entrepreneurship iii

8/8/2019 Entrepreneurship III

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EntrepreneurshipEntrepreneurship

16 October, 200816 October, 2008

SURJYA B. GOHAINSURJYA B. GOHAIN


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Entrepreneur vs. ManagerEntrepreneur vs. Manager

ManagersManagers EntrepreneursEntrepreneurs

PrimaryPrimary

MotivesMotives

Promotion,Promotion,

rewards/perks, viz. office,rewards/perks, viz. office,

staff, powerstaff, power

Independence,Independence,

opportunity to create,opportunity to create,

moneymoney

TimeTime

OrientationOrientation

ShortShort--termterm--meetingmeeting

budgets, weekly, monthly,budgets, weekly, monthly,quarterly, annual planningquarterly, annual planning

horizonshorizons

Survival and achievingSurvival and achieving

5 to 10 year growth of5 to 10 year growth ofbusinessbusiness

ActivityActivity Delegates & supervisesDelegates & supervises Direct involvementDirect involvement

RiskRisk CarefulCareful Moderate risk Moderate risk--takertaker

StatusStatus Concerned about statusConcerned about statussymbolsymbol

No concern aboutNo concern about

status symbolstatus symbol


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Entrepreneur vs. ManagerEntrepreneur vs. Manager

ManagersManagers EntrepreneursEntrepreneurs

Failure &Failure &

MistakesMistakes

Tries to avoid mistakesTries to avoid mistakes

and surprisesand surprises

Deals with mistakesDeals with mistakes

and failuresand failures

DecisionsDecisions Usually agrees with thoseUsually agrees with thosein the upper managementin the upper management

positionspositions

Follows dreams withFollows dreams with

decisionsdecisions

Serves whomServes whom OthersOthers Self and customersSelf and customers

Family HistoryFamily History Family members workedFamily members worked

for large organizationsfor large organizations

Small business orSmall business or

professionalprofessionalbackgroundbackground

RelationshipRelationship

with Otherswith Others

Hierarchy as basicHierarchy as basic

relationshiprelationship

Transactions & dealTransactions & deal

making as basicmaking as basic

relationshiprelationship


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Entrepreneurial FeelingEntrepreneurial Feeling

EntrepreneursEntrepreneurs comecome fromfrom aa variety variety ofofeducational,educational, familyfamily andand work work experienceexperiencebackgroundsbackgrounds

CertainCertain commoncommon denominatorsdenominators areareLocusLocus ofof controlcontrol

NeedNeed ofof independenceindependence

NeedNeed forfor achievementachievementRiskRisk takingtaking


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Locus of ControlLocus of Control

WhetherWhether aa personperson isis drivendriven byby anan innerinner needneed toto succeedsucceed

andand winwin WillWill sheshe bebe ableable toto sustainsustain thethe drivedrive andand energyenergy requiredrequired

toto overcomeovercome thethe inertiainertia inin formingforming somethingsomething newnew

toto managemanage thethe newnew enterpriseenterprise andand makemake itit growgrow PeoplePeople with with externalexternal locuslocus ofof controlcontrol maymay inhibitinhibit

entrepreneurialentrepreneurial tendenciestendencies

ResearchResearch isis notnot conclusiveconclusive aboutabout locuslocus ofof controlcontrol

somesome studiesstudies indicatedindicated thatthat entrepreneurialentrepreneurial intentionsintentions werewere

associatedassociated withwith internalityinternality

otherother studiesstudies showedshowed somesome entrepreneursentrepreneurs underunder stressstress shiftedshifted

towardtoward greatergreater externalityexternality


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Need for Independence & AchievementNeed for Independence & Achievement

BeingBeing onesones ownown bossboss oneone ofof thethe strongeststrongestneedsneeds ofof anan entrepreneurentrepreneur generallygenerally needsneeds toto dodo thingsthings inin his/herhis/her ownown wayway

hashas aa difficultdifficult timetime workingworking forfor someonesomeone elseelse

NeedNeed forfor achievementachievement entrepreneursentrepreneurs havehave aastrongstrong desiredesire toto bebe recognizedrecognized individualindividual responsibilityresponsibility forfor problemproblem solving,solving, settingsetting

goals,goals, andand reachingreaching thesethese goalsgoals throughthrough theirtheir ownownefforteffort

moderatemoderate riskrisk takingtaking asas aa functionfunction ofof skill,skill, notnot chancechance

knowledgeknowledge ofof resultsresults of of decision/taskdecision/task

accomplishmentaccomplishment


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Risk TakingRisk Taking

RiskRisk takingtaking whether whether financial,financial, social,social, ororpsychological,psychological, isis partpart ofof thethe entrepreneurialentrepreneurial

processprocess

ManyMany studiesstudies ofof riskrisk takingtaking inin entrepreneurshipentrepreneurshiphavehave focusedfocused onon thethe riskrisk--takingtaking propensitypropensity

HoweverHowever notnot yetyet empiricallyempirically establishedestablished thatthat riskrisk

takingtaking propensitypropensity isis aa distinguishingdistinguishing characteristiccharacteristicofof entrepreneursentrepreneurs


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Entrepreneur BackgroundEntrepreneur Background

Childhood Family Environment

researchresearch conductedconducted onon birthbirth order,order, parentsparents occupationoccupation andand socialsocial

status,status, andand relationshiprelationship withwith parentsparents

moremore femalefemale entrepreneursentrepreneurs areare foundfound toto bebe firstbornfirstborn;; nono

establishedestablished relationshiprelationship withwith entrepreneurshipentrepreneurship soso farfar

beingbeing thethe firstbornfirstborn oror anan onlyonly childchild isis postulatedpostulated toto resultresult inin thethechildchild receivingreceiving specialspecial attentionattention andand therebythereby developingdeveloping moremore selfself--

confidenceconfidence

strongstrong evidenceevidence thatthat entrepreneursentrepreneurs tendtend toto havehave selfself--employedemployed oror

entrepreneurialentrepreneurial fathersfathers independentindependent naturenature andand flexibilityflexibility ofof selfself--employmentemployment exemplifiedexemplified

byby thethe fatherfather isis ingrainedingrained atat anan earlyearly ageage

encouragementencouragement forfor independence,independence, achievementachievement andand responsibilityresponsibility

byby parentsparents establishestablish thethe desirabilitydesirability ofof entrepreneurialentrepreneurial activityactivity


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Entrepreneur BackgroundEntrepreneur Background Education

researchresearch indicatesindicates thatthat educationeducation relatedrelated toto thethe fieldfield ofof thethe ventureventure

helpshelps thethe entrepreneurentrepreneur toto confrontconfront problemsproblems

educationeducation usefuluseful inin thethe areasareas ofof finance,finance, strategicstrategic planning,planning,

marketingmarketing andand managementmanagement

abilityability toto dealdeal withwith peoplepeople andand communicationcommunication skillsskills (verbal(verbal &&

written)written) areare alsoalso importantimportant

Personal Values

studiesstudies indicateindicate thatthat anan entrepreneurentrepreneur hashas aa differentdifferent setset ofof attitudesattitudes

aboutabout thethe naturenature ofof thethe managementmanagement processprocess andand businessbusiness

naturenature ofof thethe enterprise,enterprise, opportunism,opportunism, institutioninstitution andand individualityindividuality

ofof thethe entrepreneurentrepreneur makesmakes him/herhim/her differentdifferent fromfrom managermanager

ethicsethics andand ethicalethical behaviourbehaviour onon thethe partpart ofof thethe entrepreneurentrepreneur asas wellwell

asas stockstock holdersholders areare alsoalso importantimportant


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Age

therethere isis differencedifference betweenbetween entrepreneurialentrepreneurial ageage (the(the

ageage ofof thethe entrepreneurentrepreneur reflectedreflected inin thethe experience)experience)

andand chronologicchronologic ageage

mostmost entrepreneursentrepreneurs initiateinitiate theirtheir entrepreneurialentrepreneurialcareerscareers betweenbetween thethe agesages ofof 2222 andand 4545

anan entrepreneurentrepreneur requiresrequires

experienceexperience financialfinancial supportsupport

andand aa highhigh energyenergy levellevel inin orderorder toto launchlaunch andand managemanage aanewnew ventureventure successfullysuccessfully


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Work History

maymay bebe aa negativenegative displacementdisplacement inin thethe decisiondecision toto

launchlaunch aa newnew entrepreneurialentrepreneurial ventureventure

previousprevious workwork inin thethe areasareas ofof finance,finance, productproduct oror

serviceservice development,development, manufacturing,manufacturing, developmentdevelopment ofofdistributiondistribution channelschannels andand preparationpreparation ofof aa marketingmarketing

planplan isis importantimportant

inin anan establishedestablished ventureventure managerialmanagerial experienceexperience andandskillsskills becomebecome importantimportant

asas ventureventure increasesincreases entrepreneursentrepreneurs areare exposedexposed toto

moremore newnew ventureventure opportunitiesopportunities


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MotivationMotivation

IndependenceIndependence notnot workingworking forfor anybodyanybody elseelse MoneyMoney

Job satisfactionJob satisfaction

AchievementAchievement

OpportunityOpportunity

Work and family situation as well as the roleWork and family situation as well as the rolemodel of the entrepreneur are also importantmodel of the entrepreneur are also important


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Role ModelRole Model

IndividualsIndividuals influenceinfluence anan entrepreneursentrepreneurs careercareer

choicechoice andand stylestyle

RoleRole modelsmodels supportsupport asas mentorsmentors duringduring andand afterafter

thethe launchlaunch ofof aa newnew ventureventure

AnAn entrepreneurentrepreneur mustmust establishestablish connectionsconnections toto

supportsupport resourcesresources earlyearly inin thethe newnew ventureventure

formationformation processprocess

NetworkingNetworking betweenbetween entrepreneurentrepreneur andand otherother

individualsindividuals dependdepend onon frequency,frequency, levellevel andand

reciprocityreciprocity ofof thethe relationshiprelationship


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Support SystemsSupport Systems Moral Support Network

cheeringcheering squadsquad ofof familyfamily andand friendsfriends

Professional Support Network

EntrepreneurEntrepreneur needsneeds adviceadvice andand counselcounsel throughoutthroughout thethe

establishmentestablishment ofof thethe newnew ventureventure

AdviceAdvice cancan bebe obtainedobtained fromfrom

aa mentormentor

businessbusiness associatesassociates selfself--employedemployed individualsindividuals withwith experienceexperiencestartingstarting aa business,business, clients,clients, oror buyersbuyers ofof thethe ventures ventures product/product/

service,service, expertsexperts suchsuch asas consultants,consultants, lawyerslawyers oror accountantsaccountants andand

thethe venturesventures supplierssuppliers

tradetrade associationsassociations

personnelpersonnel affiliationsaffiliations thoughthough hobbies,hobbies, sportingsporting events,events, clubs,clubs,

civiccivic involvementsinvolvements andand schoolschool alumnialumni groupsgroups


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The New Business IdeaThe New Business Idea


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Sources of

New Ideas

R & D

--helps conceptualizehelps conceptualize

& develop new ideas& develop new ideas

Government

--patent officepatent office

--govt. regulationsgovt. regulations

Existing Companies

--establish formal methodestablish formal method

for monitoring &for monitoring &evaluating competitiveevaluating competitive

Ps & SsPs & Ss

Consumers

-informal monitoringinformal monitoring

--formal forumformal forum

--market sizemarket size

Distribution Channels--have ideas/familiarityhave ideas/familiarity

with customer needswith customer needs

--can help in marketingcan help in marketing


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Focus Groups

Problem Inventory Analysis

Brainstorming

Methods for

Generating Ideas


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Idea Generating MethodsIdea Generating Methods

FocusFocus GroupsGroups

aa moderatormoderator leadsleads aa groupgroup ofof peoplepeople ((88--1414)) throughthrough anan open,open,inin--depthdepth discussiondiscussion

BrainstormingBrainstorming

basedbased onon thethe factfact thatthat peoplepeople cancan bebe stimulatedstimulated toto greatergreatercreativitycreativity byby meetingmeeting with with othersothers andand participatingparticipating inin

organisedorganised groupgroup experiencesexperiences

nono criticismcriticism allowedallowed;; nono negativenegative commentscomments

freewheelingfreewheeling -- thethe wilderwilder thethe ideaidea thethe betterbetter

greatergreater thethe numbernumber ofof ideas,ideas, greatergreater thethe likelihoodlikelihood ofof usefuluseful

ideasideas emergingemerging

combinationscombinations andand improvementsimprovements ofof ideasideas areare encouragedencouraged


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Idea Generating MethodsIdea Generating Methods

ProblemProblem InventoryInventory AnalysisAnalysis consumersconsumers areare providedprovided withwith aa listlist ofof problemsproblems inin aa

generalgeneral productproduct categorycategory

theythey areare askedasked toto identifyidentify andand discussdiscuss productsproducts inin thatthat

categorycategory thatthat havehave thethe particularparticular problemproblem

knownknown productsproducts cancan bebe relatedrelated toto thethe suggestedsuggested

problemsproblems

newnew productproduct ideaidea cancan bebe generatedgenerated forfor furtherfurtherevaluationevaluation


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CREATIVE PROBLEM SOLVINGCREATIVE PROBLEM SOLVING


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Creative Problem SolvingCreative Problem Solving

AA methodmethod forfor obtainingobtaining newnew ideasideas focusingfocusing onon

thethe parametersparameters

CreativityCreativity isis anan importantimportant attributeattribute ofof aa successfulsuccessful

entrepreneurentrepreneur

declinesdeclines withwith age,age, educationeducation andand lacklack ofof useuse

stifledstifled byby perceptual,perceptual, cultural,cultural, emotionalemotional andand

organizationalorganizational factorsfactors

CreativityCreativity cancan bebe unlocked,unlocked, creativecreative ideasideas andand

innovationsinnovations generatedgenerated byby usingusing variousvarious problemproblem--

solvingsolving techniquestechniques


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Creative Problem Solving TechniquesCreative Problem Solving Techniques

Brainstorming Reverse Brainstorming

similarsimilar toto brainstormingbrainstorming butbut criticismcriticism isis

allowedallowed involvesinvolves identificationidentification ofof everythingeverything wrongwrong

withwith anan ideaidea

followedfollowed byby aa discussiondiscussion ofof waysways toto overcomeovercomethosethose problemsproblems


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Gordon Method

beginsbegins withwith groupgroup membersmembers notnot knowingknowing thethe exactexact

naturenature ofof thethe problemproblem

entrepreneurentrepreneur startsstarts byby mentioningmentioning aa generalgeneral conceptconcept

associatedassociated withwith thethe problemproblem

groupgroup respondsresponds byby givinggiving ideas,ideas, aa conceptconcept isis

developed,developed, followedfollowed byby relatedrelated concepts,concepts, throughthrough

guidanceguidance byby thethe entrepreneurentrepreneur actualactual problemproblem revealedrevealed andand groupgroup makesmakes suggestionssuggestions

forfor implementationimplementation oror improvementimprovement ofof thethe finalfinal

solutionsolution


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Checklist Method

aa newnew ideaidea isis developeddeveloped throughthrough aa listlist ofof relatedrelatedissuesissues oror suggestionssuggestions

aa listlist ofof questionsquestions oror statementsstatements cancan bebe usedused toto guideguide

thethe directiondirection ofof developingdeveloping aa newnew ideaidea Free Association

aa wordword oror phrasephrase relatedrelated toto thethe problemproblem isis writtenwrittendowndown

thenthen anotheranother andand another,another, with with eacheach newnew wordwordattemptingattempting toto addadd somethingsomething newnew toto thethe ongoingongoingthoughtthought processesprocesses

chainchain ofof ideasideas endend withwith aa newnew productproduct ideaidea emergingemerging


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Scientific Method

definingdefining thethe problemproblem

analysinganalysing thethe problemproblem

gatheringgathering andand analysinganalysing datadata

developingdeveloping andand testingtesting potentialpotential solutionssolutions choosingchoosing thethe bestbest solutionsolution

Collective Notebook Method

groupgroup membersmembers regularlyregularly recordrecord ideas,ideas, possiblepossiblesolutionssolutions toto aa problemproblem atat leastleast onceonce butbut preferablypreferably 33timestimes aa dayday

atat thethe endend ofof thethe month,month, aa listlist ofof thethe bestbest ideasideas isis

developed,developed, alongalong withwith anyany suggestionsuggestion


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PRODUCT PLANNING &PRODUCT PLANNING &

DEVELOPMENT PROCESSDEVELOPMENT PROCESS


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Product Planning & DevelopmentProduct Planning & Development

OnceOnce ideasideas emerge,emerge, theythey needneed furtherfurtherdevelopmentdevelopment andand refinementrefinement intointo thethe finalfinalproductproduct oror serviceservice

TheThe productproduct planningplanning andand developmentdevelopmentprocessprocess resultsresults inin thethe startstart ofof thethe productproduct

lifecyclelifecycle

thethe stagesstages eacheach productproduct goesgoes throughthrough fromfromintroductionintroduction toto declinedecline


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INTRODUCTIONINTRODUCTION

GROWTHGROWTH

MATURITYMATURITY

DECLINEDECLINE

P

R

O

DU

C

T

LI

F

E

CY

C

L

E


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CriteriaCriteria shouldshould bebe developeddeveloped toto evaluateevaluate thethenewnew productproduct inin termsterms ofof

marketmarket opportunityopportunity

competitioncompetitionthethe marketingmarketing systemsystem

financialfinancial factorsfactors

productionproduction factorsfactors

AA marketmarket opportunityopportunity inin thethe formform ofof aa newnew ororcurrentcurrent needneed forfor thethe productproduct ideaidea mustmust existexist


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AssessmentAssessment ofof thethe marketmarket opportunityopportunity andand sizesizeneedsneeds toto taketake intointo accountaccount suchsuch factorsfactors asas

characteristicscharacteristics andand attitudesattitudes ofof consumersconsumers

marketmarket sizesize inin dollarsdollars andand centscents

naturenature ofof thethe marketmarket wrt wrt stagestage inin thethelifecyclelifecycle

thethe shareshare ofof thethe marketmarket thethe productproduct couldcouldcapturecapture

CurrentCurrent competingcompeting producers,producers, prices,prices, marketingmarketingpoliciespolicies shouldshould alsoalso bebe evaluatedevaluated


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TheThe newnew productproduct shouldshould

havehave somesome uniqueunique differentialdifferential advantageadvantage basedbased onon anan

evaluationevaluation ofof allall competitivecompetitive productsproducts fillingfilling thethe samesame

consumerconsumer needsneeds

bebe compatiblecompatible withwith existingexisting managementmanagement capabilitiescapabilitiesandand marketingmarketing strategiesstrategies

bebe ableable toto bebe supportedsupported byby andand contributecontribute toto thethe

companyscompanys financialfinancial structurestructure bebe evaluatedevaluated byby estimatingestimating manufacturingmanufacturing cost/unit,cost/unit,

salessales && advadv expense/unit,expense/unit, amountamount ofof capitalcapital andand

inventoryinventory requiredrequired


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TheThe breakbreak--eventevent pointpoint andand thethe longlong--termterm profitprofitoutlookoutlook forfor thethe productproduct needneed toto bebe determineddetermined

CompatibilityCompatibility ofof thethe newnew productsproducts productionproduction

requirementsrequirements withwith existingexisting plantplant && machinerymachinery

personnelpersonnel shouldshould bebe determineddetermined

LegalLegal andand ethicalethical issuesissues hashas alsoalso toto bebe consideredconsidered


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IDEA STAGEIDEA STAGE

CONCEPT STAGECONCEPT STAGE

TESTMARKETING STAGETESTMARKETING STAGE

PRODUCT DEVELOPMENT STAGEPRODUCT DEVELOPMENT STAGE

COMMERCIALISATION STAGECOMMERCIALISATION STAGE

PRO

DUCT

PLANNING

A

N

D

DEVE

LOP

MENT

S

T

A

G

E


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Idea Stage

promisingpromising ideasideas compatiblecompatible withwith thethe marketsmarkets valuesvalues

cancan bebe furtherfurther developeddeveloped

systematicsystematic marketmarket evaluationevaluation checklistchecklist methodmethod

expressesexpresses eacheach newnew ideaidea inin termsterms ofof itsits chiefchief values,values,merits,merits, andand benefitsbenefits

thethe newnew productproduct shouldshould alsoalso havehave value value toto thethe

companycompany cashcash outflow,outflow, cashcash inflow,inflow, contributioncontribution toto profit,profit,

ROIROI needsneeds toto bebe evaluatedevaluated


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Value ConsiderationsValue Considerations Cash outflow

R&DR&D costscosts

MarketingMarketing costscosts CapitalCapital equipmentequipment costscosts

OtherOther costscosts

Cash inflow

SalesSales ofof newnew productproduct

EffectEffect onon additionaladditional salessales ofof existingexisting productsproducts

Profit

FromFrom newnew productproduct

AffectingAffecting additionaladditional salessales ofof existingexisting productsproducts

Relative return ROIROI

PVPV

DCFDCF

ROEROE

Compared to other investments


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Concept Stage

the refined product idea is tested to determinethe refined product idea is tested to determine

consumer acceptance with out necessarily incurringconsumer acceptance with out necessarily incurring

the cost of manufacturingthe cost of manufacturing

initial reactions to the concept are obtained frominitial reactions to the concept are obtained frompotential customers or members of the distributionpotential customers or members of the distribution

channelchannel

selected respondents are exposed to statements thatselected respondents are exposed to statements thatreflect the physical characteristics and attributes ofreflect the physical characteristics and attributes of

the product areathe product area

compare the primary features with existing orcompare the primary features with existing or

competing products, if anycompeting products, if any


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Concept Stage

favourable as well as unfavourable product featuresfavourable as well as unfavourable product features

can be uncovered from analysing consumerscan be uncovered from analysing consumers

responsesresponses

features, price, and promotion should be evaluatedfeatures, price, and promotion should be evaluatedfor the product conceptfor the product concept

R&D can be directed to develop a more marketableR&D can be directed to develop a more marketable

productproduct


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Product Development Stage

tools like the consumer panel, is used to determinetools like the consumer panel, is used to determineconsumer reaction to the physical productconsumer reaction to the physical product

a group of potential consumers is given producta group of potential consumers is given product

samplesample participants keep a record of their use of the productparticipants keep a record of their use of the productand comment on its virtues and deficienciesand comment on its virtues and deficiencies

one or more competitive products can also be givenone or more competitive products can also be given

simultaneouslysimultaneously multiple brand comparisons, risk analysis, level ofmultiple brand comparisons, risk analysis, level of

repeat purchases, can be used to determine consumerrepeat purchases, can be used to determine consumerpreferencepreference


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Test Marketing Stage

finalfinal stagestage beforebefore commercialisationcommercialisation ofof thethe newnew

productproduct

aa marketmarket testtest cancan bebe donedone toto increaseincrease thethe certaintycertainty ofof

successfulsuccessful commercialisationcommercialisation itit providesprovides actualactual salessales results,results, whichwhich indicateindicate thethe

acceptanceacceptance levellevel ofof consumersconsumers

positivepositive testtest resultsresults indicateindicate thethe degreedegree ofof probabilityprobabilityofof aa successfulsuccessful productproduct launchlaunch andand companycompany

formationformation

entrepreneurship iii

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