New Venture (Enterprise)- Stages of Establishment & Promotion
Stages of Establishment of New Venture
Various stages of an entrepreneur is expected to undertake the following steps in his pursuit various stages of setting an enterprise :
- Searching for Prospective business ideas or opportunities.
- Processing of these ideas and selecting the best idea.
- Collecting the required resources and setting up the enterprise.
Searching for prospective business ideas :
Promotional activities commerce with the search for prospective business ideas or opportunities. The promoter is required to employ his imagination and foresight in preparing list of business ideas. Business idea may come to his mind at his own or he may depend on various sources like success stories of other entrepreneurs, excess demand for any product, producing import substitute product, study of project reports assistance from governmental agencies, visit to trade fairs etc. The idea should be sound and practicable and may relate to starting a new business or takeover of an existing enterprise. The idea must be viable and should ensure adequate return on investment. The business idea may originate from the following sources:
Market Observation :
Relevant knowledge about various products, can be obtained with the help of market surveys. Based on the information collected, an assessment can be made about the Demand-supply positions of different products. After knowing about anticipated future demand provision can be made about the possible changes in the prices, fashion, income levels, competition, technology etc. Expert advice of salesmen, dealers, advertising agencies and commercial consultants may be considered while anticipating demand of the products. From the information so collected a prospective promoter can find out the products which are more in demand and hence profitable.
Consumers Survey :
The success or failure of any venture depends upon respective consumers. Through consumers surveys detailed information regarding tastes, fashions, liking, disliking, when they will buy, where they will buy from at what price they will buy etc. is collected. Thus a product can be devised in such a manner so that it fits exactly into the requirements of the prospective buyers. Even test marketing can be conducted to know about the consumes response. It can help us in knowing about the product short comings, which can be removed before launching the product in the market on a large scale. Initially a company should concentrate on a product or two and the range can be extended depending upon consumers response.
Keeping Track of the developments :
A prospective entrepreneur must keep his eyes and ears open. He should keep in touch with whatever is happening around especially concerning business ideas, new products, changes in technology etc. In order to be successful one must acquire whatever best that is available from anywhere. Sometimes useful business ideas can be discovered by keeping in touch with the developments taking place in developed countries. Foreign collaborations can also help potential entrepreneurs in selecting the right type of product. Entrepreneurs can also visit various trade fairs, exhibitions etc. for getting useful information. The Trade Fair Authority of India is the apex agency for organization and control of trade fairs and exhibitions in India and abroad it organizes on a regular basis trade and industrial fairs.
Scrutinizing Product Profits :
Various agencies, both government and private provide profiles of various projects and industries. Through these profiles a prospective entrepreneur can make assessment of the technical, financial, managerial and market requirements of various projects. After an in-depth scrutiny of the same he can pick up the project which will be more suitable for him. Assistance from various experts can be taken for arriving at the right decision.
Processing of the ideas and selecting the best idea :
Under this head detailed investigation of the potential ideas is carried on. This investigation can cover technical and commercial feasibility:
Technical feasibility :
It is ascertained as to what extent it is possible to technically produce the product, conceived through the idea. Technical feasibility covers detailed study with regard to the availability of the requisite technology and other input requirements. Services of experts can also be utilized for ascertaining the feasibility of the various ideas from technical point of view.
Commercial feasibility :
Detailed study is carried on to know about the profitability of different business ideas. This investigation includes projection about probable demand, sales volume cost of production, break even point and profitability expected under different business propositions. There is every possibility that a particular idea may be technically sound but may not be in the interest of the organization from commercial feasibility point of view.
After comparing the plus and minus points of various options an entrepreneur can easily pick up that business proposition which suits his interest and at the same time is sound or viable from all angles. Once he has made up his mind, he can proceed ahead to give concrete shape to his dream project. He is required to take next step.
Collecting the required resources and setting up the enterprise:
An entrepreneur in order to be successful is required to remain in touch with what is happening around. He is required to develop a sound and efficient system of collection, recording and analyzing of market information. This system ensure availability of right information at right time to right persons thereby ensuring taking of right decision and achieving right results.
Finance is the lifeblood of an organization and all the business activities revolve around it. Funder are required for both fixed and current assets. The estimation of financial requirements of a concern can be done with the help of the following two theories :
Cost Theory :
An attempt is made under this theory to assess the financial requirement of the enterprise. Funds are needed for promotion and setting up of an enterprise and also for meeting fixed and current assets requirements. The capitalization of the firm includes provisioning to pinpoint anything concerning earning potentials of the enterprise. This theory can also create problems of under and over capitalization:
Earning Theory :
Under this theory capitalization of an undertaking is equal to capitalized value of its anticipated earnings.
Capitalization can be ascertained in the following way:
This theory provides a reasonable basis for calculating capital requirements. The problem area can be an accurate estimation of future earnings of a new enterprise.
After ascertaining the amount of funds required the entrepreneurs is to decide the source or sources from where the funds are to be raised. He is to decide about how much funds he would be contributing and how much he will raise from other sources. This decision about capital structure is very important as it has bearing on the return on investment.
Promotion of a Venture
Promotion of a venture is the process of promoting or setting up an enterprise. Promotion begins when someone discovers an idea on which the proposed business of the enterprise is based. The idea may be the discovery of a new product or new market of new method of marketing an existing product or to use an existing product in a new manner or solving a problem or inventing a new machine. For example, after the Second World War was over a huge stock of unused small types of war aero-planes was lying useless with Italy. Someone discovered the idea of utilizing these tyres by fitting them into a motor cycle like small machines (sector). It is how the scooter came into existence.
After the idea is discovered, it is investigated in detail to field out whether the idea is feasible i.e., commercially profitable. If its detailed investigation shows that the idea is feasible. Then steps are taken to launch (start) the enterprise by assembling the necessary inputs i.e., land, building, machinery, equipment etc. and for raising the necessary finance. This whole process of discovering the idea its detailed investigation, assembling the necessary inputs and raising finance for the venture is known as promotion. The person who brings the enterprise into existence is called a promoter i.e., an entrepreneur.
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