Unit FourUnit FourPlanning Your VenturePlanning Your Venture

What is Market Analysis?What is Market Analysis? Who are your customers? How are they Who are your customers? How are they

identified?identified? What problems might you encounter entering What problems might you encounter entering

the market?the market? Where will you be located?Where will you be located? What laws and government regulations should What laws and government regulations should

you be aware of?you be aware of?

Unit 4 VocabularyUnit 4 Vocabulary AppointmentsAppointments Bait-and-Switch AdvertisingBait-and-Switch Advertising Barriers to EntryBarriers to Entry Brand LoyaltyBrand Loyalty Business RiskBusiness Risk CapacityCapacity Carrying CapacityCarrying Capacity Census TractCensus Tract Competitive AdvantageCompetitive Advantage ComplexityComplexity ConsiderationConsideration ContractContract CopyrightCopyright Customer Needs AnalysisCustomer Needs Analysis Customer ProfileCustomer Profile

Descriptive ResearchDescriptive Research Economic BaseEconomic Base Economic RiskEconomic Risk Economies of ScaleEconomies of Scale Equal Employment Equal Employment

Opportunity CommissionOpportunity Commission Exploratory ResearchExploratory Research Extended CoverageExtended Coverage FaçadeFaçade Fidelity bondsFidelity bonds Focus GroupFocus Group GeographicsGeographics Historical ResearchHistorical Research Human RiskHuman Risk IncentiveIncentive

Unit 4 VocabularyUnit 4 Vocabulary IncubatorIncubator Industrial MarketsIndustrial Markets Industrial ParkIndustrial Park IndustryIndustry Insurance PolicyInsurance Policy Intellectual Property LawIntellectual Property Law LayoutLayout LicenseLicense MarketMarket Market PositioningMarket Positioning Market ResearchMarket Research Market SegmentationMarket Segmentation Market SegmentsMarket Segments Market ShareMarket Share Mass MarketingMass Marketing PatentPatent

Patent PendingPatent Pending PermitPermit Price DiscriminationPrice Discrimination PsychographicsPsychographics Public DomainPublic Domain RiskRisk Secondary DataSecondary Data Service MarkService Mark Target MarketTarget Market Trade AreaTrade Area TrademarkTrademark Uniform Commercial CodeUniform Commercial Code Warranty of MerchantabilityWarranty of Merchantability WorkstationWorkstation Wrongful TerminationWrongful Termination

Unit 4 EssentialUnit 4 EssentialQuestion 1Question 1

(MKT-EN-2)(MKT-EN-2)

What are the fundamental concepts of What are the fundamental concepts of business ownership?business ownership?

Essential Question 1AEssential Question 1A(MKT-EN-4H)(MKT-EN-4H)

What is the market segment for your What is the market segment for your proposed business? proposed business?

Conducting Market Research

Types of Research• Exploratory Research: Used

when little is known about a subject.

• Descriptive Research: Used when you want to determine the status of something.

• Historical Research: Used when studying the past.

Conducting Market Research

The Research Process• Define information needs.

• Collect secondary data.

• Collect primary data.

• Organize the data.

• Analyze the data.– Is there a market for the product?– How big is the market?– Will the industry support the business?

Analyzing the Industry• Industry: A collection of businesses

with a common line of product or service.

• Factors of an Industry– Carrying Capacity: The industry’s ability to

support new growth. Is there room for a new business like yours?

Analyzing the Industry• Factors of an Industry

– Uncertainty: The degree of stability or instability in an industry. Industries that are fast-changing present a high degree of uncertainty.

– Complexity: The number and diversity of contacts that a business must deal with. The more suppliers, customers, and competitors, the more complex the business environment.

Analyzing the Industry• Factors of an Industry

– Stage of Life: Where the business is in the business cycle; birth, growth, maturity, or decline. The business owner must develop business strategies that are compatible with the stage of the business’s life.

Analyzing the Industry

• Are there Barriers to Entry? Things that keep new business from entering the industry or succeeding in the industry.

Analyzing the Industry

• Barriers to Entry– Economies of Scale: Big

businesses can produce products more quickly and cheaper than small businesses. Can be overcome by

finding a niche that no one else serves.

Analyzing the Industry

• Barriers to Entry– Brand Loyalty: Occurs

when customers buy products from companies they know. Can be overcome by

increasing your brand awareness, which requires money for advertising.

Analyzing the Industry

• Sources of Supply– Must have access to affordable

sources of inventory, raw materials, and goods. Supplier location Trade discounts Alternate sources

Analyzing the Industry

• Technology– Allows companies to improve

their business process. Maintains competitiveness Must be periodically updated

Analyzing the Industry• Competition

– Know the market share: the portion of the total sales generated by all the competing companies in a given market.

– Is there a niche: a small segment of the market, usually based on customer needs.

– Identify the market position: a specific market niche for a product.

Analyzing the Industry• Competition

– Determine the competitive advantage: a feature that makes a product more desirable than its competitor’s products.

– Gather competitive intelligence:• Visit the competitor’s outlets.

• Buy your competitor’s products.

• Search the internet and your competitors website.

Identifying Your Customers• Market: A group of all potential customers

(people or businesses) who share common needs and wants, and who have the ability and willingness to buy the product.

• Target Market: The segment of the market that the company will focus its efforts.

• Market Segmentation: Dividing the total market into smaller groups of people who share specific needs and characteristics.

Market Segmentation

Geographics• Segmentation of the

market based on where people live.

Market SegmentationDemographics

• Statistics that describe a population in terms of personal characteristics. These include age, gender, income, ethnic background, education, etc.

Market Segmentation

Psychographics• Involves the study

of customers based on lifestyle, and the attitudes and values that shape it.

Market Segmentation

Product Benefits• Built in features of products in

response to consumer needs and wants.

Market Segmentation

• Consumer Market: Customers who buy products for personal use.

• Industrial Market: Customers who buy products for business use.

Developing a Customer Profile• Combining geographic, demographic,

psychographic, and product benefit data to get a complete picture of your potential customers.– Who are my customers?– What do they generally buy, and

how do they hear about the products and services they buy?

– How often do they buy?– How can my business meet their needs?

Essential Question 1BEssential Question 1B(MKT-EN-2F)(MKT-EN-2F)

What are the types of risks that What are the types of risks that businesses encounter ?businesses encounter ?

Risk Management

Risk: The possibility of financial loss. Risk can be managed by using the

best available marketing information, analyzing opportunities, and making decisions to balance risk with adequate monetary returns.

Kinds of Risk Economic Risks

Occur from changes in overall business conditions.

Amount or type of competition Changing consumer lifestyles Population changes Product obsolescence Government regulation Inflation Recession

Kinds of Risk Natural Risks

Result from natural causes. Floods Tornados Hurricanes Fire Lightning Droughts Earthquakes Unexpected changes in normal weather conditions

Kinds of Risk Human Risks

Caused by human mistakes and the unpredictability of employees and customers.

Customer or employee dishonesty Employee carelessness Employee incompetence Customer or employee accidents Employee illness Customer non-payment of accounts

Handling Business Risk Risk Prevention and Control

Screening and Training Employees Providing Safe Conditions and Safety Instruction Preventing External Theft Controlling Employee Theft

Handling Business Risk Risk Transfer

Purchasing Insurance Property Insurance Personal Liability Insurance Product Liability Insurance Worker’s Compensation Insurance

Handling Business Risk Risk Transfer

Guarantees and WarrantiesTransfer through Ownership

Sole Proprietorship Partnership Corporation

C-CorporationS-Corporation

Limited Liability Company (LLC)

Handling Business Risk Risk Retention

Businesses retain certain business risks and assume the responsibility for them because it is impossible to prevent or transfer these risks.

Risk AvoidanceForesight and anticipation will allow

businesses to avoid certain risks.

Essential Question 1CEssential Question 1C(MKT-EN-2E)(MKT-EN-2E)

What are the relevant government What are the relevant government regulations relating to the operation of a regulations relating to the operation of a business?business?

Laws that Affect EmployeesLaws that Affect Employees Title VII of the Civil Rights Act:Title VII of the Civil Rights Act: Forbids sexual Forbids sexual

harassment: any unwelcome sexual conduct.harassment: any unwelcome sexual conduct. Americans With Disabilities Act: Americans With Disabilities Act: Requires employers Requires employers

to provide reasonable accommodations to the to provide reasonable accommodations to the workplace.workplace.

Family Medical Leave Act (FMLA)Family Medical Leave Act (FMLA):: Employers who Employers who have 50 or more employees must provide up to 12 have 50 or more employees must provide up to 12 weeks of unpaid leave to their employees for family weeks of unpaid leave to their employees for family medical related issues.medical related issues.

Laws that Affect EmployeesLaws that Affect Employees Equal Pay Act of 1963:Equal Pay Act of 1963: Men and women must receive Men and women must receive

the same pay for the same work.the same pay for the same work. Fair Labor Standards Act of 1938:Fair Labor Standards Act of 1938:

Established the minimum wage at $1 per hour.Established the minimum wage at $1 per hour. Established the maximum full time workweek at 40 hours.Established the maximum full time workweek at 40 hours. Established minimum child full time labor age at 16.Established minimum child full time labor age at 16.

Wrongful TerminationWrongful Termination: When an employee is : When an employee is terminated for wrongful reasons.terminated for wrongful reasons. Notify employees in writing of rules violations.Notify employees in writing of rules violations. Maintain good records to help prevent unwanted lawsuits.Maintain good records to help prevent unwanted lawsuits.

Laws that Affect Fair TradeLaws that Affect Fair Trade Clayton Act of 1914 and Robinson-Patman Clayton Act of 1914 and Robinson-Patman

Act of 1936:Act of 1936: Prohibit Prohibit price discriminationprice discrimination: : Business cannot sell the same product to Business cannot sell the same product to different people at different prices.different people at different prices.

Warranties and Product Liability:Warranties and Product Liability: Caveat emptorCaveat emptor – – let the buyer beware.let the buyer beware. Warranty of merchantabilityWarranty of merchantability:: This warranty is This warranty is

implied by law and assures the buyer that he or she is implied by law and assures the buyer that he or she is purchasing a product of at least average quality and purchasing a product of at least average quality and fit for the purpose for which it is intended.fit for the purpose for which it is intended.

Laws that Affect Fair TradeLaws that Affect Fair Trade Fair Packaging and Labeling Act:Fair Packaging and Labeling Act:

Requires manufactures to list all ingredients and raw Requires manufactures to list all ingredients and raw materials used in production.materials used in production.

Requires the size, weight, and contents of a product Requires the size, weight, and contents of a product to be on the label.to be on the label.

Uniform Commercial Code:Uniform Commercial Code: Uniform Commercial Code (UCC)Uniform Commercial Code (UCC):: Group of laws Group of laws

that regulates commercial business transactions.that regulates commercial business transactions.

Laws that Affect Fair TradeLaws that Affect Fair Trade Truth in Lending:Truth in Lending: Consumer Credit Protection Consumer Credit Protection

Act, also known as the Truth in Lending Act, Act, also known as the Truth in Lending Act, requires those who give credit to reveal all the requires those who give credit to reveal all the terms and conditions of their credit agreements.terms and conditions of their credit agreements.

Truth in Advertising:Truth in Advertising: Federal Trade Federal Trade Commission sets rules with regard to advertising.Commission sets rules with regard to advertising. Misleading AdsMisleading Ads: Ads should not claim to do : Ads should not claim to do

something it cannot.something it cannot.

Laws that Affect Fair TradeLaws that Affect Fair Trade Sale PriceSale Price: You cannot offer a reduced price on your : You cannot offer a reduced price on your

product unless it has been offered to the public at the product unless it has been offered to the public at the regular price.regular price.

Price ComparisonsPrice Comparisons:: Cannot use list price, manufacturer’s suggested retail price Cannot use list price, manufacturer’s suggested retail price

(MSRP), as your comparison-selling price unless the product (MSRP), as your comparison-selling price unless the product is actually sold for that price.is actually sold for that price.

Must have proof your price is lower than your competitors if Must have proof your price is lower than your competitors if you use this fact in advertising.you use this fact in advertising.

Bait-and-SwitchBait-and-Switch:: Uses a bargain priced item to lure Uses a bargain priced item to lure potential customers into a store then a salesperson tries to potential customers into a store then a salesperson tries to sell them higher priced merchandise.sell them higher priced merchandise.

Unit 4 EssentialUnit 4 EssentialQuestion 2Question 2

(MKT-EN-5)(MKT-EN-5)

What are effects of government on What are effects of government on business?business?

Essential Question 2AEssential Question 2A(MKT-EN-5A)(MKT-EN-5A)

What governmental agencies affect What governmental agencies affect business?business?

Government Agencies that Government Agencies that Affect BusinessAffect Business

• Consumer Product Safety Commission (CPSC): Establishes product safety standards and recalls products

• Environmental Protection Agency (EPA): Creates and enforces standards for the environment, regulating air, water, and noise pollution as well as toxic waste

• Equal Employment Opportunity Commission (EEOC): Establishes rules relating to discrimination in the workplace

Government Agencies that Government Agencies that Affect BusinessAffect Business

• Federal Communications Commission (FCC): Regulates all forms of interstate and international communication

• Federal Trade Commission (FTC): Enforces anti-trust, truth-in-lending, and labeling laws

• Food and Drug Administration (FDA): Creates standards for foods and drugs and approves new drugs

Government Agencies that Government Agencies that Affect BusinessAffect Business

• Internal Revenue Service (IRS): Enforces tax statutes and resolves disputes

• Interstate Commerce Commission (ICC): Determines trade practices, rates, and routes for interstate railroads, bus companies, and pipelines

• Justice Department: Enforces laws to maintain free trade

Government Agencies that Government Agencies that Affect BusinessAffect Business

• National Labor Relations Board (NLRB): Monitors and governs the relationship between employees and unions

• Occupational Safety and Health Administration (OSHA): Establishes and regulates safety and health standards for employees

• Patent and Trademark Office (PTO): Issues patents and trademarks for new products

Essential Question 2BEssential Question 2B(MKT-EN-5B)(MKT-EN-5B)

What is the importance of copyright, What is the importance of copyright, trademark, patent, logo, license, permit, trademark, patent, logo, license, permit, etc.?etc.?

Protecting Your IdeasProtecting Your Ideas

PatentPatent:: A grant given to an inventor A grant given to an inventor that gives him or her the exclusive that gives him or her the exclusive right to produce and sell an invention.right to produce and sell an invention. Lasts for a period of twenty-one years after Lasts for a period of twenty-one years after

application.application. Must pass all of the following rules:Must pass all of the following rules:

Protecting Your IdeasProtecting Your Ideas The invention must not contain prior artThe invention must not contain prior art.. It It

shouldn’t be based on anything publicly available shouldn’t be based on anything publicly available before the date of the invention.before the date of the invention.

The invention must fit into one of five classesThe invention must fit into one of five classes::» A machineA machine» A processA process» Article of manufactureArticle of manufacture» A compositionA composition» A new use of one of the four categoriesA new use of one of the four categories

The invention must be “unobviousThe invention must be “unobvious.”.” It should be It should be new and unexpected.new and unexpected.

The invention must have utilityThe invention must have utility.. Must be useful, not Must be useful, not whimsical or silly.whimsical or silly.

Protecting Your IdeasProtecting Your Ideas CopyrightsCopyrights:: Protects original works of Protects original works of

authors. Examples: books, movies, authors. Examples: books, movies, musical compositions, computer musical compositions, computer software, etc.software, etc. Lasts for the life of the author plus fifty years.Lasts for the life of the author plus fifty years. After the copyright period, the work becomes part After the copyright period, the work becomes part

of the of the public domainpublic domain:: Can be used by anyone free Can be used by anyone free of charge.of charge.

Protecting Your IdeasProtecting Your Ideas TrademarkTrademark:: Word, symbol, design, or Word, symbol, design, or

combination of these that a business uses combination of these that a business uses to identify itself or something it sells.to identify itself or something it sells. Service markService mark:: Design or symbol that describes a Design or symbol that describes a

service business.service business. Lasts indefinitely unless the trademark becomes a Lasts indefinitely unless the trademark becomes a

common part of the everyday language.common part of the everyday language.

Essential Question 2CEssential Question 2C(MKT-EN-5C)(MKT-EN-5C)

What licenses are needed by small What licenses are needed by small businesses?businesses?

Laws That Affect StartupLaws That Affect Startup

Permits and LicensesPermits and Licenses PermitPermit: : A legal document giving official A legal document giving official

permission to run a business.permission to run a business. LicenseLicense: : A certificate that shows you have A certificate that shows you have

the necessary education and training to do a the necessary education and training to do a job.job.

Laws That Affect StartupLaws That Affect Startup ContractsContracts:: A binding legal agreement A binding legal agreement

between two or more persons or parties.between two or more persons or parties. To be legal a contract must contain:To be legal a contract must contain:

AgreementAgreement:: Where one party promises to do something Where one party promises to do something and the other party accepts.and the other party accepts.

ConsiderationConsideration:: What is exchanged for the promise. What is exchanged for the promise. CapacityCapacity:: The parties are legally able to enter into a The parties are legally able to enter into a

binding agreement.binding agreement. LegalityLegality:: No provisions that are illegal or result in illegal No provisions that are illegal or result in illegal

actions.actions.

Laws That Affect StartupLaws That Affect Startup

LocationLocation Zoning and building codes affect where a Zoning and building codes affect where a

business can be located and what type of business can be located and what type of business can operate in that location.business can operate in that location.

Unit 4 EssentialUnit 4 EssentialQuestion 3Question 3

(MKT-EN-4)(MKT-EN-4)

What information is needed to compile a What information is needed to compile a business plan worksheet?business plan worksheet?

Essential Question 3AEssential Question 3A(MKT-EN-4A)(MKT-EN-4A)

What are the different types of business What are the different types of business locations?locations?

Types of Business Types of Business LocationsLocations Mall SpaceMall Space

KiosksKiosks:: Small carts or like furniture found in Small carts or like furniture found in malls, airports, large sporting events or even malls, airports, large sporting events or even other retail stores that provide temporary, or other retail stores that provide temporary, or inexpensive, locations with high foot traffic.inexpensive, locations with high foot traffic.

Anchor storesAnchor stores:: Large chain stores that Large chain stores that generate a high amount of customer traffic.generate a high amount of customer traffic.

Retail shopsRetail shops

Types of Business Types of Business LocationsLocations Shopping CenterShopping Center

Strip malls and other attached, adjoining retail Strip malls and other attached, adjoining retail locationslocations

Vary in size from as few as 3 units to as many Vary in size from as few as 3 units to as many as 20 storesas 20 stores

The types of retailers, and the goods or The types of retailers, and the goods or services they offerwill also varyservices they offerwill also vary

Types of Business Types of Business LocationsLocations Downtown AreaDowntown Area

Communities that are working to revitalize their Communities that are working to revitalize their downtown areas can greatly benefit retailers downtown areas can greatly benefit retailers from this effortfrom this effort

Lack of parking is generally a big issue for Lack of parking is generally a big issue for downtown retailersdowntown retailers

Competitors are older, well-established Competitors are older, well-established specialty stores which seem to thrive in the specialty stores which seem to thrive in the downtown settingdowntown setting

Types of Business Types of Business LocationsLocations Free Standing LocationsFree Standing Locations

Is basically any stand-alone buildingIs basically any stand-alone building Can be tucked away in a neighborhood Can be tucked away in a neighborhood

location or right off a busy highwaylocation or right off a busy highway Suffers from random traffic that other retail Suffers from random traffic that other retail

outlets receive in malls or shopping centersoutlets receive in malls or shopping centers Has to work at marketing to get the customer Has to work at marketing to get the customer

insideinside

Types of Business Types of Business LocationsLocations Office BuildingOffice Building

Good for a retailers that cater to other Good for a retailers that cater to other businessesbusinesses

Tenants share maintenance costs and the Tenants share maintenance costs and the image of the building is usually upscale and image of the building is usually upscale and professional.professional.

Types of Business Types of Business LocationsLocations Home-basedHome-based

Many retail businesses are getting a start at Many retail businesses are getting a start at homehome

Some eventually move to a commercial store Some eventually move to a commercial store locationlocation

This type of location is an inexpensive option, This type of location is an inexpensive option, but growth may be limitedbut growth may be limited

Harder to separate business and personal lifeHarder to separate business and personal life

Essential Question 3BEssential Question 3B(MKT-EN-4B)(MKT-EN-4B)

What steps are involved in conducting a What steps are involved in conducting a location analysis?location analysis?

Location AnalysisLocation Analysis Is the Economic Base Favorable?Is the Economic Base Favorable?

Economic BaseEconomic Base: : The major industries The major industries that provide jobsthat provide jobs Industry-oriented or service-orientedIndustry-oriented or service-oriented Growing or shrinking (flow of money into or Growing or shrinking (flow of money into or

out of a community)out of a community)

Location AnalysisLocation Analysis Are there Financial Incentives?Are there Financial Incentives?

Financial IncentiveFinancial Incentive: : Reward or Reward or advantage that helps businessadvantage that helps business Lower taxesLower taxes Cheaper land pricesCheaper land prices Employee training programsEmployee training programs Enterprise zonesEnterprise zones

Location AnalysisLocation Analysis What is the Make Up of the What is the Make Up of the

Population?Population? Is the community’s population aging as Is the community’s population aging as

young people move away?young people move away? Is the community getting younger as new Is the community getting younger as new

families with children move in?families with children move in?

Location AnalysisLocation Analysis Does the Labor Supply Match Your Does the Labor Supply Match Your

Needs?Needs? How many employees are needed?How many employees are needed? Is there a sufficient labor pool to meet Is there a sufficient labor pool to meet

those needs?those needs? Does the available pool have the Does the available pool have the

necessary skills to help the business?necessary skills to help the business?

Essential Question 3CEssential Question 3C(MKT-EN-4C)(MKT-EN-4C)

What trends and other criteria need to be What trends and other criteria need to be identified in determining a site location?identified in determining a site location?

Site SelectionSite Selection Determine Determine trade areatrade area: : region or region or

section of the community from which section of the community from which you expect to draw customersyou expect to draw customers

Select several potential sitesSelect several potential sites Draw a circle around each potential Draw a circle around each potential

site showing the trade areasite showing the trade area

Site SelectionSite Selection Within each trade area examine the Within each trade area examine the

following features:following features: Number and Size of CompetitorsNumber and Size of Competitors: :

Mark all potential competitors both directly and Mark all potential competitors both directly and indirectlyindirectly

Look for clusters of stores to determine where Look for clusters of stores to determine where customers shopcustomers shop

Are there vacant business in the area? Why?Are there vacant business in the area? Why?

Site SelectionSite Selection Nature of the CompetitionNature of the Competition: :

How does your business compare in size and How does your business compare in size and merchandise to your competitors?merchandise to your competitors?

Do you want to be near your competitors to Do you want to be near your competitors to encourage comparison shopping and use your encourage comparison shopping and use your competitors to help draw traffic?competitors to help draw traffic?

Do you want to be located away from your Do you want to be located away from your competitors and generate your own drawing power?competitors and generate your own drawing power?

Site SelectionSite Selection Character of the AreaCharacter of the Area: :

Is it attractive and inviting?Is it attractive and inviting? Does it have the appearance of success?Does it have the appearance of success? Is it a safe, thriving environment?Is it a safe, thriving environment? Mark out potential problem blocks or areasMark out potential problem blocks or areas

Accessibility and TrafficAccessibility and Traffic Mark the routes customers will take to reach your Mark the routes customers will take to reach your

businessbusiness What is the traffic count per hour, per day What is the traffic count per hour, per day

(weekday/weekend), per week, and holidays?(weekday/weekend), per week, and holidays? Is there adequate parking?Is there adequate parking?