Lecture Slide Notes

Notes 1 -----> Click 1

Notes 2 -----> Click 2

Notes 3 -----> Click 3

Notes 4 -----> Click 4

NOTICE BOARD

DEAR STUDENTS,

As a new semester start up, we wish welcome to all of you and hopefully you are in condition of eager exploring knowledge in this S1'2011.


Technopreneurship is a university subject that bring and highlight our university vision and mission. For your information there is a few lecturer from General Studies Section teach this subject, there are:

•Mohd Hazli Mohd Rusli

•Mahfuz Abd Malek

•Rosnizza Ramlan (Subject Leader)

•Ainul Yusnita Yusop

•Suhaiza Ngah

Feel free to explore my notes from http://elearn.bmi.edu.my


THANKS

WBB10102 TEAM

Costing : Break even

 

REVENUE MODEL

Defining a revenue model for your new business is a necessity; it's the underpinning of success.

Defining a revenue model for your business will help you:

1. Stay focused on a niche and a target audience
2. Give you a foundation for your product or service development plans
3. Provide a foundation for your marketing plans
4. Begin a line of credit or get a loan
5. Raise capital

For example, Google offers targeted advertising solutions and global Internet search solutions. Its principal products and services. Therefore the revenue of Google is from "pay per click advertising program"

Pricing Strategy

There are many outside influences that affect profitability and a retailer's bottom line. Setting the right price is a crucial step toward achieving that profit. Retailers are in business to make a profit, but figuring out what and how to price products may not come easily.

Before we can determine which retail pricing strategy to use in setting the right price, we must know the costs associated with the products. Two key elements in factoring product cost is the cost of goods and the amount of operating expense.

The cost of goods includes the amount paid for the product, plus any shipping or handling expenses. The cost of operating the business, or operating expense, includes overhead, payroll, marketing and office supplies.

Regardless of the pricing strategy used, the retail price of the products should more than cover the cost of obtaining the goods plus the expenses related to operating the business. A retailer simply cannot succeed in business if they continue to sell their products below cost.

Retail Pricing Strategies

Now that we understand what our products actually cost, we should look at how our competition is pricing their products. Retailers will also need to examine their channels of distribution and research what the market is willing to pay.

Many pricing strategies exist and each is used based on particular a set of circumstances. Here are a few of the more popular pricing strategies to consider:

Mark-up Pricing

Markup on cost can be calculated by adding a pre-set (often industry standard) profit margin, or percentage, to the cost of the merchandise.

Markup on retail is determined by dividing the dollar markup by retail.

Be sure to keep the initial mark-up high enough to cover price reductions, discounts, shrinkage and other anticipated expenses, and still achieve a satisfactory profit. Retailers with a varied product selection can use different mark-ups on each product line.

Vendor Pricing

Manufacturer suggested retail price (MSRP) is a common strategy used by the smaller retail shops to avoid price wars and still maintain a decent profit. Some suppliers have minimum advertised prices but also suggest the retail pricing. By pricing products with the suggested retail prices supplied by the vendor, the retailer is out of the decision-making process. Another issue with using pre-set prices is that it doesn't allow a retailer to have an advantage over the competition.

Competitive Pricing

Consumers have many choices and are generally willing to shop around to receive the best price. Retailers considering a competitive pricing strategy will need to provide outstanding customer service to stand above the competition.

Pricing below competition simply means pricing products lower than the competitor's price. This strategy works well if the retailer negotiates the best prices, reduces costs and develops a marketing strategy to focus on price specials.

Prestige pricing, or pricing above competition, may be considered when location, exclusivity or unique customer service can justify higher prices. Retailers that stock high-quality merchandise that isn't available at any other location may be quite successful in pricing their products above competitors.

Psychological Pricing

Psychological pricing is used when prices are set to a certain level where the consumer perceives the price to be fair. The most common method is odd-pricing using figures that end in 5, 7 or 9. It is believed that consumers tend to round down a price of $9.95 to $9, rather than $10.

Other Pricing Strategies

Keystone pricing is not used as often as it once was. Doubling the cost paid for merchandise was once the rule of pricing products, but very few products these days allow a retailer to keystone the product price.

Multiple pricing is a method which involves selling more than one product for one price, such as three items for $1.00. Not only is this strategy great for markdowns or sales events, but retailers have noticed consumers tend to purchase in larger amounts where the multiple pricing strategy is used.

Discount pricing and price reductions are a natural part of retailing. Discounting can include coupons, rebates, seasonal prices and other promotional markdowns.

Merchandise priced below cost is referred to as loss leaders. Although retailers make no profit on these discounted items, the hope is consumers will purchase other products at higher margins during their visit to the store.

As you develop the best pricing model for your retail business, understand the ideal pricing strategy will depend on more than costs. It also depends on good pricing practices.

It is difficult to say which component of pricing is more important than another. Just keep in mind, the right product price is the price the consumer is willing to pay, while providing a profit to the retailer.

Biz Plan : The Market

You may possess all the confidence in the world that yours is a perfect product with a clearly defined customer base. If that’s the case, you’ll need to figure out how you’re going to get your product into the hands of those customers. That’s where the marketing analysis section of your business plan comes into play.

Traditional marketing strategy consists of three components, known as the “three C’s”:

• Company: Know the strengths and weakness of your firm.
• Competition: Know the same about your competitors.
• Customer: Know who they are and what they want.

Analyze the Competition

Of the three C’s, the competitor analysis may give you the toughest time, especially if you are new to the marketplace. First, you should look at your direct competitors. Take, for example, a McDonald’s restaurant in a busy downtown area. Its direct competitors would be any nearby Burger King or Wendy’s restaurants. Its indirect competitors would be other restaurants in the same downtown area, even upscale ones. Customers eat lunch just once a day, and all these restaurants are fighting for this finite group of customers.

Examine any substitutes. Instead of going out for lunch, some people may opt to bring lunch from home, or skip lunch entirely. These are both factors McDonald’s would need to examine when analyzing a location’s competitive position.

Assess the Marketplace

Once you’ve identified your direct and indirect rivals, as well as substitute competitors, you’ll want to gauge your potential fit in the marketplace. Some issues to consider:

• Competitor strengths and weaknesses
• Whether new competitors are entering the marketplace, or existing ones are leaving
• The product or products that your competitors rely on for most of their revenue
• Ways to overcome the threat of substitute goods

Develop a Marketing Program

After you have addressed the three C’s, you can move on to developing a marketing program, which involves analyzing “the four P’s,” collectively known as the marketing mix:

• Product: What you are selling
• Price: How much you will charge
• Place: Where you will sell your product
• Promotion: Special incentives you will use to get people to try your product

Craft a Market Development Plan

You’re now ready for the final phase of your marketing analysis – crafting a market development plan. The information you provide here likely won’t come into play until you’ve established your company and have been running for a few years, but investors will find it helpful to see how you envision your company evolving. Your market development plan should address such questions as:

• Does recent data show the market for your product is growing?
• Do you have a plan to offer new products or line extensions in the first few years?
• Are there other ways to position your company more competitively in the marketplace?
• Does your marketing plan offer ways to grow overall demand within your industry sector?

These marketing and competitive analyses are vital parts of your business plan and will likely be the most extensive portion of it. Take the time to do thorough research on your competitors and how the market has behaved in recent years. A disorganized marketing strategy can ruin even the best of products, simply because your target customers will never hear of them.

Sample2: Business Description

Business Summary & History

Christine & Denis Landscapes Limited has been in the lawn care business in Sherbrooke for four years and has a history of profitability. However, since the nature of the landscaping business is seasonal, we are interested in expanding our company into snow removal and making it a year-round operation. We will offer our services to our existing residential and commercial clients.

Industry Overview

As a northern country, Canada has always had a need for snow removal services during the winter. With the average person working longer hours and juggling more leisure activities than ever before, the need for professional snow removal services have increased in the residential sector. Similarly, as the number of small businesses with limited staffs continue to increase, more professional snow removal services are being used by these businesses as an alternative to bringing maintenance people in house. And, with new policies being implemented to fine people and businesses who fail to clear their property of snow hazards in the wintertime, market research indicates that snow removal services will enjoy a growth rate of approximately 4 per cent per year for the next five years.

On a local level, the city of Sherbrooke has recently voted to contract out $1.5 million in snow removal services.

Sectors Within Industry

• Residential sector: private residences in the Sherbrooke area; primarily those mid-to-high income dwellings inhabited by busy professionals who don't have time to shovel.
• Business sector: primarily comprised of strip mall tenants and those operating from store front locations in the greater Sherbrooke area. In addition, large institutions such as schools, hospitals and seniors' homes who, due to cutbacks, have decreased the number of maintenance workers employed, but still need to maintain a high level of winter safety.

Seasonal Factors

Snow removal is extremely sensitive to seasonal factors. A winter with a particularly heavy snowfall would result in an increase in demand for snow removal services; conversely, a mild winter would be potentially devastating to a snow removal company depending on the way its contracts are structured. However, Sherbrooke weather patterns for the last ten years have been extremely stable and the average snowfall from year to year doesn't vary more than 15 per cent.

Consumer Trends

With the risk of a substantial fine from the municipal government for failure to remove snow within 12 hours of a snowfall, residential use of snow removal services has increased by 16 per cent over the last five years. Similarly, with lawsuits stemming from property negligence on the rise, local businesses are 54 per cent more likely to contract out snow removal services than ten years ago.

Position in the Industry

Having been in the lawn care business for four years, we have established a strong reputation for ourselves in the Sherbrooke community with both business and residential customers. We are known for offering friendly and competitively priced service and enjoy a high rate of referral business. Of our more than 300 customers, the vast majority have expressed a commitment to using our snow removal services once they are fully functional.

Competition

There are currently a total of eight snow removal services in the Sherbrooke area. The two largest services Au revoir Neige and Gilles Délétang et fils Ltée currently control 80 per cent of the local market. These companies are well established and have both been in business for more than ten years. The remaining 20 per cent is currently split between six smaller contractors.

Although other contractors may try to cash in on the city's decision to contract out snow removal, Christine & Denis Landscapes Limited is in a particularly favourable position. We have built up relationships with clients in both the residential and business sectors as well as the municipal government over the last four years; therefore, we are in an excellent position not only to win contracts from the government, but also from private sectors and residential customers.

Use of Technology

We plan to make use of our computerized database, compiled during our four years in the landscape business, to market our snow removal services to existing clients. This will be an advantage over a number of our competitors who do not use a database, since it will allow us to track services rendered for customers and to send out direct mail offers to them to solicit further business.