acquiring essential information entrepreneurship 4
TRANSCRIPT
ACQUIRING ESSENTIAL
INFORMATION
Entrepreneurship
4
Introduction
Many entrepreneurs who found new ventures to develop products or services do not do their homework: they fail to acquire essential information before beginning.
Market information Who are the potential customers? How will potential customers react to the new
product of service? What can you learn about specific markets or
geographic areas?
Direct Techniques
Survey / customer surveys Potential customers compare your product with existing
ones Target group rates different dimensions of the product on a
scale from low to high
Perceptual mapping A map that reveals the key dimensions along which
potential customers perceive products and evaluate them
Focus groups Groups of 8 to 12 people similar to potential customers
meeting for 1 to 2 hours to describe their perceptions of and reactions to relevant products
Identify the key dimensions along which focus group members perceive and evaluate various products
Indirect Techniques
Desk researchExamines secondary data including
Sales of competing products Demographic data Trends (economic, lifestyle, etc.)
External Analysis
Collecting and Evaluating information from the external environment
Firms do not exist in a vacuum but are part of a complex world (systemic view)
Management should be continually aware of the external forces which: influence demand for existing products and services create opportunities for new products and services
Scanning of the external environment to evaluate PLEST factors and Industry factors (Porter’s 5 forces model)
Need also to monitor their respective trends
External Analysis
Analyzing the dynamics of the industry in which an organisation intends to compete to help identify: Opportunities: conditions in the environment that a
company can take advantage of to become more profitable
Threats: conditions in the environment that endanger the integrity and profitability of the company’s business
External Environment
General / Societal Environment – PLEST Includes environmental forces that are beyond the
influence of the organization and over which it has no (or little) control.
General forces that do not touch directly on ST activities of the firm
General forces affecting LT decisions
External Environment
Task Environment (5 forces) Includes environmental forces that are within the
organization’s operating environment and may be influenced to some degree.
Elements directly affecting the firm ( Porter’s 5 forces)
Industry within which firm intends to operate
Scanning Societal Environment
Political ForcesLegal forcesEconomic forcesSocio-cultural ForcesTechnological Forces
Political Forces
Significant impact on level of competition & on success of strategies Limiting entry in selected sectors/markets Political stability Incentives Policies Attitude towards FDI
Government policy Encouraging SMEs Conducive environment Business registration Permits and licences Tax rate
Legal Forces
Antitrust regulationsLaws protecting the environmentTax laws (Depreciation, Tax credits, etc.)Labour lawsForeign trade regulationsProduct SafetyEqual employment opportunitiesSex discriminationOccupational Safety and Health Act
Economic Forces
Obvious impact on business activity GDP trends Interest rates Inflation Unemployment Wage/Price controls Business cycle Disposable income
Socio-Cultural Forces
Lifestyle changesAttitudes & ExpectationsDemographics
Constituents (and evolution) Age distribution Growth rate
Environmental AwarenessSocial Classes & Mobility
Technological Forces
Spending on R&D (Govt, Industry)Patent/Trademark ProtectionNew productsProductivity gains through automationICT infrastructure Breakthrough Development
Rate & Degree
Industry Analysis(Porter’s 5 Forces Model)
Threat of New Entrants
Substantial Resources & New capacityDesire to gain market shareThreats of entry – function of entry barriers &
reaction of competitorsE.g. – US – new local automobile co’s are rare
due to High capital reqts. to build production facilities
to develop dealer distribution network
Traditional Barriers to Entry
Economies of scale (Intel – production & sale of microprocessors)
High Advertising & Promotion to differentiate product (P&G)
Capital Reqts. (Boeing & Airbus)Switching CostsCost Advantages Independent of Scale
Incumbents may have learning advantages, location advantages, etc.
Access to distribution channelsGovernment policy
Non-Traditional Barriers to Entry
Strength of management team
First-mover advantage
Passion of the management team and
employees
Unique Business Model
Inventing a new approach to an industry and
executing the idea in an exemplary fashion
Rivalry among Existing firms
No. of competitors
Rate of industry growth
Product/service characteristics
Amount of fixed costs
Capacity (large increment only)
Height of Exit barriers
Threat of Substitutes
Different appearance but satisfying same need Fax machines and FedEx Bottled water & cola Tea & Coffee
Low switching costs Strong effect on
industry
Subs limit potential returns of an industry by
placing a ceiling on price
Bargaining Power of Buyers
Can force prices downBargain for quality, more servicesPlay competitors against each otherPowerful if
Purchase of large proportion
Potential to integrate backwards
Alternative suppliers
Changing suppliers costs
Bargaining Power of Suppliers
Ability to reduce prices / qualityPowerful if:
Industry dominated by few (soft drink) Unique product/service (Windows) Subs not readily available (electricity) Ability to integrate forward (Intel can make PCs) Purchasing industry not important to supplier
(lawn mower tyres)