PREPARED BY : RAJA MAHANI BT RAJA SULAIMAN

COMMERCE DEPARTMENT POLISAS KUANTAN

CHAPTER TWO

ENTREPRENEURIAL IDEAS AND OPPORTUNITIES

Gathered by : Farha Mohd Fadzli

0199031453

farha@polisas.edu.my

www.polisasjkm.blogspot.com

Upon completing this course, students should be able to : 1. explain clearly the concept of entrepreneurship, business ownership and procedures in setting up a business in case study given. (C2) 2. work cooperatively in group to complete the assigned project based on entrepreneurial skills. (P2) 3. present business plan creatively prepared using knowledge gained via group. (A2)

2.1 determine entrepreneurial ideas and opportunities

2.2 determine entrepreneurial ideas based on – the suitability of ideas and person’s experience, knowledge and skills, capital and interest ; community’s response ; the feasibility of the ideas initially – legislation aspect, competitors, capital required and risks

2.3 apply the process of generating and evaluating business ideas

-is a business concept that results

in profits if it is turned into a

tangible product or service.

-also defined as the potential to

create something new that

involves changes in knowledge,

technology, economy, politics,

social and demographic

conditions.

- A business idea and opportunity

can be obtained through primary

and secondary sources.

- These sources will provide the

types of information needed by an

entrepreneur to effectively identify

opportunities or evaluate ideas.

-Refer to first-hand data or information

gathered directly through observation,

experiments, interviews and surveys.

Primary sources

Observation

Experiments

Interviews

Surveys

-Data is gathered by observing and

recording the respondent’s actions in an

activity.

-Example : An individual sitting at a

selected location everyday for a week

and counting the number of pedestrians

and cars that pass by. From this number,

it can be estimated whether the location

is suitable for business operations.

OBSERVATION

-Experiments or product sampling is

another option.

-The entrepreneur makes a number of

sample products and provides them to a

small group of consumers for the

purpose of experimentation.

- The result of this experiment can then

be used to determine how well the

product is received by consumers.

Experiments

-Field research covers interviews with

customers, suppliers, competitor and

industry experts.

-Can be conducted in two ways:

i) personal interview

the interviewer needs to be friendly

and polite, not to influence the

interviewee’s responses with

comments, body language or facial

expressions.

Interviews

ii) telephone interview

the interviewer needs to include

alternative ways to rephrase the

question in case the interviewee

faces problems in understanding the

question.

-Refers to the development of a short

questionnaire with respect to the

targeted product.

-The questions should be very

specific.

-Answers provided must be limited

and straightforward. For example : yes

or no; excellent, good, fair or poor and

agree or disagree.

Surveys

-Refer to desk research. Also known as library

research.

-It involves gathering data that have already

been compiled and are available at a very

reasonable cost or sometimes even free.

Secondary Sources

Reliable existing data

References

Mass media and

electronic media

-A secondary source that can be used

by an entrepreneur is existing data

which is reliable.

-Example : information obtained from

annual report of companies.

Reliable Existing Data

- An entrepreneur can use

references such as published

information from the library,

internet and paid database

services which provide information

on market growth, overall industry

perspectives and customer

profiles.

References

- Example : Advertisement and

information in the newspapers,

magazines and the internet.

-Information on raw materials can be a

business opportunity for an

entrepreneur.

-In the era of ICT, the internet becomes

a vital source of quick and accurate

information on business ideas.

Mass Media And Electronic Media

a) The suitability of ideas and person’s

experience, knowledge and skills,

capital and interest

b) Community’s response

c) The feasibility of the ideas initially :

legislation aspect, competitors,

capital required and risk

Determine Entrepreneurial

Ideas

- An entrepreneur runs a business

that suits his experience in the

profession.

- The intelligence to find an

opportunity from past experience

can be a way to gain success in

business.

- Example : Years of experience

working as a chef at a hotel will

enable the individual to set up and

operate a restaurant on his own.

a(i) Experience

- Experience alone is not enough to

run a business.

- The entrepreneur has to be equipped

with the knowledge on operating a

business.

- Example : When a chef open a

restaurant, he must know how to

prepare food, manage the business,

prepare accounts, arrange his staff’s

duty schedule and how to treat his

customers well.

(ii) Knowledge

- The entrepreneur must have the

necessary skills in carrying out his

job.

- Skills are usually born from

experience and knowledge.

- This is an advantage that is difficult

to obtain.

- Example : A very skilful tailor can

produce clothes of high quality in a

short period of time.

(iii) Skills

- An entrepreneur’s capital determines

growth of the business.

- Capital is the most basic aspect to think

about before opening up a business.

- If capital is limited, an entrepreneur can

start a small business using his existing

capital.

- As the small business grows, the

entrepreneur’s capital will also grow with

the corresponding increase in profits.

- The growing business will help the

entrepreneur in securing financing for

expansion.

(iv) Capital (Financial Ability)

- Interest is an important aspect that

must be taken seriously as it can give

self-confidence and a sense of

responsibility towards the business

carried out by an entrepreneur.

- With interest, the entrepreneur will be

able to concentrate on his profession

and automatically more effort for the

growth of his business.

(v) Interest

-The chemistry between a business idea

and the society is an important aspect that

must be taken into consideration before

starting a business.

-A business opportunity must be

consistent so as not to oppose the

society’s acceptance in terms of

consumer’s values, norms and culture.

- Example : Disco and gambling places

which opened in Malay villages is oppose

to the religious values of Muslim

community.

(b) Community’s Response

- A business idea that has been

suggested must be approved by the

law.

- Although the business can produce

high profits, it should not be one which

is against the law.

- Example : The pirate CD business can

gather profit easily. However, it is

against the law to produce and sell

pirate CDs.

C(i) Legislation Aspect

- An entrepreneur in a new venture must

really analyse his competitors in the

industry.

- Competitors are those who are in the

same business, fulfilling customers’

needs which are similar to those of

entrepreneurs.

- The entrepreneur should identify the

strengths and weaknesses of his

competitors in terms of organizational

resources, such as human resource,

financial and physical assets, and

reputation.

(ii) Competitors

-Capital refers to the amount invested in

the company.

-A lot of business have failed due to

insufficient capital.

- Three types of capital required for a

business operation :

Fixed or Permanent Capital

Working Capital

Plantation or Growth Capital

(iii) Capital Required

-Fixed capital is the amount of

capital invested in a business

which is required for the

purchase of permanent assets ,

for example : building, land and

equipment.

-Sometimes known as

supplementary factor, indirect

factor or overhead factors.

Fixed or Permanent Capital

- Refers to the assets of a business that

can be used to support business

operations involving a short time period.

- Used to buy inventory, pay bills and

salaries, and for emergency purposes.

- Needed to finance the business’s day-

to-day operational costs.

- Known as a variable factor, prime

factor or direct factor.

Working Capital

-Plantation or growth capital differs

from working capital.

-It is not related to the current

business situation.

-Needed when businesses undergo

development or changes according to

the direction of the business

Plantation or Growth Capital

-Can be defined as a period of uncertainty

experienced by a business.

-Two types of risks that need to be given

attention before and during carrying out

business operation :

(iv) Risk

RISK

(i)Business

Risk

ii)Financial

Risk

(i) Business Risk

-Factors which have the potential affecting

a business operation and its profitability.

-Two types of business risks :

-Can be managed by the entrepreneur such

as the quality of products and defects of

machines.

(a) Controllable business risk

-Risks that are almost impossible to

prevent.

-Example : economic recession and natural

disasters.

-Some business risks are difficult to prevent,

such as losses due to accidents .

-However these risks can be transferred to

another authority or second party such as

the insurance company.

(b) Uncontrollable Business Risk

(ii) Financial Risk

Can be divided into four categories :

(a) Credit Risk

-Is the risk when debtors are not able to

meet that obligation for full value.

-If customers/debtors do not pay the given

credit within the specific time period, it will

be classified as bad debts.

-Hence, the entrepreneur must be careful

when giving out loans to his customers.

(b) Liquidity Risk

-The risk of insufficient liquid resources to

make all payments on the due date.

-Even though the entrepreneur has

sufficient assets and net worth to make a

payments, the inability to convert assets to

cash can affect business operations.

-If the level of cash liquidity is high, it

means that chances of making profits are

high.

-On the other hand, the business will face

problem in the payment of debts when the

level of cash liquidity is low.

(c) Loan Risk

- A loan is a form of financing whereby an

entrepreneur borrows money as a source

of capital to conduct his business.

-The loan can be in the form of long,

medium or short-term financing.

-If the entrepreneur obtains a loan, he

must responsible for the repayment of

debt together with its interest.

Thank You….