Economics, Finance and Entrepreneurship Skills:

Foundation

B. Tech 1st year

Dr. Ranabir Banik

Assistant Professor
Department of Basic Science & Humanities
Institute of Engineering and Management (IEM), Kolkata
S E L F D I S C O V E RY
 FLOW

1. Childhood passion became a basic idea for a successful businessman.

2. Interest and passion will reflect in the business setup.
3. There are certain things that we deeply love and enjoy doing.
4. Area of interest or passion which consumes them completely.
5. It is an interest that they pursue on their own, and enjoy doing so.
6. This area of passion is known as “FLOW”

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 WHEN A PERSON IS SAID TO BE IN A STATE OF FLOW?
1. Do something they love
2. Lose track of time and immersed in what they are doing.
3. Have the requisite talent/skills to do this.
4. Take the initiative; you do not need to be pushed to do this.
5. Grab every opportunity in this area to improve your skill levels.
6. Even if the activity is challenging, you enjoy taking up the challenge.
7. Flow is not leisure activity which you do in order to relax or take a
break from serious work

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To become an successful entrepreneur, love and passion towards what
you do is very important. It will motivate you.
What make them to successful entrepreneur?
Do they have same thought process?
Effectuation principles
Effectuation principles
Effectuation principles
They sell Dresses for dolls
TEAM: SHARED
LEADERSHIP
 OVERVIEW OF LEADERSHIP

1. You have your product/service offering in place now, you also have an inkling of the funds
that you will require to set your venture in motion and from where to source those funds.
2. But who will take care of all these aspects?
3. Can you do it alone?
4. Obviously not!
5. You need people, you need a team, and you need to manage that team.
 LEADERSHIP STYLES – which best suits an entrepreneur venture?

1. Lead roles are assigned based on the experience and expertise of each person
2. Main aspect is to take the entire team to achieve a common goal

Driving Principles are:

 HOW TO FIND CO-FOUNDER?

LOOK FOR PEOPLE WITHIN YOUR NETWOR WITH SIMILAR BACKGROUNDS

WHY TEAM IS NECESSARY?
HIRING
 HIRING STRATEGY
1. Can not afford a costly hiring mistake
2. Adding a wrong person to a team hurts
 HIRING STRATEGY – Team

Finding a right team of people who share your passion, commitment and vision is an
entrepreneurial dream come true
 Customer and Consumer

Are they same or different?

Let us discuss using some examples
Baby food
Can the babies be the customers?

Of course NOT
They cannot buy their own products
Let us take another example…
Gift Items
 One who buys = CUSTOMER

One who consumes = CONSUMER

So, who should get more attention by a
budding entrepreneur?

It depends on the product

Both customer and consumer has equal
importance in today’s businesses.
Try to put yourself in the shoes of customer as well
as of the consumer while designing the product.
 Market types

There are typical four kinds of markets

 Existing Market

Re-segmented Market

New Market

Clone Market
EXISTING MARKET
1. When investors and entrepreneurs go after an existing market – the advantage
is that there’s little or no market risk.
2. In this market type:
Competitors exist
Customers want and need better performance
Technology is usually the driving factor
The risk is to think that competitors are dumb or too slow
NEW MARKET
Customers do not exist in the present, so revenue generation takes years
Market size is zero
Customers need to be made aware of their needs
You must consider what factors can you create that has never been offered.
RE-SEMENTED MARKET
The Re-segmented market is a hybrid between a New market and an
Existing market in the sense that it is a New Market created from a
small segment from an existing market.
CLONE MARKET
In a Clone market, customers are known because you copied an existing
market.
It is called a Clone because, in this market type, you are going to localize all
those specific issues for your country or region.
That said, it takes a foreign business model and adapts it to local conditions.
There are no competitors if you are the first one and the risk may be in
misjudging the local needs.
Why MARKET identification is important?

 Market size
 Cost of Entry
MARKET:  Launch type
 Competition
 Positioning
Why MARKET identification is important?

 Sale model
SALES:  Margin
 Sale cycle
Why MARKET identification is important?

 Capital
FINANCE:  Profitability
Why MARKET identification is important?

 Needs
CUSTOMERS:  Adaptation
Segmentation & Marketing
 Segmentation

Segmentation is the process of

defining and subdividing your
customers into distinct
segment having similar needs,
wants or demands.
 Targeting

Targeting or target marketing

is deciding which potential
customer segments your idea
or product or service will focus
on.
 Segmentation always comes before targeting

It helps you to select whom you market your product?

Remember: there is no way you can meet the demands of everyone.

 Segmentation by Geography

Search engine for Chinese people

 Segmentation by Demography

 Gender
 Age
 Occupation
 Religion
 Etc.
Segmentation by Psychographics
Segmentation by Behaviour

Segments their user based on

their behavior (say, daily use)
Segmentation by Benefits

Segments their user benefits

Niche Marketing
It is the most appropriate way to start a new venture.
Why Niche marketing?  Allow sensible use of resources
 Identify clients easily
 Easily become the expert
 Obtain repeat business
 Makes marketing easy
Take an example

For Aisha:
World largest halal baby
food brand
Does Niche Marketing means it will not grow?

NO

It can really grow to a large business venture.

Sportswear for athletes
No. 2 brand after NIKE
Specialist outfitters for
mountaineers
BOOT STRAPPING
 BOOT STRAPPING

WITH OUT ANY EXTERNAL CAPITAL

Is it Possible? YES, absolutely

EXAMPLE
 BOOT STRAPPING

INVOLVES TAPPING IN TO OWN RESOURCES

 BOOT STRAPPING – PERSONAL FINANCES

Initial funding to look at – Personal SAVINGS

Setting out some amount for emergency - begin a through
inventory of your assets
EQUITY IN REAL ESTATE
 BOOT STRAPPING – LOANS FROM FRIENDS AND FAMILY

Another Source of Funding

Loved ones are willing to support you – make sure to follow the
guideline

DON’T ASK MORE THAN THEY OFFERED TO LOSE

DESIGNATED AMOUNT FOR ACHIEVING A MILESTONE

Value Proposition Design
 Google Glass: Head mounted wearable
computer which is designed in the shape of a
pair of glasses. It can capture images quickly and
also can display like a smartphone.

Sounds cool. Right?

But it failed in market.
 Why it happened?

o Is it Bad Marketing?

o Is it designed poorly?
 o Did the customer want it?

Value proposition design

Your product or services should match what your customer wants.

Value proposition design: Simple and Comprehensive process of
designing and testing value proposition. It takes the guesswork
out and helps you to create product and services that perfectly
match the customers’ needs and desires.
Customer Jobs: These are the simple things
which the customers are trying to get done.
Customer Pains: Pains are those which annoy the
customer before, during or after a job done.
Gains: Gains are the outcomes or benefits which
the customer actually wants.
Prioritize
 Example

Wedding Planner
 Jobs

1. Organize a lovely wedding

2. Not incur too much expenses

3. Impress their friends

 Pains
1. Might not have time

2. Might not be able to finish their preparation

3. Trouble sending invites

4. Not getting best price for the items they need to buy
 Gains
1. Someone takes care of everything

2. Caterers

3. Decorators

4. Music Band
 Product and Services
It refers to all the products and services you offer. It
helps the customers to complete their jobs. It create
value when they are related to customer jobs, pains
and gains.
 Pain relievers
Pain relievers are those which reduce or eliminates
the customer pain points.
 Gain Creators
It creates outcomes and benefits that the customers
expects, desires or is surprised by.
 Example

Wedding Planner
 Product and services

1. Online wedding service via app

2. An efficient wedding planner

 Pains relievers
1. Service management

2. Contracts that can be signed online

3. Price comparison

4. Quality assurance
 Gains creators
1. Saving time

2. Saving money

3. Access to top notch resources

Introduction to business model
 Suppose you have a great idea
Does it mean, you will be successful?
 Remember, there are similar “great”
ideas are already available in market

Then, what to do?

 You need a “great” business model
Business idea and business model are not the same
Take your idea to the potential customers
Does your idea solve their problem?
If not, then “Game Over”!!!
 If yes, still you can fail.
Why?
Because, your idea may be not financially sustainable
Your first work is to search for the right
Business Model
Lean canvas: AirBNB
Lean canvas: Coffee Shop
RISKS AND ASSUMPTIONS
 WHAT IS RISK?

1. We know that startups are highly uncertain, but uncertainty and risk aren’t the same thing.
2. We can be uncertain about a lot of things that aren’t risky.
3. Uncertainty: The lack of compete certainty, that is, the existence of more than one
possibility.
4. Risk: A state of uncertainty where some of the possibilities involve a loss, catastrophe, or
other undesirable outcome.
5. Incorrect prioritization of risk is one of the top contributors of waste.
 CATEGOROZING RISK
Risks in a startup can be divided into three general categories,
❑ Product risk
❖ Getting the product right
❑ Customer risk
❖ Building a path to customers
❑ Market risk
❖ Building a viable business
⮚ Tackling all these risks at once can be overwhelming, Prioritize them
based on the stage of your product, and Tackle them systematically
B L U E O C E A N S T R AT E G Y
 BLUE OCEAN STRATEGY

 Deep unexplored space

 'Blue Ocean Strategy is referred to a market for a product where there is no
competition or very less competition.
 Demand is created and not fought over.
 This strategy revolves around searching for a business in which very few
firms operate and where there is no pricing pressure.
 RED OCEAN STRATEGY
1. In the red oceans, industry boundaries are defined and accepted, and the competitive
rules of the game are known.
2. Here, companies try to outperform their rivals to grab a greater share of existing
demand.
3. As the market space gets crowded, prospects for profits and growth are reduced.
 RED OCEAN Vs. BLUE OCEAN STRATEGY

Red Ocean Strategy Blue Ocean Strategy

Compete in existing market space. Create uncontested market space.
Beat the competition. Make the competition irrelevant.
Exploit existing demand. Create and capture new demand.
 4 action framework
Helps to decide how to differentiate
yourself from your competitor

Refers to benefits Refers to those Refers to those Refers to benefits

that can be benefits that the benefits that can that can be
reduced well industry takes for be created but raised well above
below industry granted and can the industry has the industry
standards. be eliminated. never offered standards.
before.
Solution Demo
 Solution Demo
Solution demo is the smallest possible solution that
can stand in for the actual solution for testing.
Why build something that no one wants?
Create a demo of your solution.
Test it with your customers
1. Give the customer a real sense of the solution. Not
only sketches or images.

2. Don’t build an unnecessarily flashy demo

3. Use your own resources. Don’t hire.

4. Build as many mockups as you need.

5. Use actual names and real data, not dummy data.

Solution Demo and MVP
CUSTOMER REQUIREMENT Vs OUR SOLUTION
 MINIMUM VIABLE PRODUCT (MVP)

1. A product with just enough features to satisfy early customers, and to provide
feedback for future development
2. The final, complete set of features is only designed and developed after
considering feedback from the product's initial users
3. This strategy targets avoiding building products that customers do not want and
seeks to maximize information about the customer per amount of money spent.
An MVP has three key characteristics:
1. It has enough value that people are willing to use it or buy it initially.
2. It demonstrates enough future benefit to retain early adopters.
3. It provides a feedback loop to guide future development.
What is the difference between
Solution Demo and MVP

They are similar yet different.

Solution Demo and MVP capture the core essence of
your actual solution.

Both help you to manage your risks.

Solution demo helps to identify the early adopters

MVP focuses on getting the early adopters on board

as your paying customers .
 Solution demo helps to identify the minimum
features required to build the MVP

MVP will let you know if you have a compelling

solution that your customers are willing to pay for.
Solution demo focuses on figuring out the right price

MVP will help you to validate the price with your

customers.
Solution demo helps your customers to visualize the
product.

MVP is the actual product with minimum features.

Solution demo: Problem-Solution fit

MVP: Product-Market fit

COST STRUCTURE, PRICING&
REVENUE STREAM
 COST, REVENUE & PRICING

What are the cost that would incur before start of the business?
 STARTUP COST

Example
 FIXED COST

 Usually calculated for a MONTH

Example
 VARIABLE COST

Example
 ENTREPRENUER POINT

 It is better to have a variable cost than the fixed cost and

 Fixed cost than Startup cost

This is to avoid uncertainty in business earnings

REVENUE STREAMS
 REVENUE STREAMS

Revenue ?

One source
of income

Home delivery- Another

source of income
PRICING
 PRICING

Price too high – Customers may not buy

If too low – may not able to recover the COST
PRICISING STRATEGY
 PRICISING STRATEGY: Maximization

When all customer segments have similar willingness to pay

and when optimal short term and long term prices are equal.
 PRICISING STRATEGY: Market penetration

Strategy is to price the product low to maximize the broad adoption of the product
PRICISING STRATEGY: Market Skimming
PRICISING STRATEGY: Market Skimming

Latest models are priced at highest

Older models are lowest to cater the

other customer segments
BRAND POSITIONING &
CHANNELS
BRANDS & PRODUCTS

BRANDS

MOBILE PHONE
 BRANDING

PRODUCTS

BRAND
 BRANDING

WATER – naturally available

EX: BOTTLED WATER resource to all

Although it is FREE, some companies PACK IT IN THE BOTTLE and

PUT THEIR BRAND on the bottle

How could companies able to SELL THE PRODUCT which

LOOKS AND TASTE THE SAME?

They also claim that their product is BETTER or BEST in the

market
Because they create a BRAND
 HOW IS A BRAND DIFFERENT FROM A PRODUCT?
Basis for comparison BRAND PRODUCT

Uniqueness / Originality Is Unique Can be copied

Can it be replaced? NO YES
Offers value to Performs the
What does it do?
customer functions
Brand stays in May become outdated,
Sustainability the heart of the depending on
customer customer's demands

Fulfills customer's Fulfills customer's

Benefit to customer
desires and esteem needs
POSITIONING
 WHAT IS POSITIONING?

 Creating a perception in the minds of the customer about

the product and service.
 A clear and valued place the product or service occupies in
the customer’s mind compared to the competition.

How do businesses express this positioning?

 By writing a positioning statement
 POSITIONING STATEMENT

 A positioning statement is an expression of how a given product, service or brand

fills a particular consumer need in a way that its competitors don't.
 Positioning is the process of identifying an appropriate market niche for a product
(or service or brand) and getting it established in that area.