strategic options

7/28/2019 Strategic Options

1/28

Chapter 2 Copyright 2010 by Nelson Education Ltd.

Start-up and theNeed forCompetitive

Advantage

2

PowerPoint Presentation by

Ian Anderson, Algonquin College


2/28


After studying this chapter, you should be able to:

1. Give several reasons for starting a new business ratherthan buying an existing firm or acquiring a franchise.

2. Identify several factors that determine whether an ideafor a new venture is a good investment opportunity.

3. Distinguish between the different types and sources ofstart-up ideas.

4. Define competitive advantage and assess features of theenvironment and organization itself that supportcompetitive advantage.

2-2

Looking Ahead


3/28


Looking Ahead

5. Evaluate the feasibility of a business.

6. Identify and compare strategy options for building andsustaining competitive advantage.

7. Define market segmentation and its related strategies.

8. Explain the concept of niche marketing and itsimportance to small business

2-3


4/28


Creating a New Business

Entrepreneurs may start a new business

from scratch due to several reasons:

A new product or service

Favourable conditions such as location,

equipment, employees, suppliers or bankers

To capitalize on competitors weaknesses

2-4


5/28


Evaluative CriteriaMarket Factors

2-5

Source:Adapted from Jeffrey A. Timmons and Stephen Spinelli, New Venture Creation: Entrepreneurship for the 21st Century(Boston: McGraw-Hill Irwin,

2007), pp. 128129.

Exhibit 2-1a


6/28


Evaluative Criteria Competitive Advantage

2-6


2007), pp. 128129.

Exhibit 2-1b


7/28


Evaluative CriteriaEconomics

2-7


2007), pp. 128129.

Exhibit 2-1c


8/28


Types of Ideas that

Develop into Start-ups

Exhibit 2-2

2-8


9/28


Types of Start-up Ideas

Type A

Start-up ideas centered around providing customers with

an existing product not available in their market

Type B

Start-up ideas, involving new ideas, involving new

technology, centered around providing customers with a

new product

Type C

Start-up ideas centered around providing customers with

an improved product

2-9


10/28


Sources of Start-up Ideas

Exhibit 2-3

2-10


11/28


Competitive Advantage

A firm offers a product or service that is perceived by

customers to be superior to those of competitors, thereby

promoting firm profitability

To establish competitive advantage, a business owner

needs to understand the nature of the environment

Externalwhat business potentials exist

Internalwhat the firm is able to do

2-11


12/28


Assessing The Environment

The Macroenvironment

A broad environment with its multiple factors

that affect most businesses in a society STEPSociocultural, Technological, Economic

Political/Legal

Industry EnvironmentThe combined forces that directly impact

a given firm and its competitors

2-12


13/28


Five Forces

Model

Concept by

Michael Porter

Bargaining Powerof Buyers

Threat of Substitute

Products or Services

Bargaining Power

of Suppliers

Rivalry

Among ExistingProducts

Threat of New

Competitors

Attractiveness andProfitability of a

Target Market

2-13


14/28


Environmental and Organizational

Impact on Opportunity Assessment

2 -14

Part of Exhibit 2-4


15/28


Core Competencies and

Assessing the Organization Core Competencies

Value-creating organizational capabilities that are

unique to a firm

Resources versus Capabilities Resources are basic inputs that a firm uses to conduct

business (capital, technology, equipment, employees,

etc.) intangible and tangible resources

Capabilities are the integration of several resources

which are deployed together to the firms advantage.

2-15


16/28


Venture Feasibility Assessment Model

Stage 1: Back-of-the-Envelope concept

Potential customers, technology available, match to entrepreneur,

financial feasibility

Decision: go or no go Stage 2: Research and Verification

Detailed analysis of customers, competition, HR required,

technical and financial feasibility

Decision: go or no go

Stage 3: Refine the Concept Detailed business plan

Decision: go or no go

The Leap of Faith

2-16


17/28


Competitive Advantage Factors

Unique ServiceFeatures

Notable ProductAttributes

CustomerService

Accessibility

CompetitiveAdvantage

Price/Value

2-17


18/28


Strategic Terms

Strategy

An action plan that guides resource investments

to capitalize on business opportunities

Strategic Decision

A decision regarding the direction a firm will

take in relation to its customers and competitors.

2-18


19/28


Strategies that Capture Opportunities

Broad-Based Strategy OptionsSeek an advantage in cost or marketing

Cost-Advantage Strategy and Options

Requires the firm to be the lowest-cost producer WestJet began as a low-fare, no-frills airline

Marketing-Advantage StrategyEmphasizing the uniqueness of the firms product

or service WestJet is moving to differentiate based on quality service

2-19


20/28


An established, value-creating industry

position that is likely to endure over

time

Results include superior profitability,

increased market share, and improvedcustomer satisfaction

Sustaining Competitive Advantage


21/28


Market Segmentation

and its Variables Market Segmentation

division of a market into several smaller groups

with similar needs or buying behaviour

Market

a group of customers or potential customers

who have purchasing power and unsatisfiedneeds

2-21


22/28


Ingredients of a Market

Ingredient 1Customers:

People or

businesses

Ingredient 2Purchasing

power:

Money/credit

Ingredient 3Unsatisfiedneeds


23/28


Market Segmentation Variables

Segmentation Variables

The parameters used to distinguish one form of market behaviour fromanother

Geographic Variables

Defining a market by its location, size, or extent

Benefit Variables

Specific characteristics that distinguish market segments according tothe benefit sought

Demographic Variables

Specific characteristics that describe customers and their purchasingpower

Psychographic Variables

Lifestyle trends such as fitness, diet, political and sexual orientation

2-23


24/28


Types of Market Segmentation

Strategies Unsegmented Strategy (Mass Marketing)

A strategy that defines the total market as the target

market

Multisegmented Strategy

A strategy that recognizes different preferences of

individual market segments and develops a unique

marketing mix for each

Single-Segmentation Strategy

A strategy that recognizes the existence of several distinct

segments but focuses on only the most profitable segment

2-24


25/28


Marketing Mix 2Product: Felt-Tip Pen

Price: $1.00

Promotion: Professional Magazines

Distribution: Direct from Factory

Marketing Mix 3Product: Gold Fountain Pen

Price: $50.00

Promotion: Personal Selling

Distribution: Department Stores

Marketing Mix 1Product: Felt-Tip Pen

Price: $0.49

Promotion: Campus Newspapers

Distribution: Bookstores

Small Business(Community Writing Company)

Market

Segment A

Students

Market

Segment C

Executives

Market

Segment B

Professors

Multisegmentation

Market StrategyExhibit 2-6


26/28


Marketing Mix 1

Product: Felt-Tip Pen

Price: $0.49

Promotion: Campus Newspapers

Distribution: Bookstores

Small Business(Community Writing Company)

Market

Segment A

Students

Market

Segment C

Executives

Market

Segment B

Professors

A Single-

SegmentationMarket Strategy


27/28


Implementation of

Niche Marketing Strategies Restricting focus to a single subset of customers

not adequately serviced by competitors.

Limiting the market to a single geographicalregion.

Emphasizing a single product or service.

Concentrating on superiority of product or service.

2-27


28/28


Niche Market Potential

Niche markets can quickly erode if:

The focus strategy is imitated.

Price, Product, Design, Service, Packaging, etc.

The target segment is structurally unattractive.

The target segments differences from other

segments narrow.New firms sub segment the industry.

2-28

strategic options

Documents