element
about your company. Everything counts. Everything helps or hurts Everything affects your
customer's confidence about dealing with you.

G. Positioning
The next P is positioning You should develop the habit of thinking continually about how
you are positioned in the hearts and minds of your customers. How do people think and talk
about you when you're not present? How do people think and talk about your company? What
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positioning do you have in your market, in terms of the specific words people use when they
describe you and your offerings to others?