Test 2 Flashcards
Window of opportunity
time period in which a firm can realistically enter a new market
opens when market for a new product is established
closes when market matures
Opportunity gap
basically a problem, set of circumstances that create need for a new product
Opportunity recognition
Process of perceiving the possibility of profitable new business
Corridor principle
states that once an entrepreneur start a firm, “Corridors” leading to new venture opportunities become apparent (becomes easier to see new opportunities in the industry than it is for someone looking from the outside)
Entrepreneurial alertness
Ability to notice things without engaging in deliberate search (since they have more knowledge of an area and tend to be more alert to opportunities in that area than others)
Five steps to generating creative ideas
- preparation (background)
- incubation (Considers)
- insight (solution to problem is born)
- evaluation (idea is analyzed)
- elaboration (idea is transformed into new product)
Customer advisory boards
meet to discuss needs wants and problems that may lead to new business ideas
Day in the life research
sending teams of testers to homes and businesses of its users to see how products are working and seek insights for new products ideas
how can entrepreneurial ventures encourage/protect new ideas
focal points (idea bank ex is intranet)
intellectual property (product of human intellect that is intangible but has value) protected by patents, copyrights, etc.
steps when potentially valuable idea is generated
- put in tangible form
- secure the idea, restrict access
- avoid making voluntary disclosure of idea (don’t talk about it)
industry analysis
business research that focuses on the potential of an industry
-is it accessible
-does it contain markets that are ripe for innovation/underserved
-are there positions in the industry that avoid the negative attributes
Competitor analysis
evaluation of firm’s competitors
what are the two types of trends most important to analyze
- environmental: can shift in favor or against the industry
- business trends: ex some firms are able to move their business online while others don’t have this advantage
five forces model
By Harvard professor Michael porter
framework for understanding structure of an industry
comprised of forces that determine industry’s profitability
each factor impacts average rate of return for firms by applying pressure on industry profitability
barrier to entry
conditions that creates a disincentive way for new firm to enter industry
economies of scale
makes difficult for new firms to enter unless theyre willing to accept cost disadvantage
occurs when mass producing a products results in lower average cost
(difficult for new firms to match a huge companies that has gotten to the level of mass production)
capital requirements in barriers to entry
the need to invest large amounts of money to gain entrance to an industry
can win trust in investors through expertise and innovations and surpass this barrier
cost advantages independent of size in barriers to entry
ex existing competitors may have purchased land/equipment earlier when the cost was far less than new entrants would have to pay
access to distribution channels in barriers
hard to gain shelf space in grocery stores where large number of offerings from major producers are already available to consumers
how can firms enter and overcome barriers to entry
partnering with other firms
must create barriers to entry of their own once in the industry to reduce threat of new entrants (ex: patent, copyright, or economies of scale)
rivarlry amongst firms in barriers
level of competition
sometimes prices are pushed below level of cost when super competitive
then, wide losses occur
competition in slow vs fast growth industries
slow: stronger competition since might be tempted to lower prices or increase quality (ex: insurance)
fast: lower competition since there are enough customers to satisfy most firms’ production capacity making price cutting less likely
what is threat of backward integration in bargaining power of buyers
buyer might enter supplier’s industry
ex: Pc industry can keep price of computer monitors down by threatening to make its own monitors if the price gets too high
value of five forces model
helps firm understand dynamics of the industry
1. helps determine if they should enter
2. can they carve out an attractive position in that industry
Emerging industries
new industry which standard operating procedures have yet to be developed
First mover advantage: gained by first company to est significant position in new market
low barriers to entry
no pattern of rivalry
Fragmented industry
large number of firms approximately equal size
geographic roll- up strategy: consolidate industry and est leadership, one firm starts acquiring similar firms that are located in different geographic areas
Mature industries
experiencing slow or no increase in demand
repeat customers
limited product innovation
declining industries
reduction in demand
do not meet tests of an attractive opportunity
Strategies:
leadership strategy (become a dominant firm)
niche strategy (focus on a narrow segment that could be encouraged to grow through process innovation)
cost reduction strategy (lower cost than incumbents through improvements, creates value for consumers)
global industries
International sales
multi domestic strategy (vary product to meet demands of local markets)
global strategy (same basic approach in all foreign markets)
Types of competitors
Direct: identical or similar products
Indirect: close substitutes
Future: not yet direct or indirect, could move into these roles at any time
competitive intelligence
info to learn about its competitors
Definition of opportunity
The set of forces that come together in the external environment to create a market opening from which profits or returns can be realized
Sources of opportunities
- who you are, what you know, who you know (means)
- Economic forces (spending patterns, business cycles)
- Social forces (income distribution, trends, demographic changes)
- Technological advances (new nrg sources, new use of est techs)
- political and regulatory changes
idea vs opportunity
idea is a thought, or impression
opportunity is an idea that has qualities of being attractive, timely, and is anchored in product that creates value for buyers
Technology adoption curve INNOVATORS
eager to try new ideas
substantial financial resources
first to give opinions
Technology adoption curve EARLY ADOPTERS
integrated in social system more than innovators
opinion leaders
Technology adoption curve EARLY MAJORITY
Adopts new ideas just before average member of social system
willingly follows innovation
company needs to get here to achieve mainstream adoption
Technology adoption curve LATE MAJORITY
Accepts later, skeptical
Technology adoption curve LAGGARDS
Last group
What are the Porter 5 forces
- threat of substitutes
- threat of new competitors
- bargaining power of suppliers
- bargaining power of buyers
- rivalry among existing competitors
