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Entrepreneurship

Entrepreneurship . Chapter 2 Creating Business from Opportunity: The Economics of One Unit. Market. A group of people who may be interested in buying a particular product or service. 4 Types of Business. Manufacturing—makes tangible product

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Entrepreneurship

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  1. Entrepreneurship Chapter 2 Creating Business from Opportunity: The Economics of One Unit Mariotti: Entrepreneurship

  2. Market A group of people who may be interested in buying a particular product or service. Marriotti: Entrepreneurship

  3. 4 Types of Business • Manufacturing—makes tangible product • Wholesale—buys in bulk from manufacturer; sells smaller quantities to retailers • Retail—sells one piece at time to consumers. • Service—sells time/expertise to consumers. Marriotti: Entrepreneurship

  4. The Business Definition • The offer—what will you sell? • Target market—to whom will you sell? • Production and delivery—how will you sell? Before you can start your business, you must define it. Marriotti: Entrepreneurship

  5. Competitive Advantage • What can you do better than the competition that will draw customers to your business? • Think about what your customers need. • You have unique knowledge of your market! Marriotti: Entrepreneurship

  6. Competitive Strategy Business definition + competitive advantage = competitive strategy Strategy: plan for outperforming the competition Tactics: ways to carry out strategy Marriotti: Entrepreneurship

  7. Recipe for Success • Understand the needs of your customers. • Offer them a sustainable competitive advantage. • Deliver a product or service that meets customer needs at a fair price. sustainable = can be kept going over time Marriotti: Entrepreneurship

  8. 6 Factors of Competitive Advantage • Quality • Price • Location • Selection • Service • Speed/turnaround Marriotti: Entrepreneurship

  9. Naming Your Business • Keep it simple. • Don’t use your last name. • The best name is one that tells customers what the company does, sells, or makes. Marriotti: Entrepreneurship

  10. What Are Your Core Beliefs? • Beliefs you will use to guide your business. Example: My restaurant will support local organic farmers. • Core beliefs affect: -materials you choose -prices you charge -how you treat customers Marriotti: Entrepreneurship

  11. What Is Your USP? • Unique Selling Proposition—what attracts customers away from the competition and toward your business? • Compare what your business offers to what competitors offer. • Are you at a cost advantage or disadvantage? Marriotti: Entrepreneurship

  12. Check Out the Competition! • The offer • Target market • Production and delivery capability Marriotti: Entrepreneurship

  13. Mission Statement • A concise statement of: • Your strategy • Your business definition • Your competitive advantage Marriotti: Entrepreneurship

  14. Entrepreneurs Use Profits: • To pay themselves • To expand their businesses • To start or invest in other businesses Gross profit = price – cost of goods sold Marriotti: Entrepreneurship

  15. Define Your Unit of Sale • Manufacturing—one order (e.g., 100 watches) • Wholesale—a dozen (e.g., 12 watches) • Retail—one item (e.g., 1 watch) • Service—one hour of time (one hour mowing) or one completed task (one lawn mowed) • Combination—average sale per customer Marriotti: Entrepreneurship

  16. Average Sale Per Customer Average sale per customer – average cost of sale per customer Average gross profit per customer Marriotti: Entrepreneurship

  17. Unit of Sale as a Combination of Different Items Marriotti: Entrepreneurship

  18. Cost of Goods Sold (COGS) COGS = cost of labor and materials required to make one additional unit COSS (cost of services sold) = cost of labor and materials required to provide one additional unit of service Marriotti: Entrepreneurship

  19. Economics of One Unit (EOU) • Method for seeing if a business can be profitable • If one unit of sale is profitable, the whole business is likely to be profitable. Selling price per unit – COGS per unit = Gross profit per unit Marriotti: Entrepreneurship

  20. Economics of One Unit (EOU) —Manufacturing Marriotti: Entrepreneurship

  21. Economics of One Unit (EOU) —Wholesale Marriotti: Entrepreneurship

  22. Economics of One Unit (EOU) —Retail Business Marriotti: Entrepreneurship

  23. Economics of One Unit (EOU) —Service Business Marriotti: Entrepreneurship

  24. Economics of One Unit (EOU) —Example Marriotti: Entrepreneurship

  25. The Entrepreneur’s Strategy: • Start a business with a profitable EOU • Hire others to create the units • Increase volume of units being sold • This frees the entrepreneur to start new businesses Result: The entrepreneur creates jobs and wealth. Marriotti: Entrepreneurship

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