Module_4_TIME_MVS TIME TIME TECHNOLOGICAL
- 1. Family Business Idea Generation and Feasibility Analysis- Idea Generation
- 2. Module 4 • Family Business: Role and Importance of Family Business, Contributions of Family Business in India, Stages of Development of a Family Business, Characteristics of a Family-owned Business in India, Various types of family businesses. • Idea Generation and Feasibility Analysis- Idea Generation; Creativity and Innovation; Identification of Business Opportunities; Market Entry Strategies; Marketing Feasibility; Financial Feasibilities; Political Feasibilities; Economic Feasibility; Social and Legal Feasibilities; Technical Feasibilities; Managerial Feasibility, Location and Other Utilities Feasibilities.
- 3. Role and Importance of Family Business • Family-owned businesses are the backbone of the economy as they create wealth, provide jobs, are locally rooted and connected to communities. • They seem to be around for long period of time. From historical view point, keeping in mind the evolutionary reasons, most countries have family businesses constituting the largest category in terms of ownership; estimates do vary, but is above 75 percent in all cases. • About one third of the companies listed in Fortune 500 are family businesses (Lee 2004). Since they normally do not have short term orientation and are interested in growing the family wealth with necessary precautions with a different set of strategic goals compared to non- family owned private companies, (Ward, 1987), their long term contribution to economy is significant. • This is true with the Indian economy too. Families are united over generations by their vision, values and emotional bondage. There is growing realization that families have a social role to fulfil and be responsible for specific activities including community development through charity (Gallo, 2004). • However, long term sustenance of family business depends on its smooth survival across generations.
- 4. DEFINITIONS • Family business is a corporation that is entirely owned and managed by members of a single family. • Family firm is a corporation that is entirely owned by members of single family. It is also known as company owned, controlled and operated by members of one or several families. • Family business is one in which one or more members of one or more families have ownership, interest and significant commitment towards business.
- 5. CONTRIBUTIONS OF FAMILY BUSINESSES IN INDIA
- 6. Stages of Development of a Family Business Stages of Family Business Development The typical family business goes through four stages in its development: • 1. Entrepreneurial • 2. Functionally-Specialized • 3. Process-Driven • 4. Market-Driven
- 7. Stages of Development of a Family Business • Entrepreneurial: In this phase someone in the family starts a business after having identified a business opportunity. At this stage, the business is customer – centric. The entrepreneurial vision develops and a mission is set for the organization. • Functionally Specialized: This is the growth phase for the family business. In this phase, the organization is divided into various functions and priority is given to growth and increasing the scale of operation. The organization becomes more flexible during this phase and the use of control measures is limited.
- 8. Stages of Development of a Family Business • Process Driven: in this process- driven phase, family business is system –oriented and processes are set. The greatest attention is given to core competencies and to competing with other businesses in achieving customer satisfaction. • Market Driven: During this phase, the family business matures and is completely driven by market forces. The business enters various markets and crosses geographical boundaries by strategic alliances.
- 9. Stages of Development of a Family Business
- 10. Characteristics of a Family-owned Business in India • Importance of family relationship: Family relationship is the most important factor in determining the position a person holds in the business. • Compensation of the board of directors: Family members, including those who are neither contributing nor involves in the business, are on the board of directors. • Loyalty: Members of the extended family and relatives have a very strong sense of loyalty to the family and this, by default, translate into loyalty to the business. • Dedication of family members: The family’s fortunes are usually tied to that of the family business, the owning family shows great dedication and single-mindedness in ensuring the continued survival and success of the business. • Male-dominated: Sons and male members are more likely to hold higher positions and succeed as the CEO of the company. The role of women is often that of a facilitator and mother figure to family members and employees. • Dominance of certain trading communities: Some communities have been very successful in business and are synonymous with family-owned businesses in India.
- 11. VARIOUS TYPES OF FAMILY BUSINESSES
- 12. TYPES OF FAMILY BUSINESS • Family owned business : is a profit organization were number of voting shares, but not necessarily majority of shares are owned by members of single extended family but significantly influenced by other members of family. • Family owned and managed business : is a profit organization were number of voting shares, but not necessarily majority of shares are owned by members of single extended family but significantly influenced by other members of family. In this business has active participation by one family member in the top management of company so that one or more family members have ultimate management control.
- 13. TYPES OF FAMILY BUSINESS • Family owned and led company : is a profit organization were number of voting shares, but not necessarily majority of shares are owned by members of single extended family but significantly influenced by other members of family. In this business has active participation by one family member in the top management of company so that one or more family members have ultimate management control. But in this method one member has major influence on business activities who in charge of regulating activities of business and members of family business.
- 14. What is An Idea, Opportunity and Innovation? • An idea is a concept for a product or service that does not exist or is not currently available in a market niche. • In contrast, an opportunity is an idea for a new product or service with a market that is willing to pay for that product or service so that it can form the basis of a profitable business. • Innovation is the process of making changes to something that adds value to customers.
- 17. Idea Generation and Feasibility Analysis- Idea Generation • A business opportunity may be defined as a set of favorable circumstances in which an entrepreneur can exploit a new business idea that has the potential to generate profits. Business opportunities have the following four fundamental features: 1. They create or add significant value to the customer. 2. They solve a significant problem by removing pain point or meeting a significant want or need for which someone is willing to pay a premium. 3. They have a robust market, margin and money making characteristics that will allow the entrepreneur to estimate and communicate sustainable value to potential stockholders. 4. They are a good fit with the founder and management teams at the time and marketplace along with an attractive risk- reward balance.
- 18. Good Business Opportunity • A business idea is an idea that can be used for commercial purposes. There can be many sources of business ideas, including the following: 1. A resolved problem faced by an actual or potential entrepreneur. 2. An unmet customer need discovered by an actual or potential entrepreneur at a place of employment. 3. Changes in business environment.
- 19. 5 step framework to select good business opportunity: • Urgency of the market need • Adequate market size • Sound business model • Potential brand value • An able management team
- 20. 5 step framework to select good business opportunity: • Urgency of the market need The business idea should envision a product or services that satisfies a market need or need of the customer. The market need has to be carefully assessed by consulting industry experts as well as potential customers. The greater the opportunity for a profitable business. • Adequate market size A business usually targets a particular market segment after assessing their demographical, geographical and lifestyle factors. In order to make business viable, a large number of potential customers should exist. There is a need to find out the potential market size for the product or service.
- 21. 5 step framework to select good business opportunity: • Sound business model A business model is a broad range of description of various core aspects of business, such as purpose, strategies, infrastructure, organizational structures, marketing programmes, and operational process and policies. A business model that presents a plan to generate profits in 3 to5 years is considered to be relatively good. • Potential brand value The product/ service being offered must be differentiated from those being offered by competitors to maintain a competitive advantage in the market. It is necessary to access the potential brand value of the product or service envisioned in order to ensure a fair chance of survival against competition by existing as well as future products.
- 22. 5 step framework to select good business opportunity: • An able management team The ability and passion of team members to use a business opportunity is important to success. The team should have contacts among suppliers, competitors, and customers. The number and quality of contacts up and down the value chain is an important determinant of eventual business success. On the whole the business should be big enough to make it worthwhile and the team should be looking forward to being involved with it for a long time.
- 23. Idea as an opportunity • A business idea becomes a good business opportunity when it has the following four essential qualities: 1. Attractiveness 2. Timeliness 3. Durability 4. The quality of being anchored in a product or service that creates or adds value for its buyer or end user.
- 24. How to generate business ideas Brainstorming: • This is a technique used to quickly generate a large no. of ideas and solutions to problem. • Brainstorming works well with 8-12 people and should be performed in a relaxed environment. • This session usually starts with the facilitator broadly stating the problem and setting time limit for the session. • The facilitator clearly sets down the rules, discouraging criticism of any kind and encouraging a freewheeling approach, the voicing of as many ideas as possible, and collective and constructive efforts towards the improvement of ideas. • The facilitator writes each idea presented randomly by group members, once the time is up. The best ideas are selected, based on a few criteria decided upon in advance ( like cost effectiveness) • The selection must be done on the basis of a consensus from everyone in the group. • Score is given to all the ideas, the idea with highest score may be used to solve the problem. • The facilitator should make the session fun for everybody, with no one dominating or inhibiting the discussion.
- 25. How to generate business ideas Survey method: • The survey method is used to collect information by direct observation of a phenomenon of data from a set of people. • The survey method involves gathering information from a representative sample population, that is a fraction of the whole population under study that presents an accurate proportional representation of the population. • Surveys generate new products, services and business ideas because they ask specific questions and get specific answers. • Surveys may be of different types, such as general and specific surveys, regular and ad hoc surveys, preliminary and final surveys, and census and sample survey.
- 26. How to generate business ideas Reverse Brainstorming: • This method is similar to brainstorming, with the exception that criticism is allowed. • This is also called as negative brainstorming • In this technique discussion about the negative aspects of every idea that has been generated through brainstorming. • Also called the shifting process, this process most often involves the identification of everything that is wrong with an idea, followed by a discussion of ways to overcome these problems.
- 27. How to generate business ideas The Gordon method: • This method is similar to brain storming. Collective discussion addresses every aspect of the planned product in an uninhibited solution oriented way. • Ex: to devise a new pen holder, the group discusses the holding theme and examines all possible meanings of thus word and all possible examples of holding. • The group will later sit and study each idea to see if any of them may be useful for the planning od a new pen holder. • This discussion encourages a fresh, creative and unusual approach to developing a new product.
- 28. Creation of opportunity Entrepreneurial opportunities often come into being because of certain external changes, such as • Technological • Regulatory • Political • Social • Demographic • Economic
- 29. Technological changes: • These make it possible for people to do things in new and more productive ways. • Technological changes can take the form of five form of business opportunity new products and services. As shown in table.
- 30. Political & regulatory changes • This leads to business opportunities by paying the way for new, more productive use of resources or a redistribution of wealth from one person to another. • Statutory and regulatory requirements create opportunities for entrepreneurs to start firms that help other firms and the community to comply with the requirements. • When the helmets were made compulsory by the government, helmets were reintroduced into the market with new features and the demand for helmets improved substantially.
- 31. Social and Demographic changes • These changes such as changes in family and work patterns, the aging of the population, Increasing diversity at the workplace, increasing focus on health and fitness, the increase in the number of cell phone and internet users, and new forms of entertainment, lead to the creation of business opportunities because they alter people’s preferences or demand for products and services, and consequently make it possible to generate new ideas to meet new demands.
- 32. Economic Changes • Economic forces affect business opportunities by determining who has money to spend. • An increase in the number of women in the workforce over the few decades and their related increase in disposable income is largely responsible for the number of boutique clothing stores targeting professional women that have opened in the past few years. A business opportunity has four essential qualities: 1. Attractive 2. Timely 3. Durable 4. Anchored in a product, service or business that creates or adds value for its buyer or end user.
- 33. An opportunity has four essential qualities
- 34. Identify a business opportunity • Studies have demonstrated that the identification of a business opportunity may also be a cognitive process or an innate skill. • Some people believe that entrepreneurs have an intuition or a “sixth sense” that allows them to see opportunities that others miss. • Creativity is the process of generating a novel or useful idea. • It is important for entrepreneurs to grab a business opportunity before the market becomes saturated with competitors and the window of opportunity is closed to them.
- 35. Three Ways to Identify an Opportunity
- 36. There are 3 general approaches entrepreneurs use to identify an opportunity: 1. Observing trends: • Entrepreneurs can identify business opportunities by carefully observing trends. • The most important trends to follow are economic, social, technological, and political trends. • Ex: the development of e-commerce and laptop computers.
- 37. There are 3 general approaches entrepreneurs use to identify an opportunity: 2. Solving a problem: • Another approach to identify business opportunities is to recognize and solve a pressing problem that customers are facing today. • From an entrepreneur’s point of view, every problem is a disguised opportunity. • Ex: one of the most pressing problems facing countries around the globe is finding alternatives for fossil fuels.
- 38. There are 3 general approaches entrepreneurs use to identify an opportunity: 3. Finding gap in the market place: • A third approach to identifying business opportunities is to find a gap between what is needed by the customer and what is actually provided to the customer. • Finding such gaps can help entrepreneurs develop new products and improve existing ones. • Ex: over 3 decades ago, the lack of toy stores focusing on a child’s intellectual development resulted in the development of discovery toys, a California based company specializing in educational toys.
- 40. Feasibility study • Feasibility study is an assessment of the practicality of a proposed project. • Preliminary evaluation of idea to determining if it’s worth pursuing • Provides more secure notion that a business idea is viable • A feasibility study aims to objectively and rationally uncover the strengths and weaknesses of an existing business or proposed venture, opportunities and threats present in the environment, the resources required to carry through, and ultimately the prospects for success. • In its simplest terms, the two criteria to judge feasibility are cost required and value to be attained.
- 41. Why to do feasibility Analysis • Assess Economic Viability of Project • Protects from large capital investment • Outline ideas before implementation • Presents associated risk and return • Gives objective evaluation of project to lenders
- 43. Types of feasibility • Economic • Financial • Technical • Operational • Managerial • Marketing
- 44. MARKET ANALYSIS • A market, whether a place or not, is the arena for interaction among buyers and sellers. • From seller’s point of view, market analysis is primarily concerned with the aggregate demand of the proposed product/service in future and the market share expected to be captured. • Success of the proposed project clearly hinges on the continuing support of the customers. • segment the market according to some criteria such as geographic scope, demographic and psychological profile of the potential customers etc. • It is a study of knowing who all comprise your customers, for this you require information.
- 45. MARKET ANALYSIS • Consumption trends. • Past and present supply position • Production possibilities and constraints • Imports and Exports Competition • Cost structure • Elasticity of demand • Consumer behaviour, intentions, motivations, attitudes, preferences and requirements • Distribution channels and marketing policies in use • Administrative, technical and legal constraints impinging on the marketing of the product
- 46. FINANCIALANALYSIS • The objective of financial analysis is to ascertain whether the proposed project will be financially viable in the sense of being able to meet the burden of servicing debt and whether the proposed project will satisfy the return expectations of those who provide the capital. While conducting a financial appraisal certain aspects has to be looked into like: • Investment outlay and cost of project • Means of financing • Projected profitability • Break- even point • Cash flows of the project • Investment worthiness judged in terms of various criteria of merit • Projected financial position
- 47. TECHNICALANALYSIS The issues involved in the assessment of technical analysis of the proposed project may be classified into those pertaining to inputs, throughputs and outputs. • Input Analysis • Throughput Analysis • Output Analysis
- 48. Input Analysis • Input analysis is mainly concerned with the identification, quantification and evaluation of project inputs, that is, machinery and 67 materials. • You have to ensure that the right kind and quality of inputs would be available at the right time and cost throughout the life of the project. • You have to enter into long-term contracts with the potential suppliers; in many cases you have to cultivate your supply sources. • When Macdonald entered India, they developed sustainable sources of supply of potatoes, lettuce and other ingredients for their burgers. • The activities involved in developing and retaining supply sources are referred to as supply chain management.
- 49. Throughput Analysis • It refers to the production/operations that you would perform on the inputs to add value. • Usually, the inputs received would undergo a process of transformation in several stages of manufacture. • Where to locate the facility, what would be the sequence, what would be the layout, what would be the quality control measures, etc. are the issues that you would learn in greater details in subsequent lessons. Output Analysis • this involves product specification in terms of physical features- colour, weight, length, breadth, height; functional features; chemicalmaterial properties; as well as standards to be complied with such as BIS, ISI, and ISO etc.
- 50. ECONOMIC ANALYSIS • Economics is the study of costs- and- benefits. • In regard to the feasibility of the study the entrepreneur is concerned whether the capital cost as well as the cost of the product is justifiable vis-à-vis the price at which it will sell at the market place. • For example, technically, silver can be extracted from silver bromide, (a chemical used for processing the X-ray and photo films); but, the cost of extraction is so high that it would not be economically feasible to do so. • Likewise, until recently cost of harnessing solar power was prohibitively high. This cost-benefit analysis goes into financial calculations for profitability analysis that we discussed under financial analysis. • At this stage it is also useful to distinguish between the economic and commercial feasibility; whereas economic feasibility leads one to the unit cost of the product, commercial feasibility informs whether enough units would sell.
- 51. ECOLOGICALANALYSIS • In recent years, environmental concerns have assumed a great deal of significance especially for projects, which have significant ecological implications like power plants and irrigation schemes, and for environment polluting industries (like bulk drugs, chemicals and leather processing). • The concerns that are usually addressed include the following: 1. What is the likely damage caused by the project to the environment? 2. What is the cost of restoration measures required to ensure that the damage to the environment is contained within acceptable limits?
- 52. LEGALAND ADMINISTRATIVE • Think of the plight of the entrepreneur who worked on the idea of a laundry to cater to hotels and hospitals, finds it eminently feasible only to learn subsequently that ‘laundry’ does not figure as an industry within the administrative definition of SSI as applicable on that date. • Another entrepreneur in Kalyani (West Bengal) developed an Ayurvedic preparation only to find that the office of DIC did not have an expert to validate the project; the product had to be marketed as a confectionary item! What is implied from these examples is that the entrepreneur has to be sure also of the administrative and legal issues involved in the project. • These include, choice of the form of business organisation, registration and clearances and approvals from the diverse authorities.
- 53. Forms of Organisation • Sole Proprietor: At the time of startup the entrepreneur usually has to handle all functional responsibilities of the venture and handles production, marketing, personnel, finance himself. As a result the vast majority of new businesses start as sole proprietors. This form has the added merit of being free from formalities regarding incorporation or maintenance of accounts or auditing etc. • Partnership: As the business grows the requirements for funds and management will also increase which might lead him to enter into partnership with one or more persons. It is always preferable to have a written agreement in the form of a partnership deed which clearly indicates the names and addresses of the partners, their ages, contribution to capital, profit sharing ratio etc. This form also makes for pooling of skills and responsibilities and spread of risk.
- 54. • Company: A company can be a private limited company, in which case it can have a minimum of 2 and a maximum of 50 members. It can be a public limited company, 69 which has to have a minimum of 7 members, and there is no maximum limit. This form of organisation provides vast amounts of capital as they, unlike the private limited company, invite the general public to subscribe to its shares and also provide limited liability. The Companies Act of 1956 governs the companies. • Co-operative: A co-operative is an enterprise owned and controlled by people working in it. Generally they are formed for some specific purpose like a housing cooperative society.
- 55. • Clearances and Approvals: Setting up of an industrial unit requires the entrepreneur to obtain a number of clearances and approvals regarding land use, pollution control and safety. • In this regard, you would be required to interact with the local government authorities such as the municipalities/ village panchayats and state pollution control boards. • In case, you wish to avail the incentives accruing to the firms registered under Export Processing Zone/Special Economic Zone (SEZ), Software Technology Park (STP), or 100% Export Oriented Unit you would be required to register as such. • Besides, certain products may require specific clearances from the relevant departments/authorities. Box entitled ‘Product-Specific Clearances’ illustrates a few examples of the necessary clearances and approvals vis-à-vis specific products.
- 56. Economic feasibility • The purpose of the economic feasibility assessment is to determine the positive economic benefits to the organization that the proposed system will provide. • It includes quantification and identification of all the benefits expected. This assessment typically involves a cost/ benefits analysis.
- 57. METHODS • Economic rate of return (ERR) • Social rate of return • A vision to build a sustainable company with a workforce comprising 70 percent people with disability is no mean task. “Srikanth’s vision is inbuilt in the company. It is not just a lip service to CSR
- 59. Technical feasibility • This assessment is based on an outline design of system requirements, to determine whether the company has the technical expertise to handle completion of the project. • The technical feasibility assessment is focused on gaining an understanding of the present technical resources of the organization and their applicability to the expected needs of the proposed system. • It is an evaluation of the hardware and software and how it meets the need of the proposed system
- 60. Technical feasibility • When writing a feasibility report, the following should be taken to consideration: • A brief description of the business to assess more possible factors which could affect the study • The part of the business being examined • The human and economic factor • The possible solutions to the problem
- 61. Factors • Material Inputs • Manufacturing Process and Technology • Plant Capacity • Location • Machinery and Procurement
- 62. Financial Feasibility •Capital requirements •Financial rate of return •Overall attractiveness of the investment •Sources of Financing the project
- 65. Marketing • Demand: Bobba estimates the in-home health care sector to be growing at 25-30 per cent compounded annually. It will be a $100-billion market in 15- 20 years, he says. • Prices: It provides post-surgery care and senior care using high-end technology. Among the healthcare packages is a ~9,999 scheme for individuals, including a visits by doctors and services including blood pressure, sugar checks and email consultations. • Supply and Distribution: Here, there are no operating beds and there’s no real estate. It is about last-mile delivery. It’s about remote patient care
- 66. Factors • Marketing Potential • Competitors • Cost of Project • Economic Trends • Marketing Potential: In-home healthcare is estimated to be a $3-billion opportunity in India. • Competitors: With the number of old people rising, the business can only grow and more players are looking to enter the segment • Cost of Project • Economic Trends
- 67. Operational feasibility • Operational feasibility is a measure of how well a proposed system solves the problems, and takes advantage of the opportunities identified during scope definition and how it satisfies the requirements identified in the requirements analysis phase of system development. • The operational feasibility assessment focuses on the degree to which the proposed development projects fits in with the existing business environment and objectives with regard to development schedule, delivery date, corporate culture, and existing business processes. Elements: • Process • Evaluation • Implementation • Resistance • Strategies • Adapt and Review
- 68. Managerial Feasibility • Purpose: determine if business has sufficient skills/resources to bring product/service to market successfully • Non-financial factors important to consider here • 2 primary issues to consider: 1. Management prowess 2. Resource sufficiency
- 69. Importance of Feasibility Analysis • Understanding Demand • Assessing resources • Marketing feasibility • Marking a Time line