While business plans may be used in unique ways by different businesses, the mos

Question

While business plans may be used in unique ways by different businesses, the most successful business plans share a common theme: They are rooted in current market trends and consumer interest. Without this foundation, a business plan is irrelevant—businesses exist and thrive because of their ability to effectively identify and meet the demands of the market. However, there are two different approaches for including market considerations in the business plan. First, a market driven business plan is based on an understanding of the current marketplace and evaluates how a new product or service would fit into that market. The second approach, a market driving business plan, seeks to position the business at the cutting edge of the market and actually be a force that drives the market and influences the decisions of others.

Address the following in detail: Is it more appropriate to have a market driven plan or a market driving plan? Why? What are the advantages and disadvantages of each approach for small businesses?

Explanation / Answer

For a small business, market driven business plan is more appropriate. Though, an established business such as MNCs and other big brands can go with market driving plans also. This statement is based upon the following reasons:

1.    Small businesses find out opportunities to develop businesses. Thus, systematic study of the market place will not only give them the idea of demand and supply gap, but also, that what can be sold in the present business environment. Also, it incurs less capital than the market driving business plan requires.

2.    Big MNCs need a path breaking innovation to expand. They need to create a blue ocean strategy that creates a monopoly for that MNC. Thus, any big player who wants to rule the market, should go with the market driving business plan. Examples can be taken from the launch of apple play store with revolutionary technologies as well as the launch of the iPhone. These products and their features built their own market & succeed.

Though, there are certain advantages as well as disadvantages with both the types of business plans.

For Market driven business plans,

Advantages:

a.    Function on the gap in demand & supply

b.    Caters to the existing needs of the consumers

c.     Relatively lower amount of capital

d.    Works on Opportunity present in the market

Disadvantages:

a.    Huge competition

b.    May not be futuristic

c.     The profit margin is low

d.    Dependent on market trends

For market driving business plans,

Advantages:

a.    Creates its own market

b.    Relatively no competition

c.     It is futuristic in nature

d.    It creates new trends

Disadvantages:

a.    Investment of relatively high amount of capital

b.    It may not suit to consumers also. Thus, the risk of failure is also associated with it.

c.     Other firms can copycat the idea

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