VENTURE ENVIRONMENT ASSESSMENT

Chapter 4

Villa College

Chapter Outline

The components of Ventures’ EnvironmentMacro EnvironmentMicro EnvironmentOrganizational Internal EnvironmentIdentify Business OpportunityEvaluation of Business Opportunity

Villa College

The meaning of Venture

‘A venture is a major undertaking, synonymous with adventure’

‘A business project or activity, especially one that involves taking risks’

- Oxford Business Dictionary

Villa College

Entrepreneurial Ventures

‘Organizations that are pursuing opportunities’

Are characterised by Innovative practices Growth and profitability as main goals

Villa College

The Environment

The term Environment refers to; ‘institutions or forces outside the organization that potentially affect the organization’s performance’

The conditions that affect the behaviour and development of somebody, something; the physical conditions that somebody / something exists in

- Oxford business dictionary

Villa College

The Ventures’ Environmental Scanning

Environmental scanning refers to the efforts by which an entrepreneur examines the external and internal environment before taking a decision

Often entails evaluating the three environmental components

General (External Macro / Micro & Internal environments)

Industry Competitor

Villa College

Villa College

The components of Ventures’ Environment

The Components of Ventures’ Environment

External

Macro

Political & legal

Socio-cultural

(sociodemographic)

Economy

Technology

Ecology

Micro

Customers

Suppliers

Competitors

Financial Institutions

Govt. agencies

NGOs

Internal

Organization structure

Culture

Resources

External-Macro Environment

Political & Legal

Economy

Socio-Cultural

(sociodemographical)

Technology

Ecology

Villa College

Political & Legal

The political arena has a huge influence upon the regulation of businesses, and the spending power of consumers and other businesses

Should consider issues such as:

1. How stable is the political environment?

2. Will government policy influence laws that regulate or tax your business?

3. What is the government's position on marketing ethics?

4. What is the government's policy on the economy?

5. Does the government have a view on culture and religion?

6. Is the government involved in trading agreements such as EU, NAFTA,

ASEAN, or others?

Villa College

The political & legislative segment of Macro Environment

Global National State & region

Trade barriers Taxation Taxation

Trade agreements Regulations Licensing

Tariffs & duties Patent protections Incentives

Political risks Government spending

Villa College

Economy

Economic Factors that need to consider the state of a trading economy in the short and long-terms

Should consider

1. What is the present state of the economy?

2. How sustainable is economic growth?

3. What is driving economic growth?

4. How accurate are the relevant economic indicators?

5. If real economic growth is likely, will this mean that GDP per head will also rise?

6. What will happen to exchange rate & inflation rate?

7. What about the interest rates?

8. What is the condition of the labour market?Villa College

Socio-Cultural

The social and cultural influences on business vary from country to country

The factors should be considered

1. What is the dominant religion?

2. What are attitudes towards various products and services?

3. Does language impact upon the diffusion of products onto markets?

4. How much time do consumers have for leisure?

5. What are the roles of men and women within society?

6. How long are the population living?

7. Are the older generations wealthy?

8. Do the population have a strong/weak opinion on green issues?Villa College

Technology

Technology is vital for competitive advantage, and is a major driver of globalization

Should consider the following points:

1. Does technology allow for products and services to be made more cheaply and to a better standard of quality?

2. Do the technologies offer consumers and businesses more innovative products and services such as Internet banking, new generation mobile telephones, etc?

3. How is distribution changed by new technologies e.g. books via the Internet, flight tickets, auctions, etc?

4. Does technology offer companies a new way to communicate with consumers e.g. banners, Customer Relationship Management (CRM), etc? Villa College

Ecology

The ‘bottom-line’ issues

Issues such as pollution, waste disposal, recycling, protection of wild-life, workplace safety etc.

Entrepreneurs should be a part of ‘sustainable development’

Villa College

Micro/Industrial Environment

Customers

Competitors

Suppliers

Financial Institutions

Governmental Agencies

NGOs

Consumers

Customers Vs. consumers?????

The factors should be considered

1. Who are the consumers / customers? What are their characteristics?

2. What do consumers / customers want?

3. How do consumers / customers make their decisions?

4. What are their spending patterns?

5. How much money do they have to spend?

6. How do other companies in the sector see consumer / customer base & how much are they able to sell to them in reality?

7. How difficult / easy is to reach potential consumers / customers?

8. What are the most effective ways to promote the product?

9. What kind of advertising / promotion works best?Villa College

Competitors

Are the businesses that fulfill the same customer needs or have the potential to serve these customers

The factors to be considered

1. Which competitors are already operating in the market?

2. How strong are competitors that are already there/

3. How many people do they employ & what is their organizational structure?

4. Are other competitors entering or planning to enter the market?

5. What do customers / consumers think about competitors & their products / services?

6. If competitors failed / succeeded, why?Villa College

Financial Institutions

Are one of the sources for external funding to initiate a new business venture or expanding an existing business

The factors to be considered 1. Is it possible to finance operations locally?

2. How stable is the banking system? How high is the risk of collapse?

3. How efficient is the banking system?

4. Are banks willing to lend to local private individuals, small & medium-sized enterprises?

5. What other potential sources of funding (development banks, government agencies etc.) can be tapped in to?Villa College

Governmental Agencies

Government’s involvement on developing entrepreneurship through various policies & institutions

Some factors to be considered

1. Does the government allow a level playing field?

2. To what extent do local special-interest groups have influences to businesses?

3. Does the government protect intellectual property?

4. Does the government encourage free trade?

5. To what extent does the government interfere with pricing?

6. What is the quality of public administration & government bureaucracy?

7. Who are the key government players who can make or brake plans for a business?Villa College

Industry Environment Analysis

Villa College

Competitor Intelligence Analysis

Who are they???

What are they doing???

How will they act in future???

What they are doing affect us??

Villa College

Competitor Analysis

Components of a competitor analysis

Villa College

Competitor’s Response Profile

Is the competitor satisfied with its current position?

What likely moves or strategy shifts will the competitor make?

Where is the competitor vulnerable?

What will provide the greatest & the most effective retaliation by the competitor?

Future GoalsCurrent Strategy

Assumptions Capabilities

Internal Environment

Organizations’ Structure

Organizational CultureResources

Villa College

Organizational Structure

‘The formal framework by which job tasks are divided, grouped & co-ordinated’

What type of organization design????2 generic modelscontingency factors

Contemporary organizational designsTeam basedMatrix & projectAutonomous internal units

Villa College

Boundryless Organizations

Learning organizations

Organizational Culture

‘The spirit, attitude, the behaviour of the organization’

Culture is formed through; Vision / mission of the founder Behaviour of the senior management Recruitment & training of employees

How the culture is ‘learned’????StoriesRituals

Villa College

LanguageMaterial symbols

Types of Organizational Cultures

ClanEntrepreneu

rial

Bureaucratic

Market

Internal External Forms of Attention

Form

al

Con

trol

Ori

en

tati

on

Sta

ble

Fle

xib

le

Bureaucratic Vs. Entrepreneurial cultures

Bureaucratic culture : Organization that values formality, rules, standard

operating procedures & hierarchical coordination Task responsibilities & authorities for all employees are

clearly defined Everyone believes that they have to “go by the book”

Entrepreneurial culture – High level of risk taking, dynamism & creativityThere is a commitment to experimentation, innovation &

being on the leading edge Individual initiative, flexibility & freedom foster growth and

are encouraged & well rewarded Innovation and entrepreneurship are valued

Villa College

Organizational Culture

Bureaucratic Culture vs. Entrepreneurial Culture

Villa College

Dimension Traditional Entrepreneurial

Strategy Status quo, conservative

Evolved, futuristic

Risk Averse, punished Emphasized, rewarded

Opportunity Absent Integrated

Leadership Top-down, autocratic Culture of empowerment

Power Hoarded Given away

Decision making Centralized Decentralized

Structure Hierarchical, mechanistic

Organic

Creativity Tolerated Priced, worshiped

Organizational Resources

The Entrepreneur

Financial resources

Human Resources

Villa College

What is a ‘Business Opportunity’????

A business concept that, it turned into a tangible product or service offered by a business enterprise, will result in financial profit

- Myzuka (2000)

Related with

3 S’s of opportunityVilla College

Work experienc

eHobbies Hobbies

Opportunity and Entrepreneurship

An opportunity is a gap in the market.

It represents the potential to serve the customers better than they are being served at present

The entrepreneur is responsible for scanning the business landscape for unexploited opportunities or possibilities that something important might be done both differently & better!!!

The improved way of doing ‘it’ is the innovation that the entrepreneur presents to the market

Villa College

Types of Business Opportunity

New Produ

ctNew Servi

ceNew Means of

Production

New Distributio

n RouteImpro

ved Servi

ce

Relationshi

p buildi

ng

Villa College

Recognition of an opportunity

Sources of Opportunity1.The unexpected2.The incongruous3.The process need4.Industry and market structure5.Demographics6.Change in perception7.New knowledge

Villa College

Recognition of an opportunity

Sources of Opportunity1.The unexpected2.The incongruous3.The process need4.Industry and market structure5.Demographics6.Change in perception7.New knowledge

Villa College

Seeing the Business Opportunity

OPPORTUNITY

Social Change

Economic Change

Development of new market &

distribution channel

Ready availability of Established,

Non propritery technology

Villa College

Sizing the Business Opportunity

Not all opportunities are equally valuable!!!!

Key decisions in screening & selecting opportunities relates to

Size of the opportunityThe investment necessary to exploit itThe rewards that will be gained The risks likely to be connected

Villa College

Seizing the Business Opportunity

Villa College

Opportunities and new Firms

Villa College