Sources of business ideas
4 Sources of business ideas:
- Spotting trends & anticipating their impact; Innocent Drinks tapped into the growing desire for healthier lifestyles after being started in 1999
- Indentifying a market niche; This involves noticing something that is missing from the market or can be improved on
- Copying ideas from other countries; Howard Schultz of Starbucks saw the coffee bar culture in Italy and thought it could be introduced to the USA
- Taking a scientific approach; This is where you invent orginal or new products from a university or laboratory such as the "Dyson bagless vacuum cleaner"
Franchise definition: When a business (the franchisor) gives another business (the franchisee) the right to supply its product or service.
Types of franchise:
- Business format franchise; This is where a business grants another business the right to use their business idea (often in a specific geographical area).
- Distributorship & dealership; This is where the franchisee sells the products but doess not trade under the franchise name.
- Agency; Where the franchisee sells goods or services on behalf of the supplier
- Licensing; Where the franchisee has a license to sell & make the franchisors (licensors) product.
Benefits of operating as a franchise:
- Least amount of start up risk; 95% of franchises last more than 2 years & 93% of franchises calim to be profitable after 5 years.
- Strong brand; This means the franchisee is investing in a business with a proven track record.
- Financing is easier; Banks are more willing to give money to someone investing in a proven franchise.
Pitfuls of operating a franchise:
- The franchisor may not have built up a strong enough brand
- Costs may be higher; After buying the franchise ongoing royaltie payments may come out of turnover and thus the franchisee will not earn high profits
- Other franchisees could give the brand a bad reputation which may have an adverse impact on all franchisees.
Copyright, Patents & Trademarks
Copyright definition: Legal protection against copying for authors, composers & artists.
Patent definition: An official document granting the holder the right to be the only user or producer of a newly invented product or process for a specified period.
Patents can be barriers to entry: i.e. strategic tools that protect businesses from competitiors entering the market.
Trademark definition: signs, logos, symbols or words displayed on a company's products or on its advertising , including sounds or music, which distinguish its brand from those of its competitors.
Intellectual property can help:
- Set the business apart from competitors
- Be sold or licensed, forming an important source of income
- Offer customers something new & different