Entrepreneurial Cycle

Click here to download a diagram of the The entrepreneurial cycle. (54k)

Step 1 This step helps you to find the overlap between what you can do and like to do, and what your potential customers need and want. It also helps you to test how these overlap with God’s will for your life. When you have found this overlap you have your first business idea!

Step 2 This step helps you to explore your own buying behaviours, and more importantly the buying behaviours of your potential customers. If you know what your customers are looking for in terms of quality, timeliness, relationship and cost, you can make sure that you provide something that will be bought.

Step 3 This step helps you to think through how you need to structure your activities to provide what the customer needs, when the customer needs it and in the way that the customer would like it done.

Step 4 This step helps you to work out whether you can make a workable business out of this idea. It helps you to ensure that what you will be paid will cover your costs adequately and provide you with enough income to keep the business going. In this part of the diagram, you get a chance to adjust your ideas and see whether you are able to make a profit. If you cannot, then you have only lost money on paper, and you can return to step 1 and move on to your next business idea.

Step 5 If you think you can make a profit, you are ready to move into the inner cycle and put your ideas into practice:

• Seeking the loan that you need.
• Putting your plans into action.
• Attracting and serving your customers.
• Stewarding your money and resources prayerfully so that you can begin to repay your loan and continue round the inner cycle with your successful new business.
  

The Stages in the Entrepreneurial Cycle

1. Resources — this refers to a new or reserve source of supply of something. From the viewpoint of society, an enterprise justifies its existence by converting resources into desired outputs. Resource inputs of labor, materials, ideas, government support, capital, and the like are converted by a firm into outputs of goods, services, employ­ment, stimulating experiences, markets, and other things desired by those who provide the inputs.

2. Process — determines how the product or service will be produced. There are phases to be followed in the process selection.''

a. Major technological choice — Does technology exist to produce
the product?

b. Minor technological choice — What transformation processes
will be used?

c. Specific component choice — What type of equipment (and degree of automation) should be used?

d. Process flow choice — How should the product or service flow through the operation system?

The final process-selection step determines how materials and products will move through the system. The phases in process selec­tion are closely interrelated. In each phase, choices should be made to minimize the process operations cost.

3. Product/Service — refers to the output of the enterprise. This is influenced by the technology available and the operations structure within the organization. It is a strategic task involving marketing, finance, and operations. Processes involved to determine the product or service to be produced are:

a. Research — generate the product/service idea

b. Selection — choose those that are technologically feasible, mar­ketable, and compatible with organizational strategy

c. Design — develop design specifications for the product or service

d. Product — it may be a tangible object, a service, or an idea that is offered by one party in exchange for something — money, patronage, moral support, votes, and the like.

Three Concepts of a Product

1. Generic Product — Definition of a product in terms of what it is made of or what comes out at the end of a production line, or what a factory produces.

Knowing the generic product is important because this is the basic benefit consumers look for in a product. Sometimes a manufac­turer has a different view of the generic product or functions of a product from his customers. Also, different customers may view the generic function of the same product differently. The generic function also changes through time. Limiting one's concept of a product to its generic functions is ineffective, however, especially because the same generic function is usually performed by several competing brands.

1. Formal Product—Another way of identifying a product is by its core or generic function and the manner by which it is presented. Thus, the generic function in addition to the product quality level, features, styling, brand, and package constitute what is referred to as the formal product. These elements of the formal product are easily identified in physical objects although they have their counterparts in service or intangibles. The additional elements of a formal product other than its core or generic elements are explained below.

a. Product quality — This refers to the ability of the product to perform certain functions.

b. Product features — The features of a product refer to the structural characteristics that enable it to perform or function as expected. The factors that comprise a product's structural char­acteristics are size, shape, form, color, material, odor, and tactile qualities.

While added features cost money, they can also bring in more money because they improve the marketability of a product. The correct combination of product features can give a product added attraction some of which are the following:

a. Make the product easier to operate or use.

Some examples are the no-frost refrigerators, digital watches, and remote-control television sets.

b. Improve the product's durability or quality

c. Improve the product's appearance

d. Generate new uses for the product to make it more versatile

3. Product Style — The style of a product refers to the aesthetic characteristics of a product. These characteristics "involve both the actual design, shapes, colors, and other less clear-cut, ornamental features which together help create an appealing, attractive, and distinct product."

4. Profit — These is income earned over an extended period of time. Profitability ratios are designed to put company profits into perspec­tive as a measure of the organization's efficiency of operation. It must be compared with other time periods or industry averages in order to be meaningful.

Profit is not a cause but a result — the result of the performance of the business in marketing, innovation, productivity. It is a needed result, serving essential economic functions.

Profit is, first, the test of performance — the only effective test, as the communists in Russia soon found out when they tried to abolish it in the early 1920s. Indeed, profit is a beautiful example of what engineers mean when they talk of feedback, or the self-regulation of a process by its own results.

Profit alone can supply the capital for tomorrow's jobs, both for more and better jobs.

And finally, profit pays for the economic satisfactions and services of society, from health care to defense, and from education to the opera. They all have to be paid for out of the surplus of economic production, that is, out of the difference between the value produced by economic activity and its cost.