Unit 27 -L.O.2 Explain the choice of a specific entrepreneurial idea for investigation and the market gap that it addresses

Course – Pearson BTEC Levels 4 and 5 Higher Nationals Diploma in Business

Successful entrepreneurs, by definition, are risk-takers who take a chance on new unproven markets. Market gaps exist when there is an opportunity to meet a need for products or services that do not exist in the market.

There is no shortage of people pursuing their entrepreneurial endeavors because they see other people doing it and feel like they should be able to make money from it as well.

The problem with this idea is that jumping into any market without doing research will leave you blindsided with the overwhelming competition or deluded by an equally false assurance of success because there is always room for everyone to enter the field.

Identifying customers:

Understand the need to identify specific customer types for targeting new ideas.

Understanding the needs of your specific customers is an important way to create a good customer-centric organization through new ideas and innovations.

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There are seven types of customers that you need to understand in order to make sure your products or services are appealing and relevant to them, these are socializer, thinker, adventurer, ideator, Politicker & dealmaker (SPADD)

1. The Socializer–This person craves conversation about personal experiences but not necessarily objective facts. They like talking about work projects but love discussions around their families and their hobbies at home.

They listen to the conversations of those around them and share information with their connections in order to stay up to date on what is happening in their lives.

2. The Thinker–This person craves logic, reason, and objective data that pertains specifically to their life situation without any opinions or agendas mixed into it. They don’t trust generalizations or people who aren’t relevant experts on the topic at hand. Their job is work-related but they want projects that stretch their thinking rather than routine applications of knowledge they already have.

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3. The Adventurer–This person craves physical activity like sports or traveling for spontaneous entertainment (sometimes even adventure tourism). They’re looking for experiences more so than products, though they do appreciate new technologies. They want a lot of information about the activity but they rely on their own experience for interpretation, as well as objective data where possible. Their job is work-related and they’re looking for projects that satisfy their curiosity rather than routine applications of knowledge they already have.

4. The Collector–This person craves material things like art, antiques, jewelry, or vintage clothing for what it says about them as well as its functional/aesthetic value (sometimes even “investment” potential). They’re looking for products more so than experiences, though they do appreciate new technologies. They want a lot of information about both the product and the activities surrounding it but they rely heavily on reputation/word-of-mouth and other opinions they trust from people they like.

5. The Connector–This person gets inspired by the stories of other doers and initiators: entrepreneurs, inventors, artists, or explorers that have overcome obstacles to make a real impact on the world. They’re looking for new friends as much as products and services; particularly those who are doing interesting things or starting promising ventures. Most of all they want to feel connected to others that share their passions and interests even if it isn’t necessarily practical or conventional (like “green” fashion).

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6. The Dabbler–This person goes through phases in life where they need change but doesn’t know what kind or how much, so they keep changing their minds about what’s important to the next. They’re looking for new friends as much as products and services; particularly those who can offer them a variety of things to try and experience. Most of all they want to feel connected to others that share their passions and interests even if it isn’t necessarily practical or conventional (like “green” fashion).

7. The Dutiful–This person follows rules and directions set for all by others (teachers, coaches, bosses). They have large ambitions in life but aren’t willing to follow unique paths that might get them there because they prefer security and an easy existence instead.

Behavioral, demographic, and geographic segmentation.

Behavioral segmentation uses a person’s past responses to marketing stimuli (either in-store or online) to identify what they might purchase once that person is contacted. These and other measures of behavior are used to predict future behavior, such as how much they will purchase. This allows marketers greater efficiency when concentrating advertising efforts into those demographic segments with the most potential for profit.”

Demographic segmentation based on different age groups, gender, and socio-economic level, etc which forms a various social classes section while geographic segmentation provides such information as people who live in southern California have different needs than people who live in Ohio.”

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Geographic segmentation is the practice of dividing a population into a finite number of equally sized groups called segments.

This practice seeks to capture more specific customer profiles, with these profiles adding dimensions such as types of products bought or hobbies pursued that help differentiates one group from another. That way, marketers can engage with their customers at a more granular level and tailor messages and offers accordingly.

Tangible and intangible features and benefits of a product or service

Tangible features of a product or service are the physical aspects that you can touch and measure, such as size, price, weight, color.

Intangible features are intangible qualities that cannot be seen or touched but still contribute to the quality of something.

For example durability and style. It is often very difficult to determine which type of benefits are worth prioritizing in marketing material unless there is some clear organization-wide strategy because each company may have different needs based on their goals. Imagine how different a car manufacturer’s answer would be to a gas manufacturer’s when it comes to answering this subjective question. That is why it’s best for companies with limited resources to stick with tangible benefits at first so they can focus on creating a product and selling it to the right group of people.

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Understanding the industry environment:

How the industry environment affects the likely success of a new entrant.

The industry environment affects the likely success of a new entrant by the following mechanisms:

1) It defines the distribution channels and products through which a firm can enter and compete.

For example, it is much easier to sell cosmetics in department stores than it is via online retailers

2) It shapes the macroeconomic variables that determine the overall demand for products produced by firms considering entry into an industry or within industries where entrants from other industries are strong candidates for rationalization projects.

For example, when consumer confidence falls, demand for goods sold by all incumbents decreases

3) The objective structures of industry environments shape the strategies employed by incumbents as well as competitive choices made by entrants. Different structural features of industry environments account for different outcomes when firms consider rationalization projects.

For example, as depicted in Exhibit 7-1, when industry environments are characterized by low comparative costs of production but great barriers to entry and exit (e.g., electronic components), incumbents will tend to employ strategies that emphasize differentiation from rivals.

Explore Porter’s Five Forces model to analyze the attractiveness of industry from the perspective of a new entrant.

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Porter’s Five Forces model is a framework that can be used to analyze the attractiveness of an industry. The five forces are:

1.Supplier Power

2.Buyer Power

3.Threat of Substitute Products or Services

4.Competitive Rivalry within an Industry

5.Threat of New Entrants.

These forces shape how power works in the industry and what kind of experience buyers have as well as what actions companies take within the industry.

The relative strength of these five things will determine whether you should enter an industry because it has high-profit potential but also might not be easy to work with.

It is important to know that this framework applies only when there’s no dominant firm in the market. It is based on a current situation and if one company dominates an industry, it will not be as easy to enter the market or make a profit within that industry. The five forces help you to verify this so it’s important to know them and how they work in order for you to understand the business better.

Approaches to competitor analysis relevant to entrepreneurs and small firms.

There are two approaches to competitor analysis relevant for entrepreneurs.

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The first is using your niche as a weapons-grade advantage and leveraging it against competitors. Evernote, a Silicon Valley company known for its note-taking apps, has the unique benefit of being able to keep all notes synced between machines locally without the carryover of duplicate data that occurs through cloud-based services like Google Docs. They have mastered this skill (for which they do not pay cloud storage fees) and use it effectively as a powerful weapon against Word because the product and features offered by an enterprise-level Google client would be cost-prohibitive in comparison.

Other approaches for entrepreneurs include consulting analytics software that gathers data from many sources on customers’ moods, habits, and loyalty to their product. This type of software is free to use but requires set-up fees would be a logical consideration for a new entrepreneur looking to enter the market space.

Industry life-cycle.

The industry life-cycle is the process of planning, executing, and closing an industrial project. If done well, an industrial project can earn competitive revenue from day one and achieve predictable results over its lifetime.

For a company to be successful in this endeavor, it must gain market share early on by identifying customer needs and developing products or services that deliver strong value propositions to customers. This article will provide information on the phases of the industry life-cycle with a focus on branding strategies for maximizing return.

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