© 2002 by Prentice Hall 3-1 The New Venture’s Environment New Venture Industry Environment...

© 2002 by Prentice Hall 3-1

The New Venture’s Environment

NewVenture

Industry

EnvironmentEcological

Technological Economic

Political

Socio-demographic


Five Segments of Macroenvironment

TechnologyEconomyPoliticalSociodemographyEcology


Tasks of Environmental Analysis

Scanning: detect changesMonitoring: track events that affect

businessForecasting: make plausible projectionsAssessing: most difficult, “What does it

all mean?”


Technology

Pure Invention: creation of something radically different from existing technologies or products.

Process Innovation: incremental and evolutionary with the purpose of making existing industries more efficient.


Economy

GlobalNationalRegionalLocal


Political

Stakeholders Seven Dimensions

Global Trade Tariffs and Agreements Risks

National Taxes Regulations Patents Governments

State and Local Licensing Securities and Incorporation Laws Incentives


Sociodemographic

DemographicsSocial Trends and Values


Ecology

Current state of ecologyCuts across all other environmental areas


Quantitative and Judgemental Forecasting Methods

Method

Sales force estimate

Juries of executive opinion

Customer surveys:

Market research focus

groups

Scenario development

Delphi method

Brainstorming

Description

A bottom-up approach that aggregates unit demand

Forecasts jointly prepared by experts in a functional area

Learning about intentions of potential customers and final

users

Effects of anticipated conditions imagined by forecasters

Experts guided to consensus

Idea generation in a non-critical group situation

Cost

Low

Low

Medium

Medium

Low

Low

Complexity

Low

Low

Medium

Low

Medium

Medium


Sources of Entrepreneurial Opportunities

The unexpectedThe incongruousThe process needIndustry and market structuresDemographicsChanges in perceptionNew knowledge


Elements of Industry Structure

New Entrants

Substitutes

Buyers

Industry Competitors

Intensity of Rivalry

Suppliers

Bargaining Power

of Suppliers

Bargaining Power

of Buyers

Threat of Substitutes

Threat of New Entrants


Entry Barriers: Economies of scale Proprietary product differences Brand identity Switching costs Capital requirements Access to distribution Absolute cost advantages

Proprietary learning curve Access to necessary inputs Proprietary low-cost product design

Government policy Expected retaliation



Rivalry Determinants:

Industry growth

Fixed (or storage) costs / value added

Intermittent overcapacity

Product differences

Brand identity

Switching costs

Concentration and balance

Informational complexity

Diversity of competitors

Corporate stakes

Exit barriers



Determinants of Supplier Power:

Differentiation of inputs

Switching costs of suppliers and firms in the industry

Presence of substitute inputs

Supplier concentration

Importance of volume to supplier

Cost relative to total purchases in the industry

Impact of inputs on cost or differentiation

Threat of forward integration relative to threat of backward integration

by firms in the industry



Bargaining Leverage:

Buyer concentration versus firm concentration

Buyer volume

Buyer switching costs relative to firm switching costs

Buyer information

Ability to backward integrate

Substitute products

Pull-through




Price Sensitivity:

Price / total purchases

Product differences

Brand identity

Impact on quality performance

Buyer profits

Decision makers’ incentives


Determinants of substitution threats:

Relative price performance of substitutes

Switching costs

Buyer propensity to substitute



Political and Governmental Issues Effecting Entrepreneurs

Global National State and Regional Local

Trade barriers Taxation Taxation Taxation

Trade agreements Regulation Securities law Zoning

Tariffs and duties Antitrust issues Licensing

Political risk Patent issues Incentives

Gov’t spending


Entry Barriers

Structural Barriers

Economies of scale

Excess capacity

Product differentiation core

Specific assets

Capital requirements

Switching costs

Access to distribution channels

Non-size cost disadvantages


Entry Barriers

Retaliatory Barriers

Competitors' reputation

Industry history

Attack competitors

Slow industry growth rate

Competitors with substantial resources

Price cutting

Legal challenges


Factors Affecting Retaliatory Pricing

Encouraging Factors Discouraging Factors

Elastic demand Inelastic demand

Cost advantages No cost advantages

Excess capacity Tight capacity

Small competitors Large competitors

New competitors Long-time rivalries

Single-product markets Mkt. interdependence


Industry Environment Issues

Competitive analysisIndustry analysisBuyer powerSupplier powerThreat of substitutesEntry barriersRivalry between firms


The Sweet Spot

Attractive OpportunityInterest, Passions and CommitmentCapabilities and Skills


Characteristics of an Attractive Opportunity

Timely: a current need or problemSolvable: a problem that can be solved in the

near future with accessible resourcesImportant: customer deems the problem or

need importantProfitable: customer will pay for the solution

and allow it to be profitableContext: a favorable regulatory and industry

situation


Characteristics of Interests and Passions

Like to do the tasksLike the challengeCommitted to do what is necessary


Capabilities and Skills

Good at the needed tasks Willingness to learn


The Firm

Clear about its vision and missionMust know customers, suppliers and

competitorsUnderstand Intellectual CapitalUnderstand environment


Firm’s Intellectual Capital

Human Capital (HC): skills, capabilities and knowledge of firm’s people

Organizational Capital (OC): patents, technologies, processes and networks

Social Capital (SC): quality of relationships with customers, suppliers, and partners

IC = HC + OC + Sc


Competitor Resource Analysis

Resource Type Own Firm #1 #2 #3 #4 #5

Financial

Physical

Human

Technical

Reputational

Organizational

Total Scores

Grand Mean

+/- from Mean

Evaluate each resource base from 1-7. 1: Firm has no advantage in this area.4: Firm’s capabilities are about the same as other competitors.7: Firm possesses an absolute advantage in this area.

© 2002 by Prentice Hall 3-1 The New Venture’s Environment New Venture Industry Environment...

Documents

Transcript of © 2002 by Prentice Hall 3-1 The New Venture’s Environment New Venture Industry Environment...