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Entrepreneurship and Business Management

 Entrepreneurship and
Business Management
N4

Entrepreneurship and Business Management

 Market feasibility study
Module 3

Entrepreneurship and Business Management

 Think about it
• Who will buy my products?

• How do I do market research?

• How will my business be affected by the

surrounding environment?

Entrepreneurship and Business Management

 Introduction

Entrepreneurship and Business Management

 Why is a feasibility study
important?
• Definition:
• A study that is done to determine
whether or not something can become
viable or be put into practice.

Entrepreneurship and Business Management

 Why is a feasibility study
important?
• Various feasibility studies can be done.

• A feasibility study is done to determine whether

a business or project is viable.

• Such a study will determine whether your

business concept or idea will work or not.

• Basic data is obtained from primary and

secondary data sources.

Entrepreneurship and Business Management

 Important point
• Do not confuse a feasibility study with a business
plan.
• A business plan contains a detailed description
of the product. It also includes:
• Your planning with regard to finance.
• Marketing and human resources.
• Other relevant resources.

• The business plan serves as a road map for

building a business.
Entrepreneurship and Business Management
 Marketing feasibility vs Market
feasibility
• Marketing feasibility (marketing plan)
refers to flow of information from the
business to the consumer.

• Market feasibility refers to the flow of

information from the intended or possible
consumer to the business.

Entrepreneurship and Business Management

 Market feasibility

Figure 3.1: Mind map for market feasibility

Entrepreneurship and Business Management
 Product/service
description
Unit 3.1

Entrepreneurship and Business Management

 Product/service description
• What the product does.
• The kind of product (industrial, convenience,
service).
• How it works.
• What the commercial use for the consumer will
be.
• The benefits for the consumer.
• How it solves problems.

Entrepreneurship and Business Management

 Activity 3.1
Test your
knowledge of this
section by
completing
Activity 3.1
(page 29 of your
Student’s Book)

Entrepreneurship and Business Management

 Products can be divided into:
• Industrial products.

• Consumer products:
• Convenience goods.
• Shopping goods.
• Speciality goods.

• Services.
Entrepreneurship and Business Management
 Products can be divided into:

Industrial products:
• These are goods and services that are used
to produce or manufacture other goods.

• Examples are:
• Raw materials.
• Machinery.

Entrepreneurship and Business Management

 Products can be divided into:

Consumer products:
• These products satisfy the needs of the
consumer/households.

• The consumer is the end user.

• A distinction can be made between

convenience, shopping and speciality
goods.
Entrepreneurship and Business Management
 Products can be divided into:
Convenience goods:
• These are products that the consumer uses every
day, like bread and milk.
• No long decision-making process takes place.
• They are sold in many places.
• They are relatively cheap in relation to shopping and
speciality products.
• The seller tries to have these goods as close as
possible to the consumer.

Entrepreneurship and Business Management

 Products can be divided into:
Convenience goods:
• In general, consumers are not brand particular as far
as these goods are concerned. Some consumers may
prefer a particular brand.
• Examples of convenience goods are: bread, milk,
newspapers, fruit and vegetables, and matches.

Figure 3.2: Convenience goods are

products that are used every day

Entrepreneurship and Business Management

 Products can be divided into:
Shopping goods:
• These products are more expensive than
convenience goods.
• Consumers usually do some research before buying
them.
• Consumers will compare the quality and prices of
different manufacturers and retailers, as well as the
different brands.
• Some time is spent on decision-making.

Entrepreneurship and Business Management

 Products can be divided into:
Shopping goods:
• Examples of shopping goods are stoves,
refrigerators, ordinary cars, clothing, shoes, some
jewellery, and motorcycles.
• Advertising campaigns for these
goods should be more specific to
convince people of the
advantages of a particular
product.
Figure 3.3:
• Brand awareness should also be Consumers usually do
research before buying
created. shopping goods
Entrepreneurship and Business Management
 Products can be divided into:
Speciality goods:

• These products are expensive.

• They are not manufactured in large quantities.
• Sales are limited to specific shops.
• Brand awareness plays a very important role.
• These products are not bought very often.

Entrepreneurship and Business Management

 Products can be divided into:
Speciality goods:
• They are sometimes seen as a status symbol, for
example, an expensive Rolex watch.

• Examples of speciality goods are a Harley Davidson

motorcycle, a dress from Dior, and a designer watch.

Figure 3.4: An expensive motorcycle

such as a Harley Davidson
is a speciality product

Entrepreneurship and Business Management

 Products can be divided into:
Services:
• Services are intangible (cannot be
touched).
• Consumption and production take place
at the same time.
• Examples are the services provided by a
laundry, hairdressing salon, garden
service, guest house and accounting firm.
Entrepreneurship and Business Management
 VIDEO: GRABBING OPPORTUNITIES
WITH BOTH HANDS

Entrepreneurship and Business Management

 Activity 3.2 – 3.4
Test your
knowledge of this
section by
completing
Activity 3.2 – 3.4
(page 31 of your
Student’s Book)

Entrepreneurship and Business Management

 Identify the market
position
Unit 3.2

Entrepreneurship and Business Management

 Identify the market position

• All possible customers form the market.

• However, entrepreneurs have to

determine their target market to enable
them to focus on the needs of a specific
group of customers.

• How is this done?

Entrepreneurship and Business Management

 Identify the target market
• A business must have enough customers to be
successful.
• The whole market cannot be captured with one
attempt.
• Try to determine who will most likely be your
customers.
• This will influence your product, price and
promotion strategy, as well as where you will
establish your business.
Entrepreneurship and Business Management
 Ask yourself questions like:

• What am I selling and what makes it

unique (the only one of its kind)?
• Do I want to sell my product to young
children, young people, parents or
pensioners?
• Is my product affordable for all income
groups?

Entrepreneurship and Business Management

 Market description

The demographic profile includes aspects

like:
• Age.
• Gender.
• Income level.
• Level of education.
• Occupation or industry.
• Location.

Entrepreneurship and Business Management

 Market description

Other aspects include:

• Ethnic group.
• Buying habits.
• Hobbies and interests.
• Family life cycle (babies, teenagers, adults,
pensioners).
The above aspects are discussed fully under ‘market
segmentation’.

Entrepreneurship and Business Management

 Market segmentation
• Market segmentation involves dividing a market
into homogenous groups.

• This means that a particular market segment

shares the same characteristics in some or other
way.

• For example:
• All are female and younger than 30 years.

Entrepreneurship and Business Management

 Market segmentation
• The four Ps (product, price, promotion and place) will be
influenced by the specific market segment that you want
to address.

Figure 3.7: Market positioning

Entrepreneurship and Business Management
 Activity 3.5
Test your
knowledge of this
section by
completing
Activity 3.5
(page 33 of your
Student’s Book)

Entrepreneurship and Business Management

 Four variables are commonly used
for segmenting consumer markets:

Figure 3.8: The four variables

used for segmenting markets

Entrepreneurship and Business Management

 Demographic segmentation

Gender
• Men and women have different interests,
preferences and needs.
• These needs must be addressed in
different ways.
• This is especially the case in industries like
jewellery, cosmetics and footwear.

Entrepreneurship and Business Management

 Demographic segmentation
Age group
• Different age groups have different needs.
• An elderly woman does not wear the same clothes
as a young teenage girl.
• Teenagers have styles and needs that differ from
those of young children.
• Different age groups need different cosmetics, for
example, women above 30 may start to focus on
anti-ageing products.
Entrepreneurship and Business Management
 Demographic segmentation

Figure 3.9: Demographic segmentation

Entrepreneurship and Business Management
 Demographic segmentation

Income
• Markets can be segmented
according to income.
• The three main categories of
income are the:
• High-income group. Figure 3.10: People of different
• Middle-income group. age groups, and with different
incomes and occupations,
• Low-income group. have different needs

Entrepreneurship and Business Management

 Demographic segmentation

Income
• Stores catering for the higher-income group will
have different ranges of products and strategies
when compared with stores targeting the lower-
income group.
• An example: High-income groups may shop for
clothing at speciality stores like Poetry, middle
income groups at Foschini, and low-income groups
at Pep Stores.

Entrepreneurship and Business Management

 Demographic segmentation

Marital status
• Market segmentation can also be done
according to the marital status of individuals.
• Travel agencies will normally work out different
packages for bachelors and married couples.

Entrepreneurship and Business Management

 Demographic segmentation
Occupation
• People with different occupations will have different
needs that they will want to satisfy.

• A distinction can also be made between professional

occupations.

• For example, attorneys and educators, and trades

people like plumbers and electricians.

• Attorneys and educators need to dress differently from

plumbers and electricians.
Entrepreneurship and Business Management
 Demographic segmentation

Education
• The level of education can often be linked to income and
occupation.
• A higher level of education may result in a better
occupation and income.
• The level of education may even have an influence on
buying convenience goods.
• However, level of education may in many instances have
no influence.

Entrepreneurship and Business Management

 Psychographic segmentation
• Segmentation done according to the lifestyle of the
individual, that is, according to such aspects as attitude,
interest, value, and spending patterns.

Figure 3.11: John’s lifestyle

Entrepreneurship and Business Management

 Psychographic segmentation
Table 3.1: Psychographic segmentation

Entrepreneurship and Business Management

 VIDEO: DO YOU HAVE DRIVE AND RESILIENCE?

Entrepreneurship and Business Management

 Activity 3.6
Test your
knowledge of this
section by
completing
Activity 3.6
(page 36 of your
Student’s Book)

Entrepreneurship and Business Management

 Behavioural segmentation
• Behavioural segmentation is based on the behaviour of
the population.
• It divides the population according to how they respond
to, use or know a product.
• Use may be linked to occasions.
• Customers also respond to the benefit that they want.
• Customers act according to brand loyalty.
• Any product which is not targeted at the masses
generally uses behavioural segmentation.

Entrepreneurship and Business Management

 Geographic segmentation

• Geographic segmentation is the

classification of a market into various
geographical areas.

• This can include regions and countries.

Entrepreneurship and Business Management

 Important point

A combination of segmentation methods can

also be used, for example, demographic plus
psychographic segmentation, or any other
combination.

Entrepreneurship and Business Management

 Demographic segmentation
Table 3.2: Demographic segmentation for Gym Trim

Age 14+

Sex Female

Education Grades 8–12

and teachers of the
school

Income Not applicable, as

gym fees are paid by
parents

Entrepreneurship and Business Management

 Case study 3.1
Test your
knowledge of this
section by
completing
Case study 3.1
(page 37 of your
Student’s Book)

Entrepreneurship and Business Management

 Market share
• In most cases, an enterprise has competitors and it
will therefore not capture the whole market.
• The performance of its competitors is based on the
segment of the market over which the business can
gain control.
• This is called the ‘market share’.
• It is therefore very important for entrepreneurs to
calculate their potential market share, taking into
account the surrounding competitors.

Entrepreneurship and Business Management

 Calculation of market share

• The calculation of the market share is explained

with the aid of the following example on the
next slide.

Figure 3.12: Market-share

calculation

Entrepreneurship and Business Management

 Potential market share
Assume that there are 600 customers in your
target area (target market). The average income
per annum per customer amounts to R10 500.
You estimate that each customer spends 1,5% of
their yearly income on your product/service. You
believe that you will enjoy a market share of 30%
of the total market. Calculate (show ALL
calculations) the potential market share of the
business.

Entrepreneurship and Business Management

 Calculating potential market share
Table 3.3: Calculating the potential market share of the business

Step Calculation
Determine the average income per customer. R10 500
Determine the total number of potential customers. 600
Calculate the total income of all the potential customers R10 500 × 600 = R6
(average income × total number of potential customers). 300 000
Determine the percentage of this total income that they 1,5%
spend on the relevant product or service.
Multiply this percentage by the total income to determine 1,5 % × R6 300 000
the total amount spent on the relevant product. = R94 500
Determine the percentage that they spend on YOUR 30%
product.
Multiply this percentage by the total amount spent on the 30% × R94 500
relevant product. This is your market share. = R28 350

Entrepreneurship and Business Management

 VIDEO: KNOW YOUR SURROUNDINGS

Entrepreneurship and Business Management

 Activity 3.7 – 3.8
Test your
knowledge of this
section by
completing
Activity 3.7 – 3.8
(page 38 of your
Student’s Book)

Entrepreneurship and Business Management

 Indicators of growth
Indicators of growth are factors that benefit
the economy of a country.
• The need for better infrastructure.
• Government involvement.
• World tendencies.

Figure 3.13: Solar-heating systems are

an indicator of infrastructural growth

Entrepreneurship and Business Management

 Market information
Unit 3.3

Entrepreneurship and Business Management

 Why should an entrepreneur do
market research?
• Entrepreneurs have to do market research before
starting a new business so that they can test whether
there is a demand for their product or service.
• Market research consists of four steps, namely:
• Definition of the problem.
• Development of the research plan.
• Collection of information.
• Compilation of the final report.

Entrepreneurship and Business Management

 Collection of data
Data are relevant pieces of information obtained from
primary and secondary sources.
• Primary data:
• This is data that the
researcher collects
himself or herself.
• Secondary data:
• This is data that has
already been collected Figure 3.14: Steps in
by somebody other than market research
you.
Entrepreneurship and Business Management
 Methods of collecting data

Figure 3.15: Data-collection methods

Entrepreneurship and Business Management

 Collecting primary data
• Surveys:
• In-person surveys.
• Telephone surveys.
• Mail surveys.
• Online surveys.
• Questionnaires:
• Pre-sales questionnaire.
• Post-sales questionnaire.
Figure 3.16: The survey is
• Personal interviews: important for market research
• Personal interviews include
unstructured, open-ended
questions.

Entrepreneurship and Business Management

 Collecting primary data
• Observation:
• Observe people in shops, at work, on the beach or
wherever relevant to your product.
• Experiments (test marking):
• Place a new product in selected stores to test
customer response.
• Ask customers for their opinions regarding the
packaging and the price.
• Test marking can also be done.

Entrepreneurship and Business Management

 Case study 3.2
Test your
knowledge of this
section by
completing
Case study 3.2
(page 47 of your
Student’s Book)

Entrepreneurship and Business Management

 Collecting secondary data
Sources of secondary data include the following:
 The Internet.
 Reference works.
 Censuses.
 Statistics.
 The Yellow Pages or the telephone directory.
 Textbooks.

Entrepreneurship and Business Management

 Applying market research
techniques
Unit 3.4

Entrepreneurship and Business Management

 Applying market research
techniques
• The techniques for doing market research will differ
from business to business.
• A questionnaire is always a good tool to use, but it
can also be used together with any of the other
methods.
• It is very important that the tool used measures
what it is supposed to measure.
• Most businesses will make use of both primary and
secondary data-collection methods.

Entrepreneurship and Business Management

 Activity 3.9
Test your
knowledge of this
section by
completing
Activity 3.9
(page 48 of your
Student’s Book)

Entrepreneurship and Business Management

 The business SWOT
analysis
Unit 3.5

Entrepreneurship and Business Management

 The business SWOT analysis

Figure 3.18: The environments that surround and affect a business

Entrepreneurship and Business Management

 Important points:
• The enterprise is the micro-environment (internal
environment):
• Examples are managers, the employees, policies, and the
mission and vision of the enterprise.
• The market environment:
• Consists of suppliers, buyers (customers), competitors and
intermediaries.
• The macro-environment:
• Consists of the uncontrollable elements, including
technology, legislation, the economy, politics, and social
values and lifestyles (culture).

Entrepreneurship and Business Management

 A SWOT analysis

Figure 3.19: Business SWOT analysis

Entrepreneurship and Business Management

 The micro-environment
The micro-environment of the business consists of the
following components:
• The mission statement.
• The objectives.
• The resources.
• The management functions.
• Management skills, levels and tasks.

The FOUR main managerial functions are:

• Planning.
• Organising.
• Leading.
• Control.

Entrepreneurship and Business Management

 The market environment
The market environment consists of the components
outlined.

Figure 3.20: Components of the market environment

Entrepreneurship and Business Management

 The macro-environment

Figure 3.21: The macro-environment

Entrepreneurship and Business Management

 VIDEO: THE BUSINESS PLAN MAKES
YOUR DREAM A REALITY

Entrepreneurship and Business Management

 Activity 3.10 – 3.12
Test your
knowledge of this
section by
completing
Activity 3.10 – 3.12
(page 53 of your
Student’s Book)

Entrepreneurship and Business Management

 Competitive advantage
Unit 3.6

Entrepreneurship and Business Management

 Competitive advantage

• A competitive advantage is something that gives

an enterprise a definite advantage over another
enterprise in the same line of business.

• To gain a competitive advantage, a business

should analyse its competition to determine the
weaknesses of competitors and to try to make
these weaknesses its strengths.

Entrepreneurship and Business Management

 Summative assessment
Test your
knowledge of this
section by
completing the
Summative
assessment
(page 55 of your
Student’s Book)
Entrepreneurship and Business Management