Enterpreneurship
An entrepreneur is someone who organizes, manages, and assumes the risks of a business or enterprise. An entrepreneur is an agent of change. Entrepreneurship is the process of discovering new ways of combining resources. When the market value generated by this new combination of resources is greater than the market value these resources can generate elsewhere individually or in some other combination, the entrepreneur makes a profit. An entrepreneur who takes the resources necessary to produce a pair of jeans that can be sold for thirty dollars and instead turns them into a denim backpack that sells for fifty dollars will earn a profit by increasing the value those resources create. This comparison is possible because in competitive resource markets, an entrepreneur’s costs of production are determined by the prices required to bid the necessary resources away from alternative uses. Those prices will be equal to the value that the resources could create in their next-best alternate uses. Because the price of purchasing resources measures this opportunity cost— the value of the forgone alternatives—the profit entrepreneurs make reflects the amount by which they have increased the value generated by the resources under their control.
Entrepreneurs who make a loss, however, have reduced the value created by the resources under their control; that is, those resources could have produced more value elsewhere. Losses mean that an entrepreneur has essentially turned a fifty-dollar denim backpack into a thirty-dollar pair of jeans. This error in judgment is part of the entrepreneurial learning, or discovery, process vital to the efficient operation of markets.
Successful entrepreneurs expand the size of the economic pie for everyone. Bill Gates, who as an undergraduate at Harvard developed BASIC for the first microcomputer, went on to help found Microsoft in 1975. During the 1980s, IBM contracted with Gates to provide the operating system for its computers, a system now known as MS-DOS. Gates procured the software from another firm, essentially turning the thirty-dollar pair of jeans into a multibillion-dollar product. Microsoft’s Office and Windows operating software now run on about 90 percent of the world’s computers. By making software that increases human productivity, Gates expanded our ability to generate output (and income), resulting in a higher standard of living for all.
Products and services
People satisfy their needs and wants with products. We will define products broadly to cover anything that can be offered to someone to satisfy a need or want. Normally the word product brings to mind a physical object, such as a car, a television set, or a soft drink. And we normally use the expression products and services to distinguish between physical objects and non-material ones. But in thinking about physical products, their importance lies not so much in owning them as in using them to satisfy our wants. We don’t buy a car to look at but because it supplies transportation service. We don’t buy a microwave oven to admire but because it supplies a cooking service. Thus, physical products are really vehicles that deliver services to us.
In fact, services are also supplied by other vehicles, such as persons, places, activities, organizations, and ideas. If we are bored, we can go to a nightclub and watch an entertainer (person): travel to a warm vacationland like Bermuda (place): engage in some physical exercise (activity): join a lonely-hearts club (organization), or adopt a different philosophy about life (idea). In other words, services can be delivered through physical objects and other vehicles. We will use the term product to cover all vehicles that can deliver satisfaction of a want or need. Occasionally we will use other terms for product, such as offers, satisfiers, or resources.
Manufacturers get into a lot of trouble by paying more attention to their products than to the services produced by these products. Manufacturers love their products but forget that customers buy them because they satisfy a need. People do not buy physical objects for their own sake. A tube of lipstick is bought to supply a service: helping the person look better. A drill bit is bought to supply a service: producing a needed hole. The marketer’s job is to sell the benefits or services built into physical products, rather than just describe their features.
Therefore, a product is more than a simple set of material features. Consumers tend to see products as complex combinations of benefits that satisfy their needs. When developing products, marketers first must identify the core consumer needs the product will satisfy. They must then design the actual product and find ways to augment it in order to create the combination of benefits that will best satisfy consumers.
Key terms:
Actual products — товар у реальному виконанні — a product’s parts, quality level, features, design, brand name, packaging, and other attributes that combine to deliver core product benefits.
Augmented products — товар з підкріпленням — additional consumer services and benefits built around the core and actual products.
Consumer products — споживчі товари — products bought by final consumers for personal consumption.
Core products — сутність товарів, товари за задумом — the problem-solving services or core benefits that consumers are really buying when they obtain a product.
Packaging — упаковка — the activities of designing and producing the container or wrapper for a product.