Entrepreneurship case study

Brian has not conducted the proper market research for this potential opportunity. He has committed several errors in his conceptualizing of this venture. He has made two errors with respect to market demand estimation. One is that he believes that market demand exists on the basis of demand existing for other forms of entertainment media through similar channels. Typically, to find a gap in the current market, one needs to identify an opportunity that others would not readily identify. Brian's concept is a short leap from the existing concepts in the marketplace. His beliefs about potential demand have probably been tested by other companies and no demand was found. The second error Brian made was estimating the total market demand on the basis of what he expects to be his breakeven point, rather than on surveys of the public. As a result, he has beliefs about the existence and size of the potential market that are completely unsubstantiated by research.

Brian also committed an error by assuming that the usage pattern of music entertainment among his friends could reasonably be extrapolated to the general public. Not only is this sample too small to be representative of the general public, but it is too narrow both in terms of demographics and psychographics.

2) I would caution Brian about several key mistakes. The first is pushing ahead without conducting any market research. Brian is full of enthusiasm for his idea, rather than being full of enthusiasm for a demonstrable market opportunity. He needs to focus on gathering evidence of the market's potential size and its characteristics before becoming excited about his idea. I would also caution against confusing the enthusiasm of his friends for the enthusiasm of the market as a whole. His friends are not representative of the broad market, and furthermore they are biased.

I would also caution Brian about some of this other assumptions. He is assuming that he can get a discount from CD producers without confirming this. Indeed, rarely do such entities sign into favorable agreements with underfunded startups. I would also caution Brian about entering into this business without a long-term business plan. Even if his wild, uninformed assumptions prove to be prescient in the short-term, the technological shift represented by the mp3 is something that could easily destroy his business before it achieves critical mass. It is foolish to enter into a business based around a technology that is approaching obsolescence without considering the impacts of the new technologies on the long-term future of the business model.

3) the first step I would advise Brian undertake is to design and undertake a significant amount of market research. It is unwise to invest thousands of dollars in building a business based on a hunch. He needs to know for certain that there is a market out there for his idea, and he will also need to have a sense of the best ways he can reach that market. This can only be done by designing and implementing a professional market research survey.