Explain the factors that help an entrepreneur to identify a product.

Question

Accepted Answer

The factors involved in idea and opportunity assessment, which help an entrepreneur identify a product, are:

1. **Product identification** — The idea should lead to a definite product or service which the entrepreneur can sell; the first step is to obtain a concept of the product or service suggested by the idea.

2. **Application and use** — The idea is examined for its real life use and application; an existing product may be modified for better use.

3. **Level of operation** — Depending on the use of the product or service, it is produced in a cottage industry, a small scale industry or a large scale industry.

4. **Cost** — The per unit cost at the particular level of operation is calculated and compared with that of competitive products; this ultimately decides the sale price.

5. **Competition** — Market competition is assessed through a study of the trends in demand and supply.

6. **Technical complexity** — The type of technology required, whether training and application will be locally available, and the supply position of plant and machinery are examined.

7. **Annual turnover and profit margin** — The idea is examined on the basis of expected annual turnover, which indicates the market share of the product or service.