Chapter 3 packet notes Flashcards
Identification of potential new products or services that may lead to promoting businesses.
Opportunity Recognition
Readiness to act on existing, but unnoticed, business opportunities.
Entrepreneurial Alertness
- Products that serve clear and important needs.
- Products that customers know about.
- Products that customers can afford.
- A good idea is not the same as a good opportunity.
Good Investment Qualities
- Opportunity Recognition
- Entrepreneurial Alertness
- Good Investment Qualities
Identifying Startup Ideas
- To develop a commercial market for new product or service.
- Wanting the challenge of succeeding (or failing) on your own.
- To tap into unique resources that are available.
- To avoid undesirable features of existing companies.
Creating a New Business from Scratch- Motivations to Start a Business
- Type A
- Type B
- Type C
Kinds of Startup Ideas
Are centered around providing customers with an existing product not available in their market.
Type A Ideas (New Market)
Involve new ideas, involve new technology, centered around providing customers with a new product.
Type B Ideas (New Technology)
Are centered around providing customers with an improved product.
Type C Ideas (New Benefit)
- The unexpected
- The incongruous
- Process needs
- Structural change
Industry or Enterprise Factors
Unanticipated events lead to either enterprise success or failure.
The Unexpected
What is expected is out of line with what will work.
The Incongruous
Current technology is insufficient to address an emerging challenge.
Process Needs
Changes in technology, markets, etc,. after industry dynamics.
Structural Change
- Demographics
- Changes in perception
- New knowledge
Human and Economic Factors
Shifts in population size, age structure, ethnicity, and income distribution impact product demand.
Demographics
Perceptual variations determine product demand.
Changes in Perception
Learning opens the door to new product opportunities with commercial potential.
New Knowledge
- Industry or enterprise factors
- Human and economic factors
Change-Based Sources of Entrepreneurial Opportunities
- Borrow ideas from existing products and services or other industries.
- Combine two businesses into one to create a market opening.
- Begin with a problem in mind.
- Recognize a hot trend and ride the wave.
- Explore ways to improve a product or service’s function.
- Think of how to streamline a customer’s activities.
- Adapt a product or service to meet customer needs in different ways.
- Imagine how market for a product or service could be expanded.
- Use “green” technologies to makek the product or service more environmentally friendly.
- Keep an eye on new technologies.
Applying Innovative Thinking to Business Ideas
Studying context of venture to identify and determine business ideas that qualify as opportunities.
- General Environment
- Industry Environment
- Competitive Environment
Outside-In Analysis
Encompasses factors influencing business in a society.
General Environment
Combined forces impacting a firm and its competitors.
Industry Environment
Focus on the strength, position, and likely moves and countermoves of competitors in an industry.
Competitive Environment
- Political/legal
- Technological
- Sociocultural
- Global
- Demographic
- Economic
Trends in the General Environment
- Threat of new competitors.
- Threat of substitute products or services.
- Intensity of rivalry among existing competitors.
- Bargaining power of suppliers.
- Bargining power of buyers.
Major Factors Offsetting Market Attractiveness
- Who are the new venture’s current competitors?
- What unique resources do they control?
- What are their strengths and weaknesses?
- How will they respond to the new venture’s decision to enter the industry?
- How can the new venture respond?
- Who else might be able to observe and exploit the same opportunity?
- Are there ways to co-opt potential or actual competitors by forming alliances?
Competitor Analysis
Assessing the firm’s internal competitive potential.
- Resources
- Capabilities
- Core Competencies
Inside-Out Analysis
Basic inputs that girm uses to conduct its business.
- Tangible resources
- Intangible resources
Resources
Visible and easy to measure.
Tangible Resources
Invisible, difficult to quantify.
Intangible Resources
Integration of various organizational resources that are deployed together to the firm’s competitive advantage.
Capabilities
Resources and capabilities that provide a firm with a competitive advantage over its rivals.
Core Competencies
- Provides concise overview of a firm’s strategic situation.
- Helps identify opportunities that match the venture.
Strengths, Weaknesses, Opportunities, and Threats (SWOT) Analysis
- Will the opportunity lead to others in the future?
- Will the opportunity build skills that open the door to new opportunities in the future?
- Will pursuit of the opportunity be likely to lead to competitive response by potential rivals?
Seeking Competitive Insight
- Important core competencies
- Financial strengths
- Innovative capacity
- Skilled or experienced management
- Well-planned strategy
- Effective entry wedge
- A strong network of personal contacts
- Positive reputation in the marketplace
- Proprietary technology
Strengths
- Inadequate financial resources
- Poorly planned strategy
- Lack of managerial skills or experience
- Inadequate innovation capacity
- Negative reputation in the marketplace
- Inadequate facilities
- Distribution problems
- Limited marketing skills
- Production inefficiencies
Weaknesses
- An untapped market potential
- New product or geographic market
- Favorable shift in industry dynamics
- High potential for market growth
- Emerging technologies
- Changes allowing overseas expansion
- Favorable government deregulation
- Increasing market fragmentation
Opportunities
- New competitors
- Rising demands of buyers or suppliers
- Sales shifting to substitute products
- Increased government regulation
- Adverse shifts in the business cycle
- Slowed market growth
- Changing customer preferences
- Adverse demographic shifts
Threats
- Strategy
- Strategic decision
- Sustainable competitive advantage
Important Strategic Terms
Plan of action that coordinates resources and commitments of an organization to achieve superior performance.
Strategy
A decision regarding the direction a firm will take in relating to its customers and competitors.
Strategic Decision
A value-creating industry position likely to endure over time.
Sustainable Competitive Advantage
- Broad based strategy
- Differentiation- based strategy
- Focus strategy
Selecting Strategies that capture opportunities
Seeking an advantage in cost or differientiation.
Broad-Based Strategy
Requiring the firm to be the lowest-cost competitor.
Cost-Based Strategy
Emphasizing the uniqueness of the firm’s product or service.
Differentiation-Based Strategy
Targeting a specific market slice (niche) using either a cost or a differentiation-based strategy.
Focus Strategy
- Restricting focus to a single subset of customers.
- Emphasizing a single product or service
- Limiting the market to a single geographical region.
- Concentrating on superiority of product or service.
Focus Strategy Implementation
- Niche market shields from direct competition
- Allow development of unique expertise
Advantages- Focus Strategies
Focus market can quickly erode if:
- Competitors successfully imitate the strategy
- Segment erodes or demand disappears.
- Segment’s differences from other segments narrow.
- New firms subsegment the industry.
Disadvantages- Focus Strategies
- Judging a business opportunity
- Market factors
- Fatal flaws
- Competitive advantage
- Management capability
- Industry Attractiveness
How Feasible is my Idea?
A preliminary assessment of a business idea that gauges whether or not the venture envisioned is likely to succeed.
Feasibility Analysis
A circumstance or development that alone could render a new business unsuccessful.
- Market potential: acceptance, accessibilitiy, growth and size.
- Power of competitors
- Strength of competitive advantage.
- Startup costs
- Management capability
Fatal Flaws
Leader’s grasp of cirtical enterprise success factors and ability to execute on these factors.
Industry Attractiveness
- Fit the venture with leader’s mission, aspirations, and comfort level with risk involved.
- Leader’s connections to others who will be essential to making the venture work.
Management Capability
