Business concept

Business concept
See also

The business concept is a description of the intended conduct of an entrepreneur through the creation or development of an enterprise or a separate enterprise. Each such the concept is related to market activities and should include decisions and projects marketing [1]. A business concept is understood here as a description of the intended conduct of an entrepreneur, which includes: determination of objectives for a given period, formulation of assumptions and directions of development of business activity, a systematized set of activities to be carried out [2]. The concept is prepared by the business owner or manager working for him, sometimes with the support of advisory teams from inside and outside, on the basis of analysis and assessment of the internal situation and external conditions [3].

The role of the business concept in the operation of the enterprise

Preparation of an appropriate business concept is treated as a foundation in the construction of an enterprise and its development, as well as in the preparation for the implementation of a business venture [4]. Without a concept it is impossible to imagine a lasting business success. A business concept is a tool for creating business, more precisely - as one of several sets of tools, next to financial, technological, human resources and others [5].

Creating a business concept

There are two approaches to developing a business concept [6]:

  • The first refers to the situation where a concept for the creation, operation, transformation and/or development of a business is created, distinguishing between a business concept that is yet to be created and an existing organisation that, for example, we wish to change or develop or simply plan to function within a certain period of time.
  • The second approach, on the other hand, refers to the project concept in the sense of the project, which has a defined scope and time frame, for example - an investment project, restructuring, organization of a significant business event.

In both approaches, a structured concept must be developed, which is the real foundation of the business to be initiated or planned. The development of a business concept should be based on an analytical approach, i.e. it should take into account previously performed research and analysis, and not only vision and intuition (R. Casadesus-Masanell F. Zhu, 2013, p.3-4). They can, for example, use methods such as [7]:

Stages of creating a business concept

The business concept of the project must be based on the previously implemented analyses, which in total form a three-phase sequence: first a purposefulness analysis, then, if purposefulness is confirmed, a feasibility analysis and cost-effectiveness, and finally - development of an implementation plan - in-kind and financial [8]. As can be seen, the first two phases are of the nature of the analyses, which take the form of the form of pre-implementation studies, sometimes referred to as feasibility studies (e.g. in EU-funded projects) European). These studies are [9]:

  • an opportunity study to answer the questions of whether the project makes sense or is feasible in the existing reality;
  • a feasibility study to clarify whether the project will be feasible at a given point in time and cost-effective under defined variants, and what are the success and risk factors.

Elements of the business concept

Only after receiving and analyzing the results of necessary studies does the following occur the business concept of the project in the form of a business plan which includes the following main elements [10]: Genesis of the project[11]:

  • project participants,
  • history of the project,
  • types of studies carried out and their costs.

Market analysis and marketing strategy[12]:

  • Market - products,
  • supply and demand actors,
  • prices,
  • tendencies,
  • market forecasts,
  • segmentation;
  • target buyers and their acquisition,
  • marketing mix,
  • sales production programme.

Material inputs[13]:

  • structure and expected size of demand,
  • current and potential availability,
  • estimation of prices and annual costs of material inputs.

Technical characteristics of the project[14]:

  • identification of the size of the project,
  • technology and equipment,
  • buildings and construction/assembly works,
  • estimates of investment expenditure.

Organisation and employment[15]:

  • general organisational plan,
  • anticipated staffing requirements,
  • staff structure,
  • the estimated staff and management expenditure.

Timetable for implementation[16]:

  • period and timetable for implementation;
  • expected costs of individual stages.

Financial analysis[17]:

  • total investment outlays,
  • project financing,
  • production costs,
  • revenues,
  • cash flows,
  • profit and loss account,
  • balance sheet forecast,
  • evaluation of the profitability of the project.

Business concept form

The most general and far-reaching provision of the concept is the company's strategy, which includes at least elements such as[18]:

  • vision,
  • mission,
  • deliverables,
  • action, often in a formalised form, i.e. accepted by the relevant management or ownership body.

At the other extreme, there is a concept in the form of a set of recorded assumptions of the enterprise and its future or assumptions of the intended enterprise - such sets of assumptions are usually only a record of reflections and/or discussions, they are not always based on analyses, do not always have the necessary depth or detail of shots [19]. Between these business plans of a new entity, an existing entity, an enterprise (project) are extreme forms of concept [20].

Types of business concepts

A distinction should be made between business concepts relating to enterprises (emerging and existing) and projects (projects). The most important differences between these types of concepts are listed below [21]. A business concept is a description of an economic entity and its intended or planned activities, including in particular [22]:

  • characteristics of the entity at the moment of preparing the concept, including its legal and economic status and organisation,
  • the object of the action,
  • strategic assumptions,
  • target markets and assessment of market opportunities,
  • the environment of the enterprise and the conditions of its operation,
  • analysis and forecast of costs, sales, market effects and result financial.

The concept of a project is an ordered description of an intended economic or managerial undertaking containing in particular[23]:

  • objectives,
  • assumptions, including how to manage the project,
  • the necessary means of action,
  • expected costs and effects,
  • the necessary actions and their timetable,
  • the necessary financial outlays together with an estimate of their effectiveness.

Author: Natalia Chowaniak

Footnotes

  1. L. Nwaeke 2012, pp. 1
  2. L. Nwaeke 2012, pp. 1
  3. L. Nwaeke 2012, pp. 1
  4. L. Nwaeke 2012, pp. 2
  5. L. Nwaeke 2012, pp. 2
  6. R. Casadesus-Masanell F. Zhu, 2013, p.3-4
  7. R. Casadesus-Masanell F. Zhu, 2013, p.3-4
  8. R.J. Arend, 2013, p.6
  9. R.J. Arend, 2013, p.6-7
  10. B. W. Wirtz et al. 2016, pp.36-54
  11. P. Desyllas, M. Sako, 2013, pp.5-7
  12. P. Desyllas, M. Sako, 2013, pp.5-7
  13. R.J. Arend, 2013, p.12
  14. R.J. Arend, 2013, p.12
  15. L. Nwaeke 2012, pp. 4-5
  16. L. Nwaeke, 2012, pp. 4-5
  17. L. Nwaeke, 2012, pp. 4-5
  18. C. Baden-Fuller, S. Haefliger, 2013 p.5-8
  19. C. Baden-Fuller, S. Haefliger, 2013, p.5-8
  20. C. Baden-Fuller, S. Haefliger, 2013, p.5-8
  21. F. Hacklin, M. Wallnofer, 2012 p.2
  22. F. Hacklin, M. Wallnofer, 2012 p.2
  23. C. Zott, R. Amit, L. Massa, 2011, p.4

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References