1. The search for sound business
Ideas
HRTM 134 Entrepreneurship &
Business Planning
Prepared by: Aireen Y. Clores

2. Generating Business Ideas
Today you will know sources of potential
business ideas.
You will understand the factors that
contribute to their success.

3. Generating Business Ideas…
Potential sources of business ideas may include:
 Brainstorming – Individually or in groups/teams
 Own personal experiences – What jobs have been done in the
past? Have you started businesses before? What was learnt
from success and failures?
 Innovation and invention – A flash of individual inspiration
 Spotting flaws and errors in existing products – Can something
being done already be done better?
 Copying ideas from other countries - e.g. Howard Schulz
Starbucks founder, copied the idea of a coffee bar from Italy
 Spotting trends and anticipating their impacts on people’s lives
e.g. Healthier lifestyles
 Taking a scientific approach, working in a laboratory (e.g.
James Dyson)
 Noticing a gap in the market for something that is not
currently being produced
 Purchasing a franchise

4. Generating Business Ideas…
 Small business with limited resources
(finances, assets, land, people etc) do not
have the funds for large teams of people to
invent new product/business ideas.
 Therefore new small business ideas often have
interesting stories based on individuals own
innovation and inventiveness.
 Did you know???
 Socorro Ramos the
Matriarch of National
Bookstore?

5.  “Does the idea represents a future attractive opportunity
in a market which may not even have into existence
yet”?
 Therefore, within entrepreneurship we are dealing a
forward-looking evaluation (ex-ante) rather than
retrospective evaluation (ex-post).
 Can idea for the basis of a cost-effective and viable
organization “The entrepreneur must forecast
future prices and goods and resources and use
intuitive judgment to gauge market potential”
(Keh et al. 2002:130)

6. Porter’s “Five Forces model”
 The model originated from Michael E. Porter's 1980 book
"Competitive Strategy: Techniques for Analyzing Industries and
Competitors." Since then, it has become a frequently used tool for
analyzing a company's industry structure and its corporate
strategy.
 In his book, Porter identified five competitive forces that shape
every single industry and market.
 These forces help us to analyze everything from the intensity of
competition to the profitability and attractiveness of an
industry. The model that follows shows the relationship between
the different competitive forces.

8.  Threat of New Entrants - The easier it is for new
companies to enter the industry, the more cutthroat
competition there will be. Factors that can limit the
threat of new entrants are known as barriers to
entry. Some examples include:
 Existing loyalty to major brands
 Incentives for using a particular buyer (such as frequent
shopper programs)
 High fixed costs
 Scarcity of resources
 High costs of switching companies
 Government restrictions or legislation

9.  Power of Suppliers - This is how much pressure
suppliers can place on a business. If one supplier
has a large enough impact to affect a company's
margins and volumes, then it holds substantial
power. Here are a few reasons that suppliers might
have power:
 There are very few suppliers of a particular product
 There are no substitutes
 Switching to another (competitive) product is very costly
 The product is extremely important to buyers - can't do
without it
 The supplying industry has a higher profitability than the
buying industry

10.  Power of Buyers - This is how much pressure
customers can place on a business. If one customer
has a large enough impact to affect a company's
margins and volumes, then the customer hold
substantial power. Here are a few reasons that
customers might have power:
 Small number of buyers
 Purchases large volumes
 Switching to another (competitive) product is simple
 The product is not extremely important to buyers; they
can do without the product for a period of time
 Customers are price sensitive

11.  Availability of Substitutes - What is the
likelihood that someone will switch to a competitive
product or service? If the cost of switching is
low, then this poses a serious threat. Here are a
few factors that can affect the threat of substitutes:
 The main issue is the similarity of substitutes. For
example, if the price of coffee rises substantially, a
coffee drinker may switch over to a beverage like tea.
 If substitutes are similar, it can be viewed in the same
light as a new entrant.

12.  Competitive Rivalry - This describes the intensity
of competition between existing firms in an
industry. Highly competitive industries generally
earn low returns because the cost of competition is
high. A highly competitive market might result
from:
 Many players of about the same size; there is no
dominant firm
 Little differentiation between competitors products and
services
 A mature industry with very little growth; companies can
only grow by stealing customers away from competitors

13.  Evaluation and human factor
 Business plan – why entrepreneurs need
one?
 (Barringer & Ireland 2006:19-20)
 Thinking carefully about all aspects of the
business
 Setting up milestones

14. Evaluation of opportunities with great
potential
 Wickham (2004) points out three central
criteria for evaluation of opportunities:
 Scale (size of opportunity)
 Scope (value)
 Span (validity over time)
 Hindle (2007):
 Viability (possible)
 Durability (potential)
 Credibility (Can it be implemented?)

15. Case Studies…
Case Studies:
Hortaliza (beauty & body care products),
Andoks (food), & Mini-foodstop (mini mart)
Read the case studies based on business start ups and the
source of the entrepreneur’s business ideas.

16. Case Studies:
1. What is an entrepreneur? (4 marks)
2. What characteristics did each of these entrepreneurs have that
made them successful? (4 marks)
3. To what extent could you argue that the skills of the individual
owners were the main factors leading to the success of
a) Hortaliza (beauty & body care products) (4 marks), b) Andoks (food)
(4 marks), & c) Mini-foodstop (mini mart)(4 marks)
4. How important is market research in ensuring new business ideas
are successful? (6 marks)
5. Explain what external factors provided Selecta Ice Cream and
Cobra (energy drink) with the opportunity to develop their
successful product idea? (4 marks)
6. “Without the entrepreneurial skills demonstrated by those in the
case studies, these businesses would not have succeeded.” To what
extent do you agree with this statement? (10 marks)
7. Hortaliza spotted a gap/niche in the beauty and body care
market. Evaluate the importance of spotting a gap for the success
of a small business. (10 marks)