New Venture Formation - Research Paper Example

? New Venture Formation Introduction New venture development is a complex process that involves all the activities concerned with identification of business opportunities including product or service design, business frame design, and marketing. The process of new venture development consists of several phases irrespective of the nature and size of the business. Many scholars are of the opinion that the efficacy of new venture development process determines the future of a proposed venture. This paper will analyze different phases of the new venture development process by focusing on classical entrepreneurial approaches as well as corporate entrepreneurship perspectives. New venture development In order to easily interpret the process of new venture or business development, it is better to split the term ‘business development’ into two such as business and development. The term business constitutes certain significant elements like finance, managerial activities, competition, marketing, and prices. In addition, the basic idea behind the term business is that it largely relates to risk and entrepreneurship. At the same time, the term ‘development’ can be linked with some other aspects such as technological improvement, improved relations, cost reduction, and general welfare. According to conventional views, business development is considered as gradual development of business ideas and business operations; and although the techniques used to promote the business expansion may differ, all of them constitute traditional marketing (“New venture development”). The traditional marketing was mainly concerned with how to find, approach, and customer retention using the given lines of product. It is obvious that this traditional business development concept has limited scope as it covers only marketing views. Hence, the modern corporate entrepreneurship concept redefines the new business development in a broad manner. According to this modern concept, marketers focus on the total offering they give instead of only concentrating on the product or service. An offering reflects a package that contains different components such as physical product, service, advice, delivery, and the costs. According to contingency theory, different product-market-technology combinations need different marketing practices and business models in order to operate effectively. Recently, scholars have identified that new venture development process has a close relationship with technology and business networks. In other words, the major purpose of the business development process is to recognize opportunities in a fast changing technological world. Phases of new venture formation New venture formation or development includes a series of processes including idea generation and development, market research methodologies, financial forecasting and spread sheet formulation, and new venture funding. These processes/phases are briefly described below. 1. Idea generation and development As Mallett points out, idea generation is the most important phase of a new venture development process as this phase determines the direction of flow of the whole business performance (149). While forming a business idea, an entrepreneur must take different factors into account. He has to ensure that his business idea well suits with persisting market trends and possesses adequate financial sources to successfully launch the product into the market. It must be also emphasized that the business idea should be novel enough to survive the market competition. Idea generation is a very challenging task but putting it into practice can be much harder. Once an idea strikes a person (entrepreneur), he has to chart all the details of what he wants to achieve and how he is going to proceed with it. The entrepreneur must be very careful at this stage since spending too much time in the idea generation phase would stunt the entrepreneur’s creativity. The entrepreneur may seek assistance from managerial experts to make necessary adjustments to his framed business plan. 2. Market research methodologies For starting up a business systematically and effectively, it is necessary to carry out a well designed marketing research. Market research is an effective tool to discover what people want, need, or believe. Once the market research is complete, the entrepreneur can use the obtained results to determine how to market his specific product/service. The process of market research mainly deals with market information, market segmentation, market trends, market size, and market analysis (“The Business Plan”). The market research methodology has not an exact order since it is more of an interactive process whereby an entrepreneur may move backward during his market investigation. However, defining the research problem is the first step of marketing research. In this step, the entrepreneur identifies different problems and establishes research objectives. After establishing research objectives, the researcher (entrepreneur) selects and establishes the research design. Here, he identifies the information types and sources and fixes research instrument. Information types are of two types: primary data and secondary data. Primary data represents the original information gathered for a particular purpose while secondary data constitutes information that already exists. Generally, research designs are of three types namely exploratory research design, descriptive research, and casual research. Finally the entrepreneur formulates findings on the basis of a collected and analyzed data. 3. Financial forecasting and spread sheet formulation Financial forecasting is an effective managerial tool that enables the firm to think about and prepare for the future. While starting up a new venture, the entrepreneur would not have a clear idea regarding its financial future. Therefore, the financial forecasting tool would be very helpful for the entrepreneur to express his goals and priorities and to ensure that they internally feasible and consistent. It is obvious that majority balance sheet and income statement accounts are related to sales and hence sales forecast has been set as the crucial element of financial forecasting process. Hence, the sales forecast assists the management team to determine the increase in current and fixed assets that are required to support the forecasted sales level. The spread sheet presentation is a subsidiary step of financial forecasting and it is used to present the collected data before users. 4. New venture funding New venture funding is the most difficult task for an entrepreneur. Although the entrepreneur may have an innovative business idea, sometimes he struggles to raise adequate capital to finance his business idea. Mainly entrepreneurs get finance from venture capitalists that provide financial assistance to commence innovative business ventures. However, finance acquisition from venture capitalists is not an easy task. In order to acquire finance from venture capitalist, an entrepreneur must convince the venture capitalist that the proposed business idea is potential enough to repay the borrowed money. Similarly, an entrepreneur may approach angel investors to acquire adequate funds to finance his venture. Angel investors are rich individuals who are always seeking potential business ventures to invest their excess money. Finally, the entrepreneur can raise funds from his family and friends. However, it is a risky option as it may endanger the private properties of the entrepreneur in case of business collapse. Therefore, the entrepreneur must be very cautious while selecting capital sources. Conclusion From the discussion it is evident that classical entrepreneurial approaches have largely changed. The modern corporate entrepreneurship polices widely covers different aspects of a new venture formation. The new venture development is a complicated process and it includes several vital phases. Idea generation is the most significant part of a new venture formation as it is the focal point of all subsequent business activities. The generated idea must be effectively developed to make the project a success. Likewise, new venture funding also plays an important role in determining the degree of efficacy of the proposed project. In total, effective coordination of various new venture formation phases is necessary to introduce the product/service successfully to the market. Works Cited The Business Plan. Your guide to better business planning. Web. 10 Aug 2011 Mallett, C. P. Frozen Food Technology. UK: Springer, 1993. Print. New venture development. Rodney Solutions. Web. 10 Aug 2011 Read More