The New Venture’s Environment

1. The New Venture’s Environment Technological Economic Industry New Venture Environment Political Ecological Socio-demographic

2. 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

3. Sources of Entrepreneurial Opportunities • The unexpected • The incongruous • The process need • Industry and market structures • Demographics • Changes in perception • New knowledge

4. Elements of Industry Structure New Entrants Threat of New Entrants Industry Competitors Intensity of Rivalry Bargaining Power of Suppliers Bargaining Power of Buyers Suppliers Buyers Threat of Substitutes Substitutes

5. Elements of Industry Structure 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

6. Elements of Industry Structure 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

7. Elements of Industry Structure 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

8. Elements of Industry Structure 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 Determinants of Buyer Power

9. Elements of Industry Structure Price Sensitivity: • Price / total purchases • Product differences • Brand identity • Impact on quality performance • Buyer profits • Decision makers’ incentives Determinants of Buyer Power

10. Elements of Industry Structure Determinants of substitution threats: • Relative price performance of substitutes • Switching costs • Buyer propensity to substitute

11. Political and Governmental Issues Effecting Entrepreneurs GlobalNationalState and RegionalLocal 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

12. 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

13. Entry Barriers Retaliatory Barriers • Competitors' reputation • Industry history • Attack competitors • Slow industry growth rate • Competitors with substantial resources • Price cutting • Legal challenges

14. Factors Affecting Retaliatory Pricing Encouraging FactorsDiscouraging 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

15. Industry Environment Issues • Competitive analysis • Industry analysis • Buyer power • Supplier power • Threat of substitutes • Entry barriers • Rivalry between firms

16. 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.