THE IMPORTANCE OF THE SELF EMPLOYMENT AND THE ENTREPRENEURIAL SPIRIT.- Definition of self employment.- Self-employment is working for one's self rather than for another person or company. In other sense, it is, earning one's livelihood directly from one's own trade or business rather than as an employee of another. To be self-employed, an individual is normally highly skilled in a trade or has a niche product or service for his or her local community. With the creation of the Internet, the ability for an individual to become self-employed has increased dramatically. Self-employed people can also be referred to as a person who works for himself/herself instead of an employer, but drawing income from a trade or business that they operate personally.
Self-employed vs business owner.- To be self-employed is not the same as being a business owner: A business owner is not required to be hands-on with the day-to-day operations of his or her company, while a self-employed person has to utilize a very hands-on approach in order to survive. According the US Beureau of Labor Statistics, only 44% of businesses survive the first 4 years in business.
Solution.- Policymakers increasingly view self-employment in the form of youth entrepreneurship as a possible solution to the youth umemployment crisis. However, many experts believe only 20% of all people are fit to run their own businesses.
Hide.- In some countries, (the US and UK, for example) governments are cracking down on disguised employment, often described as the pretense of a contractual intra-business relationship to hide what is otherwise a simple employer-employee relationship
BUSINESS PLAN. THE ORGANIZATIONAL BACKGROUND.- Appearance.-In a written plan, information may appear in a separate section, an appendix, or may be omitted all together depending on the nature of the plan. If the plan is directed at people outside of the company, a brief synopsis may appear in the executive summary. This will be supplemented with a more detailed discussion elsewhere in the plan.
Current status.- Number of employees, annual sales figures, key product lines, location of facilities, current stage of development (start-ups), corporate structure and names of the majority investor, if any
History.- Founding date, major successes, strategically valuable learning experiences, etc.
Management team.- Board members, owners, senior managers, managing partners, head scientists and researchers, etc
Several objectives.- The marketing plan has several objectives: If the product is a new product with no existing market, one must identify all substitute products. For each significant substitute product one must explain:
Name, features, why substitute, why proposed product better
Switching costs and why new product justifies switching
Demand management.- In economics, demand management is the art or science of controlling economic demand to avoid a recession. The term is also used to refer to management of the distribution of, and access to goods and services on the basic of needs. An example is social security and welfare services. Rather than increasing budgets for these things, governments may develop policies that allocate existing resources according a hierarchy of need.
Distribution.- Distribution strategy
List of major distributors
Current status of negotiations
Promotion and brand development.- Promotion strategy
Training requirements.- Training requirements should look to address two issues - a benefit to motivate staff and developing the capability of the organisation to deliver the business objectives. Ideally all training requirements should be based on as an assessment of the business plan objectives, the required competence and capability to deliver these objectives and understanding of the current capacity and capability of the organisation. Simple question to ask to assess the appropriateness of the training - as a result of the training how much better will the organisation be at delivering its objectives. Remember that training covers a wide range of activities from project work and on the job training to professional qualifications. Most learning takes place outside of formal training activities.
Acquisition plan.- Buying companies.- Some business plans gain competitive advantage by buying companies up and down the value chain. Some gain competitive advantage by buying up companies and consolidating them. Sometimes a business plan will seek to earn a superior return by adding superior management talent to an existing weak company.
Included.- When acquisitions form a major part of the business strategy, the acquisition plan needs to be included in the business plan.
Proposed acquisition targets
Effect on market structure (if consolidation plan is being proposed)
Organizational learning plan.- The organizational learning plan discusses what lessons will be learned from the marketing, operational, and finance plans and how those lessons will be consolidated to gain strategic advantage.
Cost allocation model.- If variable costs play an important role in the business plan, it may be helpful to include a cost allocation model. This is particularly true if one has a unique business model that creates competitive advantage by transforming traditionally fixed costs into variable costs
FINANCIAL PLAN.- Financial statements.- In business, a financial plan can refer to the three primary financial statements (balance sheet, income statement and cash flow statement) created within a business plan. Financial forecast or financial plan can also refer to an annual projection of income and expenses for a company, division or department. A financial plan can also be an estimation of cash needs and a decision on how to raise the cash, such as through borrowing or issuing additional shares in a company.
Financial plan vs financing plan.- While a financial plan refers to estimating future income, expenses and assets, a financing plan or finance plan usually refers to the means by which cash will be acquired to cover future expenses, for instance through earning, borrowing or using saved cash.
More information about PERT (click here to return to the topic)
Overview.- Definition.- The Program (or Project) Evaluation and Review Technique, commonly abbreviated PERT, is a model for project management designed to analyze and represent the tasks involved in completing a given project. It is commonly used in conjunction with the critical path method or CPM.
Minimum time.- PERT is a method to analyze the involved tasks in completing a given project, especially the time needed to complete each task, and identifying the minimum time needed to complete the total project.
History.- PERT was developed primarily to simplify the planning and scheduling of large and complex projects. It was developed by the U.S. Navy Special Projects Office in 1957 to support the U.S. Navy's Polaris nuclear submarine project. It was able to incorporate uncertainty by making it possible to schedule a project while not knowing precisely the details and durations of all the activities. It is more of an event-oriented technique rather than start- and completion-oriented, and is used more in projects where time, rather than cost, is the major factor. It is applied to very large-scale, one-time, complex, non-routine infrastructure and Research and Development projects.
Scientific management.- This project model was the first of its kind, a revival for scientific management, founded by Frederick Taylor (Taylorism) and later refined by Henry Ford (Fordism). DuPont corporation’s critical path method was invented at roughly the same time as PERT.
Conventions.- Number.- A PERT chart is a tool that facilitates decision making; The first draft of a PERT chart will number its events sequentially to allow the later insertion of additional events.
Links.- Two consecutive events in a PERT chart are linked by activities, which are conventionally represented as arrows (see the diagram below).
Sequence.- The events are presented in a logical sequence and no activity can commence until its immediately preceding event is completed.
Proper.- The planner decides which milestones should be PERT events and also decides their “proper” sequence.
Pages.- A PERT chart may have multiple pages with many sub-tasks.
More information about Wilson Model.- (click here to return to the topic) Economic order quantity.- It’s the level of inventory that minimizes the total inventory holding costs and ordering costs. It is one of the oldest classical production scheduling models. The framework used to determine this order quantity is also known as Wilson EOQ Model or Wilson Formula. The model was developed by F. W. Harris in 1913, but R. H. Wilson, a consultant who applied it extensively, is given credit for his early in-depth analysis it
Overview.- Constant.- Assume that the demand for a product is constant over the year and that each new order is delivered in full when the inventory reaches zero. There is a fixed cost charged for each order placed, regardless of the number of units ordered. There is also a holding or storage cost for each unit held in storage (sometimes expressed as a percentage of the purchase cost of the item).
Optimal.- We want to determine the optimal number of units of the product to order so that we minimize the total cost associated with the purchase, delivery and storage of the product
Parameters.- The required parameters to the solution are the total demand for the year, the purchase cost for each item, the fixed cost to place the order and the storage cost for each item per year. Note that the number of times an order is placed will also affect the total cost, however, this number can be determined from the other parameters
Underlying assumptions.- The ordering cost is constant.
The rate of demand is constant
The lead time is fixed
The purchase price of the item is constant i.e no discount is available
The replenishment is made instantaneously, the whole batch is delivered at once.
EOQ is the quantity to order, so that ordering cost + carrying cost finds its minimum.
Variables.- Q = order quantity
Q* = optimal order quantity
D = annual demand quantity of the product
P = purchase cost per unit
S = fixed cost per order (not per unit, in addition to unit cost)
H = annual holding cost per unit (also known as carrying cost or storage cost) (warehouse space, refrigeration, insurance, etc. usually not related to the unit cost)
The Total Cost Function.- Minimum point.- The EOQ formula finds the minimum point of the following cost function:
Purchase cost: This is the variable cost of goods: purchase unit price × annual demand quantity. This is P×D
Ordering cost: This is the cost of placing orders: each order has a fixed cost S, and we need to order D/Q times per year. This is S × D/Q
Holding cost: the average quantity in stock (between fully replenished and empty) is Q/2, so this cost is H × Q/2
TC = PD + DS : Q + HQ : 2
To determine the minimum point of the total cost curve, set the ordering cost equal to the holding cost:
DS : Q = HQ : 2
Solving for Q gives Q* (the optimal order quantity):
H : 2 = DS : Q2
Q2 = 2DS : H
Q* = sqrt (2DS : H)
Therefore: Note that interestingly, Q* is independent of P; it is a function of only S, D, H.
Example.- Annual demand quantity of the product (D) = 10000 units
Fixed cost per order (S) = $2
Cost per unit (CU)= $8
Carrying cost %age (%age of CU) = 0.02
Carrying cost Per unit (H) = $0.16
Q* = sqrt (2DS : H) = sqrt (2 x 10,000 x 2 : 0.16) = 500 units
Number of order per year (based on EOQ) = 10,000 : 500 = 20
Total cost = PD + DS : Q + HQ : 2
Total cost = 8 x 10,000 + (10.000 x 2) : 500 + (0.16 x 500) : 2
Total cost = $80,080
1st check.- If we check the total cost for any order quantity other than 500, we will see that the cost is higher. For instance, supposing 600 units per order, then
Total cost = 8 x 10,000 + (10,000 x 2) : 600 + (0.16 x 600) : 2
Total cost = $80,081.33
2nd check.- Similarly, if we choose 300 for the order quantity then:
Total cost = 8 x 10,000 + (10.000 x 2) : 300 + (0.16 x 300) : 2
Total cost = $80,090.67
Interest.- This illustrates that the Economic Order Quantity is always in the best interests of the entity.
More information about ways to obtain primary data.- (click here to return to the topic) Surveys.- Telephone.- Encourage.- Use of interviewers encourages sample persons to respond, leading to higher response rates.
Comprehension.- Interviewers can increase comprehension of questions by answering respondents' questions.
Large sampling frames.- Good for large national (or international) sampling frames
Bias.- Some potential for interviewer bias (e.g. some people may be more willing to discuss a sensitive issue with a female interviewer than with a male one)
Non-audio.- Cannot be used for non-audio information (graphics, demonstrations, taste/smell samples)
Rural areas.- Unreliable for consumer surveys in rural areas where telephone penetration is low
Three types.- traditional telephone interviews
computer assisted telephone dialing
computer assisted telephone interviewing (CATI)
Mail.- Handed or mailed.- The questionnaire may be handed to the respondents or mailed to them, but in all cases they are returned to the researcher via mail.
Cost.- Cost is very low, since bulk postage is cheap in most countries
Delay.- Long time delays, often several months, before the surveys are returned and statistical analysis can begin
Clarification.- Not suitable for issues that may require clarification
Own convenience.- Respondents can answer at their own convenience (allowing them to break up long surveys; also useful if they need to check records to answer a question)
Bias.- No interviewer bias introduced
Large amount.- Large amount of information can be obtained: some mail surveys are as long as 50 pages
Mail panels.- Response rates can be improved by using mail panels. Members of the panel have agreed to participate. Panels can be used in longitudinal designs where the same respondents are surveyed several times.
Online surveys.- Web or e-mail.- Can use web or e-mail, web is preferred over e-mail because interactive html forms can be used
Cheap.- Often inexpensive to administer
Fast.- Very fast results
Modify.- Easy to modify
Panels.- Response rates can be improved by using online panels - members of the panel have agreed to participate
Long.- Often suitable for long surveys (but some respondents object to allowing strangers into their home for extended periods)
No telephone.- Suitable for locations where telephone or mail are not developed
Response rates.- Skilled interviewers can persuade respondents to cooperate, improving response rates
Bias.- Potential for interviewer bias
Personal mall intercept survey.- Several ways.- Shoppers at malls are intercepted - they are either interviewed on the spot, taken to a room and interviewed, or taken to a room and given a self-administered questionnaire
Acceptable.- Socially acceptable - people feel that a mall is a more appropriate place to do research than their home
Bias.- Potential for interviewer bias
Manipulate.- Easy to manipulate by completing multiple times to skew results
Observation.- Observation is an activity consisting of receiving knowledge of the outside world through the senses, or the recording of data using scientific instruments. The term may also refer to any data collected during this activity.
Experimentation.- The outcomes are observed in a laboratory environment.
Consumer panels.- (click here to return to the topic)
Definition.- Consumer Panels are a research technique for measuring markets that use the same sample of respondents on a continuous basis. This research technique benefits from a number of very special features to be the most efficient way to measure markets and behaviours accurately.
Large sample sizes.- Using large sample sizes with the same respondents over time gives the best possible quality of consumer panel information and data, in both absolute terms and in trend.
Ongoing basis.- Because the information is collected on an ongoing basis, the panellists do not need to use recall to remember their behaviour.
Change.- As the sample is fixed, any change in behaviour from one period to the next is picked up as precisely as possible.
Information to supplement.- A range of information to supplement the fundamentals of purchasing and usage is also picked up from the sample. These allow exploration of the attitudes behind the behaviours measured, and the response to the influences on them from various marketing activities.
Purchasing and usage.- It is possible to measure both the purchasing behaviour and the subsequent usage patterns. The combination of both data provides even greater insights for the users.
Several methods.- The right methodology for the task is vital. Panelmembers need to be able to accurately collect and record the information required, but in a way which is simple and easy to maintain their motivation on an ongoing basis. Depending on the market, a variety of approaches including in-home bar code scanning, till receipt harvesting, SMS and web-based methods can be used to help the panellist to do their work as conveniently as possible.
Collate.- Once the data has been collected, it is collated into a database. Each service has a regular set of metrics that are used to monitor the performance of a market and the products within it. These include:
Sales and shares (in volume and value)