Generating & Protecting Business Ideas

Revision cards for buss 1 topic 2: Generating and protecting business ideas

Covers:

  • Sources of business ideas 
  • Identification of a product or market niche
  • Franchises
  • Copyrights, patents and trademarks
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Sources of business ideas: Business Experience

Business Experience

Experience from working in a particular market or industry.

Advantages:

  • Better of understanding of what customers want
  • Knowledge of competitors, pricing and suppliers 
  • Less need for market research 
  • Able to make more realistic assumptions in the business plan
  • Industry contacts

Disadvantages:

  • Doesnt have a fresh perspective
  • Entrepreneurs that are new to the market might exploit approaches successful in other industries
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Sources of business ideas; Personal Experience & O

Personal Experience

Comes from day-to-day dealings, hobbies and interests

Observation

Simplu observing what goes on around you

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Identification of a product/service

An entrepreneur will often decide what product/service to offer based on their own experience i.e. a product/service they are familiar with through a previous hobby/interest/job.

Advantages:

  • Good knowledge of the features of the product/service
  • Passionate and interested in the product/service so motivated to do well
  • Good contacts in an established market
  • May already have a good reputation within the market

Disadvantages:

  • Is there room for another competitor?
  • The entrepreneurs passion might not be shared
  • Knowledge of the product/service isnt the only skill needed?
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Identification of a market niche

The entrepreneur might spot a gap in the market for unmet consumer needs.

Advantages:

  • Basing product/service on customer needs
  • Benefit of being first in the market
  • No/little competition in the early stages of setting up their business when it is most vulnerable

Disadvantages:

  • Entrepreneur will have little or no expertise in the market
  • Is the gap real? Has somebody else tried to exploit and discovered why it doesnt work?
  • Competition may enter quickly and capture the market share
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Franchises

A replication of a successful business formula. The franchisor licenses the use of trademarks and proven businesss ideas to the franchisee. 

Each franchise is owned and operated by a franchisee. 

However, the franchisor retains control over the way in which products and services are sold and marketed. They also control the quality and standards of the business.

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Benefits and pitfalls of being a franchisor

Benefits:

  • Franchisors can expand the business quickly
  • Risk is shared - much of the cost is met by the franchisee
  • Franchisee may have very good entrepreneurial skills which will earn the franchisor revenue

Pitfalls:

  • Some franchisees become powerful as they acquire more franchises 
  • Potential loss of control as to how the product/service is presented to the customer
  • May be difficult to control quality as franchise network expands
  • Litigation - a failed franchisee is a court case waiting to happen
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Benefits and pitfalls of being a franchisee

Benefits:

  • Able to sell an already recognised and successful product/service
  • Take advantage of central services such as marketing, purchasing, training, stock control, accounting systems and administration provided by the franchisor
  • Franchisor may have experience in the market that the fracnhisee can benefit from

Pitfalls:

  • Proportion of revenue is paid to the franchisor
  • Lack of control - franchisee has to follow the franchisors rules
  • Right to operate might be withdrawn
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Protecting business ideas

Copyright - Protection given to books, plays, films and music. Does not protect ideas until they are fixed.

Patent - An exclusive right to use a process or produce a product, usually for a fixed period of time (up to 20 years). A patent protects new inventions, they way they are made, what they are made from and how they work.

Trademark - A word, image, sound or smell that enables a business to differentiate itself from competitors. A trademark can create loyalty amongst customers.

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