abdm4223 lecture week 8 220612

Industry, Industry, Competitor &Competitor &

Market AnalysisMarket Analysis

Industry, Industry, Competitor &Competitor &

Market AnalysisMarket Analysis

ABDM4233 ENTREPRENEURSHIPABDM4233 ENTREPRENEURSHIP

byStephen OngStephen Ong

Principal Lecturer (Specialist)Principal Lecturer (Specialist)Visiting Professor, Shenzhen UniversityVisiting Professor, Shenzhen University

FinancialFeasibility

Product or ServiceProduct or Service FeasibilityFeasibility

Elements of a Feasibility AnalysisElements of a Feasibility Analysis

Industry and Industry and Market Market

FeasibilityFeasibility

FINANCIAL FINANCIAL

MILESTONEMILESTONESS

BUSINESBUSINESS MODELS MODEL

The 360° CUBE PitchThe 360° CUBE Pitch

Six Posters in a 6 minute Investor Pitch

SOCIAL SOCIAL PROBLEMPROBLEM

VISION & VISION & MISSIONMISSION

MARKETINMARKETING & SALESG & SALES

OPERATIONS OPERATIONS TEAM & KEY TEAM & KEY PARTNERSPARTNERS

360° Business CUBE360° Business CUBE1.1. The Problem : How BIG is the problem?The Problem : How BIG is the problem?2.2. The Solution : Our Social Enterprise’s The Solution : Our Social Enterprise’s

Vision & Mission Vision & Mission

3.3. The Business Model : Getting the The Business Model : Getting the JOB done for the Customer JOB done for the Customer SegmentsSegments

4.4. Marketing & Sales (and Fundraising)Marketing & Sales (and Fundraising)5.5. The Team & Key PartnersThe Team & Key Partners6.6. The Financial Plan : Goals and objectives, The Financial Plan : Goals and objectives,

with a timeline (Milestones)with a timeline (Milestones)

What is Industry Analysis?What is Industry Analysis?

IndustryIndustry An industry is a group of firms producing a similar An industry is a group of firms producing a similar

product or service, such as airlines, fitness drinks, product or service, such as airlines, fitness drinks, furniture, or electronic games.furniture, or electronic games.

Industry AnalysisIndustry Analysis Is business research that focuses on the potential of an Is business research that focuses on the potential of an

industry.industry.

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Why is Industry Analysis Important?Why is Industry Analysis Important?

Industry Analysis

Importance

• Once it is determined that a new venture is feasible in regard to the industry and market in which it will compete, a more in-depth analysis is needed to learn the ins and outs of the industry.• The analysis helps a firm determine if the target market it identified during feasibility analysis is favorable for a new firm.

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Three Key QuestionsThree Key Questions

When studying an industry, an entrepreneur must answer three questions before pursuing the idea of starting a firm.

Is the industryaccessible—in other

words, is it is realisticplace for

a new a new venture venture to enterto enter?

Are there positions in

the industry thatthat avoidavoid

some of the some of the

negativenegativeattributesattributes

of the industry as a whole?

Does the industrycontain markets that

are riperipe for innovationfor innovation

or are underserved?

Question 1 Question 3

Question 2

How Industry and Firm-Level FactorsHow Industry and Firm-Level FactorsAffect PerformanceAffect Performance

Firm-Level FactorsFirm-Level Factors Include a firm’s assets, products, culture, teamwork Include a firm’s assets, products, culture, teamwork

among its employees, reputation, and other resources.among its employees, reputation, and other resources. Industry-Level FactorsIndustry-Level Factors

Include threat of new entrants, rivalry among existing Include threat of new entrants, rivalry among existing firms, bargaining power of buyers, and related factors.firms, bargaining power of buyers, and related factors.

ConclusionConclusion In various studies, researchers have found that from In various studies, researchers have found that from

8% to 30% of the variation in firm profitability 8% to 30% of the variation in firm profitability is is directly attributable to the industry in which a firm directly attributable to the industry in which a firm competes.competes.

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Techniques Available to Assess IndustryTechniques Available to Assess IndustryAttractivenessAttractiveness

Study EnvironmentalStudy Environmentaland Business Trendsand Business Trends

PoliticsPoliticsEconomicsEconomics

Socio-DemographicsSocio-DemographicsTechnologyTechnology

EnvironmentEnvironmentLegalLegal

The Five CompetitiveForces ModelSubstitutesSubstitutes

New EntrantsNew EntrantsCompetitorsCompetitors

SuppliersSuppliersBuyersBuyers

Assessing Industry Attractiveness

Studying Industry TrendsStudying Industry Trends

Environmental TrendsEnvironmental Trends Include economic trends, social trends, technological Include economic trends, social trends, technological

advances, and political and regulatory changes.advances, and political and regulatory changes. For example, industries that sell products to seniors are For example, industries that sell products to seniors are

benefiting by the aging of the population. benefiting by the aging of the population. Business TrendsBusiness Trends

Other trends that impact an industry. Other trends that impact an industry. For example, are profit margins in the industry For example, are profit margins in the industry

increasing or falling? Is innovation accelerating or increasing or falling? Is innovation accelerating or waning? Are input costs going up or down?waning? Are input costs going up or down?

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The Five Competitive Forces ModelThe Five Competitive Forces Model1 of 31 of 3

Explanation of Porter’s Five Forces Explanation of Porter’s Five Forces ModelModel The five competitive forces model is a The five competitive forces model is a

framework for understanding the structure framework for understanding the structure of an industry.of an industry.

The model is composed of the forces that The model is composed of the forces that determine industry profitability.determine industry profitability.

They help determine the average rate of They help determine the average rate of return for the firms in an industry. return for the firms in an industry.

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The Five Competitive Forces ModelThe Five Competitive Forces Model2 of 32 of 3

Explanation of the Five Forces Model (continued)Explanation of the Five Forces Model (continued) Each of the five forces impacts the Each of the five forces impacts the

average rate of return for the firms in an average rate of return for the firms in an industry by applying pressure on industry by applying pressure on industry profitability.industry profitability.

Well managed firms try to position their Well managed firms try to position their firms in a way that avoids or diminishes firms in a way that avoids or diminishes these forces—in an attempt to beat the these forces—in an attempt to beat the average rate of return of the industry.average rate of return of the industry.

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Porter’s Five Competitive Forces ModelPorter’s Five Competitive Forces Model3 of 33 of 3

Industry Competitors

Rivalry among existing firms

Buyers

Bargaining PowerBargaining Powerof Buyersof Buyers

Suppliers

Bargaining PowerBargaining Powerof Suppliersof Suppliers

Substitutes

PotentialEntrants

Threat ofThreat ofNew EntrantsNew Entrants

Threat of SubstituteThreat of SubstituteProducts or ServicesProducts or Services

Threat of SubstitutesThreat of Substitutes1 of 31 of 3

Threat of SubstitutesThreat of Substitutes The price that consumers are willing to pay for a The price that consumers are willing to pay for a

product depends in part on the product depends in part on the availabilityavailability of of substitute products.substitute products.

For example, there are few if any substitutes for For example, there are few if any substitutes for prescription medicines, which is one of the prescription medicines, which is one of the reasons the pharmaceutical industry is so reasons the pharmaceutical industry is so profitable.profitable.

In contrast, when close substitutes for a product In contrast, when close substitutes for a product exist, industry profitability is suppressed, because exist, industry profitability is suppressed, because consumers will opt out if the consumers will opt out if the priceprice gets too high. gets too high.

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Threat of Substitutes (continued)Threat of Substitutes (continued) The extent to which substitutes suppress the The extent to which substitutes suppress the

profitability of an industry depends on the profitability of an industry depends on the propensity for buyers to substitute between propensity for buyers to substitute between alternatives.alternatives.

This is why firms in an industry often offer This is why firms in an industry often offer their customers amenities to reduce the their customers amenities to reduce the likelihood that they will switch to a substitute likelihood that they will switch to a substitute product, even in light of a price increase. product, even in light of a price increase.

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• This independently owned coffee shop doesn’t just sell coffee.• It also offers its patrons a convenient and pleasant place to meet, socialize, and study.• It provides these amenities to decrease the likelihood that its customers will “substitute” coffee at this shop for less expensive alternatives.

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Threat of New EntrantsThreat of New Entrants1 of 61 of 6

Threat of New EntrantsThreat of New Entrants If the firms in an industry are highly profitable, If the firms in an industry are highly profitable,

the industry becomes a magnet to new entrants.the industry becomes a magnet to new entrants. Unless something is done to stop this, the Unless something is done to stop this, the

competition in the industry will increase, and competition in the industry will increase, and average industry profitability will decline.average industry profitability will decline.

Firms in an industry try to keep the number of Firms in an industry try to keep the number of new entrants low by erecting new entrants low by erecting barriers to entrybarriers to entry..

A barrier to entry is a condition that creates a A barrier to entry is a condition that creates a disincentive for a new firm to enter an industry. disincentive for a new firm to enter an industry.

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Barrier to Entry Explanation

Economies of Economies of ScaleScale

Product Product differentiationdifferentiation

Capital Capital requirementsrequirements

Barriers to Entry

Industries that are characterized by large economies of scale are difficult for new firms to enter, unless

they are willing to accept a cost disadvantage.

Industries such as the soft drink industry that are characterized by firms with strong brands are difficult to break into without spending heavily on advertising.

The need to invest large amounts of money to gain entrance to an industry is another barrier to entry.

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Cost advantages Cost advantages independent of independent of

sizesize

Access to Access to distribution distribution

channelschannels

Government Government and legal and legal barriersbarriers

Barriers to Entry (continued)

Existing firms may have cost advantages not related to size. For example, the existing firms in an industry may have purchased land when it was less expensive

than it is today.

Distribution channels are often hard to crack. This is particularly true in crowded markets, such as the

convenience store market.

Some industries, such as broadcasting, require the granting of a license by a public authority to compete.

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Non-traditional Barriers to EntryNon-traditional Barriers to Entry It is difficult for start-ups to execute barriers to entry It is difficult for start-ups to execute barriers to entry

that are expensive, such as economies of scale, because that are expensive, such as economies of scale, because money is usually tight.money is usually tight.

Start-ups have to rely on non-traditional barriers to Start-ups have to rely on non-traditional barriers to entry to discourage new entrants, such as assembling a entry to discourage new entrants, such as assembling a

world-class management teamworld-class management team

that would be difficult for another company to that would be difficult for another company to replicate.replicate.

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Nontraditional Barriers to Entry

Strength of Strength of management management

teamteam

If a start-up puts together a world-class management team, it may give potential rivals pause in taking on

the start-up in its chosen industry.

First-mover First-mover advantageadvantage

If a start-up pioneers an industry or a new concept within an industry, the name recognition the start-up

establishes may create a barrier to entry.

PassionPassion

of the management of the management team and team and employeesemployees

If the employees of a start-up are motivated by the unique culture of a start-up, and anticipate a large

financial reward, this is a combination that cannot be replicated by larger firms.

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Nontraditional Barriers to Entry (continued)

Unique Unique business modelbusiness model

Inventing a Inventing a new approach new approach to an industryto an industry

If a start-up is able to construct a unique business model and establish a network of relationships that

makes the business model work, this set of advantages creates a barrier to entry.

If a start-up invents a new approach to an industry and executes it in an exemplary fashion, these factors

create a barrier to entry for potential imitators.

Internet domain name

Some Internet domain names are so “spot-on” that they give a start-up a meaningful leg up in terms of e-

commerce opportunities.

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Rivalry Among Existing FirmsRivalry Among Existing Firms1 of 31 of 3

Rivalry Among Existing FirmsRivalry Among Existing Firms In most industries, the major determinant of In most industries, the major determinant of

industry industry profitabilityprofitability is the level of is the level of competition among existing firms.competition among existing firms.

Some industries are fiercely competitive, to Some industries are fiercely competitive, to the point where prices are pushed below the the point where prices are pushed below the level of costs, and industry-wide losses occur.level of costs, and industry-wide losses occur.

In other industries, competition is much less In other industries, competition is much less intense and intense and price competitionprice competition is subdued is subdued..

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Factors that determine the intensity of the rivalry among existing firms in an industry.

Number & Number & balance of balance of

competitorscompetitors

Degree of Degree of difference difference between between productsproducts

The more competitors there are, the more likely it is that one or more will try to gain customers by

cutting its price.

The degree to which products differ from one product to another affects industry rivalry.

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Factors that determine the intensity of the rivalry among existing firms in an industry (continued)

Growth rate Growth rate of an of an

industryindustry

Level of Level of fixed fixed costscosts

The competition among firms in a slow-growth industry is stronger than among those in fast-

growth industries.

Firms that have high fixed costs must sell a higher volume of their product to reach the break-even

point than firms with low fixed costs.

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Bargaining Power of SuppliersBargaining Power of Suppliers1 of 31 of 3

Bargaining Power of SuppliersBargaining Power of Suppliers Suppliers can suppress the profitability of the Suppliers can suppress the profitability of the

industries to which they sell by raising industries to which they sell by raising pricesprices or or reducing the reducing the qualityquality of the components they of the components they provide.provide.

If a supplier reduces the quality of the components If a supplier reduces the quality of the components it supplies, the quality of the finished product will it supplies, the quality of the finished product will suffer, and the manufacturer will eventually have suffer, and the manufacturer will eventually have to lower its price.to lower its price.

If the suppliers are powerful relative to the firms If the suppliers are powerful relative to the firms in the industry to which they sell, industry in the industry to which they sell, industry profitability can suffer.profitability can suffer.

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Factors that have an impact on the ability of suppliers to exert pressure on buyers

Supplier Supplier concen- concen- trationtration

SwitchSwitch-ing -ing costscosts

Switching costs are the fixed costs that buyers encounter when switching or changing from one supplier to another. If switching costs are high, a

buyer will be less likely to switch suppliers.

When there are only a few suppliers that supply a critical product to a large number of buyers, the

supplier has an advantage.

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Factors that have an impact on the ability of suppliers to exert pressure on buyers (continued)

Attractive-Attractive-ness of ness of

substitutessubstitutes

Threat of Threat of forward forward

integrationintegration

The power of a supplier is enhanced if there is a credible possibility that the supplier might enter

the buyer’s industry.

Supplier power is enhanced if there are no attractive substitutes for the product or services

the supplier offers.

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Bargaining Power of BuyersBargaining Power of Buyers1 of 31 of 3

Bargaining Power of BuyersBargaining Power of Buyers Buyers can suppress the profitability of the Buyers can suppress the profitability of the

industries from which they purchase by demanding industries from which they purchase by demanding price concessionsprice concessions or increases in or increases in qualityquality..

For example, the automobile industry is dominated For example, the automobile industry is dominated by a handful of large companies that buy products by a handful of large companies that buy products from thousands of suppliers in different industries. from thousands of suppliers in different industries. This allows the automakers to suppress the This allows the automakers to suppress the profitability of the industries from which they buy profitability of the industries from which they buy by demanding price reductions.by demanding price reductions.

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Factors that have an impact on the ability of suppliers to exert pressure on buyers

Buyer Buyer group group

concentraconcentra-tion-tion

Buyer’s Buyer’s costscosts

The greater the importance of an item is to a buyer, the more sensitive the buyer will be to the

price it pays.

If there are only a few large buyers, and they buy from a large number of suppliers, they can

pressure the suppliers to lower costs and thus affect the profitability of the industries from which

they buy.

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Factors that have an impact on the ability of buyers to exert pressure on suppliers (continued)

Degree of standardi-zation of supplier’s products

Threat of Threat of backward backward integrationintegration

The power of buyers is enhanced if there is a credible threat that the buyer might enter the

supplier’s industry.

The degree to which a supplier’s product differs from its competitors affects the buyer’s

bargaining power.

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First Application of the Five Forces First Application of the Five Forces ModelModel

1 of 21 of 2

First Application of the ModelFirst Application of the Model The five forces model can be used to assess the The five forces model can be used to assess the

attractiveness of an industry by determining the level of attractiveness of an industry by determining the level of threat to industry profitability for each of the forces.threat to industry profitability for each of the forces.

If a firm fills out the form shown on the next slide and If a firm fills out the form shown on the next slide and several of the threats to industry profitability are high, several of the threats to industry profitability are high, the firm may want to reconsider entering the industry the firm may want to reconsider entering the industry or think carefully about the position it would occupy.or think carefully about the position it would occupy.

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First Application of the Five Forced First Application of the Five Forced ModelModel

2 of 22 of 2

Assessing Industry Attractiveness Using the Five Forces Model

Second Application of the Five Forces Second Application of the Five Forces ModelModel

1 of 21 of 2

Second Application of the ModelSecond Application of the Model The second way a new firm can apply the The second way a new firm can apply the

five forces model to help determine whether five forces model to help determine whether it should enter an industry is by using the it should enter an industry is by using the model to answer several key questions.model to answer several key questions.

The questions are shown in the figure on the The questions are shown in the figure on the next slide, and help a firm project the next slide, and help a firm project the potential success of a new venture in a potential success of a new venture in a particular industry.particular industry.

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Second Application of the Five Forces Second Application of the Five Forces ModelModel

2 of 22 of 2Using the Five Forces Model to Pose Questions to Determine the Potential

Success of a New Venture in an Industry

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Second Application of the Five Second Application of the Five Forces ModelForces Model

Can achieve Can achieve Higher Profits and Higher Profits and Social GoodSocial Good??

Maintain a Maintain a Unique Unique Position Position in the in the industry?industry?

Have a Have a Superior Superior Business Model Business Model that is hard to that is hard to duplicate?duplicate?

Emerging IndustriesEmerging Industries Industries in which standard operating Industries in which standard operating

procedures have yet to be developed.procedures have yet to be developed. Opportunity: Opportunity: First-mover advantageFirst-mover advantage

Fragmented IndustriesFragmented Industries Industries that are characterized by a large Industries that are characterized by a large

number of firms of approximately equal size.number of firms of approximately equal size. Opportunity: Opportunity: ConsolidationConsolidation

Industry Types and the Opportunities Industry Types and the Opportunities They OfferThey Offer

1 of 31 of 3

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MatureMature Industries Industries Industries that are experiencing slow or no increase in Industries that are experiencing slow or no increase in

demand.demand. Opportunities: Opportunities: Process innovation and after-sale Process innovation and after-sale

service innovationservice innovation DecliningDeclining Industries Industries

Industries that are experiencing a reduction in demand.Industries that are experiencing a reduction in demand. Opportunities: Opportunities: Leadership, establishing a niche Leadership, establishing a niche

market, and pursuing a cost reduction strategymarket, and pursuing a cost reduction strategy


2 of 32 of 3

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GlobalGlobal Industries Industries

Industries that are experiencing Industries that are experiencing significant international sales.significant international sales. Opportunities: Opportunities: Multi-domestic and Multi-domestic and

global strategiesglobal strategies


3 of 33 of 3

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Market Analysis

&

6P of Marketing

Selecting a Market and Establishing a Selecting a Market and Establishing a Position in the MarketPosition in the Market

Important Questions That All Start-ups Must Important Questions That All Start-ups Must AskAsk In order to succeed, a new firm must address this In order to succeed, a new firm must address this

important issue: Who are our customers and how important issue: Who are our customers and how will we appeal to them?will we appeal to them?

A well-managed start-up approaches this query by A well-managed start-up approaches this query by following a three-step process: following a three-step process: SegmentingSegmenting the market the market

Selecting a Selecting a target markettarget market Establishing a Establishing a unique positionunique position

The Process of Selecting a Target The Process of Selecting a Target Market and Positioning StrategyMarket and Positioning Strategy

Market SegmentationMarket Segmentation

Segmenting the Market

• Involves studying a firm’s industry and determining the different target markets in that industry.• Markets can be segmented in a number of different ways, including - Product type - Geography (city, state, region) - Demographic variables

Example: Segmenting the Dance Studio Example: Segmenting the Dance Studio Market by Customers ServedMarket by Customers Served

Professional Dancing

Serious dancers who aspire

to make a livingdancing in Broadway

plays

Adult Dancing

Ballroom and othertypes of dancing

for adults who wantto learn dance forrecreation and fun

Youth Dancing

Ballet and other types of dancing for young

girls who want to learn to dance to

develop poise and grace

Selecting a Target MarketSelecting a Target Market

Target Market

• Once a firm has segmented the market, a target market must be chosen.• The market must be sufficiently attractive and the firm must have the capability to serve it.• By focusing on a clearly defined market, a firm can become an expertexpert in that market and then

be able to provide customers a high level of servicehigh level of service.

Establishing a Unique PositionEstablishing a Unique Position1 of 21 of 2

Positioning

• After selecting a target market, the firm’s next step is to establish a “position” within the market that differentiates it from its rivals.• A “position” is the part of a market that the firm is claiming as its own.• A firm establishes a unique position in its customers’ minds by drawing attention to

two or three of the product’s attributes.

Establishing a Unique PositionEstablishing a Unique Position2 of 22 of 2

Positioning (continued)Positioning (continued) Firms often develop a “tagline” to reinforce the Firms often develop a “tagline” to reinforce the

position they have staked out in their market, or a position they have staked out in their market, or a phrase that is used consistently in a company’s phrase that is used consistently in a company’s literature and thus becomes associated with the literature and thus becomes associated with the company.company.

An example is Nike’s familiar tagline, “Just do it.”An example is Nike’s familiar tagline, “Just do it.” The beauty of this simple three-word expression is that The beauty of this simple three-word expression is that

it applies equally to a 21-year-old triathlete and a 65-it applies equally to a 21-year-old triathlete and a 65-year-old mall walker.year-old mall walker.

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Taglines—Developed to Reinforce a Taglines—Developed to Reinforce a Firm’s Positioning StrategyFirm’s Positioning Strategy

Who are you?Who are you?1.1. Live on the Coke side of Life.Live on the Coke side of Life.

2.2. Smarter together.Smarter together.

3.3. Your potential. Our passion.Your potential. Our passion.

4.4. Don’t do evil.Don’t do evil.

5.5. Imagination at work.Imagination at work.

6.6. I’m lovin’ it.I’m lovin’ it.

7.7. Leap ahead.Leap ahead.

8.8. Think different.Think different.

9.9. Where dreams come true.Where dreams come true.

10.10. Invent.Invent.

11.11. It’s not the destination, it’s the journey.It’s not the destination, it’s the journey.

BrandingBranding1 of 41 of 4

Establishing a BrandEstablishing a Brand

A brand is A brand is the set of attributesthe set of attributes——positive or negative—that people associate with a positive or negative—that people associate with a company.company.

These attributes can be positive, such as trustworthy, These attributes can be positive, such as trustworthy, dependable, or easy to deal with.dependable, or easy to deal with.

Or they can be negative, such as cheap, unreliable, or difficult Or they can be negative, such as cheap, unreliable, or difficult to deal with.to deal with.

The customer loyalty a company creates through its The customer loyalty a company creates through its brand is one of its most valuable assets.brand is one of its most valuable assets.

Brand ManagementBrand Management Some companies monitor the integrity of their brands Some companies monitor the integrity of their brands

through a program called “brand management.”through a program called “brand management.”

Branding : What is a Brand?Branding : What is a Brand?2 of 42 of 4


Establishing a BrandEstablishing a Brand So how does a firm establish a brand?So how does a firm establish a brand?

On a philosophical level, a firm must have meaning On a philosophical level, a firm must have meaning in its customers’ lives. It must create value—in its customers’ lives. It must create value—something for which customers are willing to pay.something for which customers are willing to pay.

On a more practical level, brands are built through On a more practical level, brands are built through a number of techniques, including advertising, a number of techniques, including advertising, public relations, sponsorships, support of social public relations, sponsorships, support of social causes, and good performance.causes, and good performance.

A firm’s name, logo, Web site design, Facebook A firm’s name, logo, Web site design, Facebook page, and even its letterhead are part of its brandpage, and even its letterhead are part of its brand. .

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Power of a Strong BrandPower of a Strong Brand Ultimately, a strong brand can be a very powerful Ultimately, a strong brand can be a very powerful

asset for a firm. asset for a firm. Over 50% of consumers say that a known and Over 50% of consumers say that a known and

trusted brand is a trusted brand is a reason to buy a productreason to buy a product..

A brand allows a company to A brand allows a company to charge a price charge a price for for its products or services that is consistent with its its products or services that is consistent with its image.image.

A successful brand can A successful brand can increase the market increase the market value value of a company by 50% to 75%.of a company by 50% to 75%.

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Who are the Best?Who are the Best?1.1. The way the world tells its story.The way the world tells its story.

2.2. Whatever it takes.Whatever it takes.

3.3. United for a more equitable world.United for a more equitable world.

4.4. Harnessing the past. Enriching the future.Harnessing the past. Enriching the future.

5.5. From harm to home.From harm to home.

6.6. Pioneering solutions, lifesaving results.Pioneering solutions, lifesaving results.

7.7. Defending dignity. Fighting poverty.Defending dignity. Fighting poverty.

8.8. Our doctors go to places photographers don’t.Our doctors go to places photographers don’t.

9.9. It’s about saving lives.It’s about saving lives.

10.10. Changes the way information flows in the world.Changes the way information flows in the world.

11.11. No good food should go to waste.No good food should go to waste.

Competitor AnalysisCompetitor Analysis

What is a Competitor Analysis?What is a Competitor Analysis? A competitor analysis is a detailed analysis of a firm’s A competitor analysis is a detailed analysis of a firm’s

competition. competition. It helps a firm understand the positions of its It helps a firm understand the positions of its

major competitors and the major competitors and the opportunities opportunities that are available.that are available.

A competitive analysis grid is a tool for organizing the A competitive analysis grid is a tool for organizing the information a firm collects about its competitors.information a firm collects about its competitors.

Identifying CompetitorsIdentifying Competitors

Types of Competitors New Ventures Face

Sources of Competitive IntelligenceSources of Competitive Intelligence1 of 31 of 3

Collecting Competitive IntelligenceCollecting Competitive Intelligence To complete a competitive analysis grid, a firm must To complete a competitive analysis grid, a firm must

first understand the strategies and behaviours of its first understand the strategies and behaviours of its competitors.competitors.

The information that is gathered by a firm to learn The information that is gathered by a firm to learn about its competitors is referred to as competitive about its competitors is referred to as competitive intelligence.intelligence.

A new venture should take care that it collects A new venture should take care that it collects competitive intelligence in a professional and ethical competitive intelligence in a professional and ethical manner.manner.

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Ethical ways to obtain information about competitors

• Attend conferences and trade shows.• Purchase competitors’ products.• Study competitors’ Web sites.• Set up Google and Yahoo! e-mail alerts.• Read industry-related books, magazines, and Web sites.• Talk to customers about what motivated them to buy your product as opposed to your competitor’s product.

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• Many companies attend trade shows to not only display their products, but to see what their competitors are up to.• This is a photo of the 2011 Consumer Electronics Trade Show in Las Vegas.

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Completing a Competitive Analysis GridCompleting a Competitive Analysis Grid

Competitive Analysis GridCompetitive Analysis Grid A tool for organizing the information a firm collects about its A tool for organizing the information a firm collects about its

competitorscompetitors A competitive analysis grid can help a firm see how it stacks A competitive analysis grid can help a firm see how it stacks

up against its competitors, provide up against its competitors, provide ideas for ideas for markets markets to pursue, and identify its primary to pursue, and identify its primary

sources of sources of competitive advantagecompetitive advantage . .

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Competitive Analysis Grid for Element Competitive Analysis Grid for Element BarsBars

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The 6 Ps of Marketing for New VenturesThe 6 Ps of Marketing for New Ventures

Marketing Mix

Product Price

Philantrophy

(Do GOOD)

People (or Customer Service)

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Place (or distribution

channel)

Promotion

ProductProduct

ProductProduct Is the good or service a firm offers to its target Is the good or service a firm offers to its target

market. market. The initial rollout is one of the most critical The initial rollout is one of the most critical

times in the marketing of a new product. times in the marketing of a new product. All firms face the challenge that they are All firms face the challenge that they are

unknown and that it takes a leap of faith for the unknown and that it takes a leap of faith for the first customers to buy their products.first customers to buy their products.

Some start-ups meet this challenge by using Some start-ups meet this challenge by using reference accounts.reference accounts.

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Core Product vs. Actual ProductCore Product vs. Actual Product

Core Product Actual Product

The product itself, such as an antivirus software

program.

The product plus all the attributes that come

with it such as quality level, features, design,

packaging, and warranty.

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PricePrice

PricePrice Price is the amount of money consumers pay to Price is the amount of money consumers pay to

buy a product. buy a product. The price a company charges for its products The price a company charges for its products

sends an important message to its target market.sends an important message to its target market. For example, Oakley positions its sunglasses as For example, Oakley positions its sunglasses as

innovative, state-of-the-art products that are both high innovative, state-of-the-art products that are both high quality and visually appealing. quality and visually appealing.

This position in the market suggests a premium price This position in the market suggests a premium price that Oakley charges.that Oakley charges.

Most entrepreneurs use one of two methods to set Most entrepreneurs use one of two methods to set the price for their products, as shown on the next the price for their products, as shown on the next slide.slide.

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Core Product vs. Actual ProductCore Product vs. Actual Product

Cost-Based Pricing Value-Based Pricing

The list price is determined by adding a markup percentage to a

product’s cost.

The list price is determined by

estimating what consumers are willing to pay for a product.

PromotionPromotion

PromotionPromotion Refers to the activities the firm takes to Refers to the activities the firm takes to

communicate the merits of its product to its target communicate the merits of its product to its target market. market.

There are several common activities that There are several common activities that entrepreneurs use to promote their products and entrepreneurs use to promote their products and services.services.

AdvertisingAdvertising Advertising is making people aware of a product Advertising is making people aware of a product

or service in hopes of persuading them to buy it.or service in hopes of persuading them to buy it.

Pluses and Minuses of AdvertisingPluses and Minuses of Advertising

Pluses

• Raise customer awareness of a product.• Explain a product’s comparative features and benefits.• Create associations between a product and a certain lifestyle.

Minuses

• Low credibility.• The possibility that a high percentage of people who see the ad will not be interested.• Message clutter.• Relative costliness compared to other forms of promotion.• Intrusiveness.

Steps Involved in Putting Together an Steps Involved in Putting Together an AdvertisementAdvertisement

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Google AdWords and AdSense ProgramGoogle AdWords and AdSense Program1 of 21 of 2

AdWordsAdWords Allows advertisers to buy keywords on the Google Allows advertisers to buy keywords on the Google

home page.home page. Triggers text-based ads to the side of (and sometimes Triggers text-based ads to the side of (and sometimes

above) search results when the keyword is used.above) search results when the keyword is used. The program includes local, national, and The program includes local, national, and

international distribution.international distribution. Advertisers pay a certain amount per click.Advertisers pay a certain amount per click. Advertisers benefit because they are able to place Advertisers benefit because they are able to place

their ads in front of people who are already searching their ads in front of people who are already searching for information about their product.for information about their product.

Google AdWords and AdSense ProgramGoogle AdWords and AdSense Program2 of 22 of 2

AdSenseAdSense Allows advertisers to buy ads that will be shown Allows advertisers to buy ads that will be shown

on other Web sites instead of Google’s home page.on other Web sites instead of Google’s home page. Google selects sites of interest to the advertiser’s Google selects sites of interest to the advertiser’s

customers.customers. Advertisers are charged on a pay-per-click or a Advertisers are charged on a pay-per-click or a

per-thousand impression basis.per-thousand impression basis. Advertisers benefit because the content of the ad is Advertisers benefit because the content of the ad is

often relevant to the Web site.often relevant to the Web site. Web site owners benefit by using the service to Web site owners benefit by using the service to

monetize their Web site.monetize their Web site.

Public RelationsPublic Relations

Public RelationsPublic Relations One of the most cost effective ways to increase One of the most cost effective ways to increase

the awareness of the products of a company is the awareness of the products of a company is through public relations.through public relations.

Public relations refer to efforts to establish and Public relations refer to efforts to establish and maintain a company’s image with the public.maintain a company’s image with the public.

The major difference between public relations The major difference between public relations and advertising is that public relations is not and advertising is that public relations is not paid for—directly.paid for—directly.

Public Relations TechniquesPublic Relations Techniques

Press release

Social mediacoverage

Blogging

Civic, social, and communityinvolvement

Traditional mediacoverage

Articles in industrypress and periodicals

Monthly newsletter

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Social MediaSocial Media

Social MediaSocial Media Consists primarily of blogging and connecting with Consists primarily of blogging and connecting with

customers and others through social networking sites like customers and others through social networking sites like Facebook and Twitter.Facebook and Twitter.

BloggingBlogging The idea behind blogs is that they familiarize people with The idea behind blogs is that they familiarize people with

a business and help build an emotional bond between a a business and help build an emotional bond between a business and its customers. business and its customers.

Facebook and TwitterFacebook and Twitter Businesses establish a presence on Facebook and Twitter Businesses establish a presence on Facebook and Twitter

to build a community around their products and services.to build a community around their products and services.

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Other Promotions TechniquesOther Promotions Techniques

Viral Marketing Guerrilla Marketing

Facilitates and encourages people to

pass along a marketing message about a

particular product or service

A low-budget approach to marketing that relies

on ingenuity, cleverness, and surprise rather than traditional

techniques

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Place (or Distribution)Place (or Distribution)

PlacePlace Encompasses all the activities that move a firm’s Encompasses all the activities that move a firm’s

product from its place of origin to the consumer. product from its place of origin to the consumer. The first choice a firm has to make regarding The first choice a firm has to make regarding

distribution is whether to sell its products directly to distribution is whether to sell its products directly to consumers or through intermediaries (such as consumers or through intermediaries (such as wholesalers and retailers).wholesalers and retailers).

Within most industries, both choices are available, so Within most industries, both choices are available, so the decision typically depends on how a firm believes its the decision typically depends on how a firm believes its target market wants to buy its product.target market wants to buy its product.

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Selling Direct Vs. Selling Through an Selling Direct Vs. Selling Through an IntermediaryIntermediary

1 of 21 of 2

Approach to Distribution

Description

Selling Direct

Selling Through Intermediaries

Many firms sell direct to the customer, maintaining control of the distribution and sales process.

Other firms sell through intermediaries and pass off their products to wholesalers who place them in retail

outlets to be sold.

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Selling Direct Vs. Selling Through an Selling Direct Vs. Selling Through an IntermediaryIntermediary

2 of 22 of 2

Sales ProcessSales Process1 of 31 of 3

Sales ProcessSales Process A firm’s sales process (or sales funnel) depicts the steps A firm’s sales process (or sales funnel) depicts the steps

it goes through to identify prospects and close sales.it goes through to identify prospects and close sales. A formal sales process involves a number of identifiable A formal sales process involves a number of identifiable

steps.steps. Importance of ProcessImportance of Process

Some companies simply wing it when it comes to sales, Some companies simply wing it when it comes to sales, which isn’t recommended.which isn’t recommended.

It’s much better to have a well thought-out approach to It’s much better to have a well thought-out approach to prospecting customers and closing sales.prospecting customers and closing sales.


11-80


Usefulness of Sales ProcessUsefulness of Sales Process Mapping the sales process in the manner shown on the Mapping the sales process in the manner shown on the

previous slide provides a standard method for a firm’s previous slide provides a standard method for a firm’s employees to use, and provides a starting point for employees to use, and provides a starting point for careful analysis and continuous improvement.careful analysis and continuous improvement.

Often, when companies lose an important sale they’ll Often, when companies lose an important sale they’ll find that an important step in the sales process was find that an important step in the sales process was missed or mishandled.missed or mishandled.

Having a well thought-out sales process, along with Having a well thought-out sales process, along with appropriate follow-through, can dramatically improve appropriate follow-through, can dramatically improve a company’s sales performance.a company’s sales performance.

Further ReadingFurther Reading Scarborough, Norman, M. 2011. Scarborough, Norman, M. 2011. Essentials of Essentials of

Entrepreneurship and Small Business Management.Entrepreneurship and Small Business Management. 66thth edition. Pearson. edition. Pearson.

Brooks, Arthur C. (2006) Social Entrepreneurship : A Brooks, Arthur C. (2006) Social Entrepreneurship : A Modern Approach to Social Value Creation. Pearson Modern Approach to Social Value Creation. Pearson

Barringer, Bruce R. & Ireland, R. Duane, 2011 Barringer, Bruce R. & Ireland, R. Duane, 2011 Entrepreneurship – Successfully launching new Entrepreneurship – Successfully launching new ventures ventures 44thth edition, Pearson. edition, Pearson.

Schaper, M., Volery, T., Weber, P. & Lewis, K. 2011. Schaper, M., Volery, T., Weber, P. & Lewis, K. 2011. Entrepreneurship and Small Business.Entrepreneurship and Small Business. 3 3rdrd Asia Asia Pacific edition. John Wiley.Pacific edition. John Wiley.

abdm4223 lecture week 8 220612

Business

competitive analysis grid

web site

competitor analysis

average rate

public relations

selling direct

sales process

industry analysis