Frederick 4e_PP_Ch09 ; Entrepreneurship slides

Slides on entrepreneurship

1. Chapter 9 The a ssessment of entrepreneurial opportunities

2. Objectives To understand that assessing an opportunity requires various techniques including both analysis and active learning To distinguish Internet opportunities from other opportunities To recognise common pitfalls in taking new venture ideas to the marketplace To identify critical factors involved in new venture development To examine the opportunity landscape and the factors that underlie and promote entrepreneurial opportunities To assess industry value chains and ecosystems from an opportunity perspective To examine Porter’s five forces model of competitive market analysis To compare opportunity profile analysis methods: critical questions analysis, feasibility criteria approach and comprehensive feasibility method To be alert to how an entrepreneurial ecosystem contributes to the opportunity landscape

3. But first What kinds of things would you consider in predicting whether a business idea will be successful? ?

4. Is your idea truly worth pursuing?

5. Opportunities are already ‘out there’ waiting to be discovered. But the entrepreneur recognises them due to superior knowledge of the market, industry, technology and/or networks . The entrepreneur has the advantage of seeing things differently. Model 3: Alertness Joseph von Mises, popularised by Kirzner This is a slide from Chapter 6

6. Modelling the entrepreneurial process Hindle model shows that exploiting an opportunity is a ‘jerky’ process: Spotting the opportunity Evaluating it Creating a business model Moving from commitment to achievement of value Redrawn with the assistance of Professor Hindle . Originally appeared in Hindle , K. (2010). Skillful dreaming: Testing a general model of entrepreneurial process with a ‘unique’ narrative of business formation. In William B. Gartner (ed.). Entrepreneurial Narrative: Theory, Ethnomethodology and Reflexivity . Clemson SC: Clemson University, 97–136. Copyright © 2010 by Clemson University. Used by permission.

7. Modelling the entrepreneurial process Three activities (on right ): strategic , personal and tactical . Each domain requires a distinctive capacity (on left ). The central function – that distinguishes entrepreneurs from other people – is evaluation. Redrawn with the assistance of Professor Hindle . Originally appeared in Hindle , K. (2010). Skillful dreaming: Testing a general model of entrepreneurial process with a ‘unique’ narrative of business formation. In William B. Gartner (ed.). Entrepreneurial Narrative: Theory, Ethnomethodology and Reflexivity . Clemson SC: Clemson University, 97–136. Copyright © 2010 by Clemson University. Used by permission.

8. Beware of ‘ analysis paralysis’! Over-evaluating an opportunity such that a decision is never taken. Undermines entrepreneurial ambition and breeds procrastination. The tools in this book assist you to decide whether the opportunity is realistic or not and whether to move forward. Bottom line: an entrepreneur will never be in a position to have all the facts .

9. H ow to recognise a profitable and viable opportunity when you see one Rules of thumb Join an exploitable market (Can you really beat Microsoft?) Find a niche market catering for specialist needs (like the Body Shop) Open or join a new (growing) market Avoid overcrowded marketplaces Or be nimble and small in a large operator ’ s market Offer a unique product or service

10. Critical factors in assessing an opportunity (1) Relative uniqueness of the venture (amount of innovation) Relative investment size at start-up (extent and timing) Growth of sales: What is the growth pattern anticipated for new-venture sales and profits? Is it a lifestyle venture or a high-growth venture? Does it truly stand out head and shoulders above the competition? Steven Depolo , licensed under CC Attribution 2.0 creativecommons.org/licenses/by/2.0/, cropped from original

11. Product availability (and readiness for the consumer) Customer availability (identified customers, willing to pay) Critical factors in assessing an opportunity (2) Does it truly stand out head and shoulders above the competition? Steven Depolo , licensed under CC Attribution 2.0 creativecommons.org/licenses/by/2.0/, cropped from original

12. Common pitfalls Lack of objective evaluation No real insight into the market Inadequate understanding of technical requirements Poor financial understanding Lack of venture uniqueness Ignorance of legal and regulatory issues Pacific Southwest Region USFWS, licensed under CC Attribution 2.0 creativecommons.org/licenses/by/2.0/, cropped from original

13. Analysing the opportunity landscape Examine external conditions that shape and influence an opportunity Also called PEST and STEEP PESTEL analysis consists of: Political Economic Sociocultural Technological Environmental Legal

14. Unlike risks, there is little one can do to mitigate uncertainty as there is no past experience of it to rely on. Technological uncertainty Strategic uncertainty First-time buyer uncertainty Short-time horizon and strategic uncertainty Analysing industry uncertainty

15. A network of suppliers and buyers Each link in the chain: carries the cost imposed by upstream suppliers contributes to the costs of the downstream purchasers. Every link must have a profit margin that enables a price the end user is willing to pay. Analysing the value chain

16. Analysing the value chain The more complex the industry system, the more factors are introduced that may influence sales, growth and performance of the business . Adapted from Ahlqvist , T., Vanderhoek , N., Dufva , M., Kettle, J., Valovirta , V., Kivimaa , A. & Loikkanen , T. (2013 ). South Australian Cellulosic Value. Chain Technology Roadmap . VTT, Finland. Published by VTT, Finland, ª 2013. Available at http://www.dmitre.sa.gov.au/page/view_by_id/319.

17. Analysing Porter’s ‘Five Forces’

18. Is it expensive for your competitor to access proprietary technology? Do they have access to distribution channels? Do they have a ccess to raw materials and skilled labour ? Do they lack experience? Will they have a hard time raising capital? Analysing the barriers to entry

19. Consideration of: the number of competitors the strength of each competitor what drives the competition what the competition can do. Analysing the competition Adapted from Michael E. Porter, Competitive Advantage: Creating and Sustaining Superior Performance , The Free Press, 1985; 1998: 6. Copyright © 1985, 1998 by Michael E. Porter; Aaker , David A., 2001, ‘Competitor analysis’, in Aaker , David A., Strategic market management , 6th ed., Wiley, Hoboken, NJ, pp. 56–75.

20. A checklist approach. List competitors and consider factors: Advertising and promotional policies/ Availability/convenience Calibre of personnel Financial condition Location Analysing the internal profile Price Product design Product uniqueness Production capability R&D position Raw material cost Relative product quality Reputation/image Service Variety/selection

21. Examine the viability of the venture. Consider criteria such as: Is it proprietary? Are the initial production costs realistic? Are the initial marketing costs realistic? Does the product have potential for very high margins? Is the time required to get to market and to reach the break-even point realistic? Analysing the feasibility criteria

22. External factors in addition to those in the feasibility criteria approach Including: Technical feasibility Market feasibility Comprehensive feasibility analysis See complete Feasibility Study outline in Appendix.

23. Major areas of investigation: Full market potential and identifying customers The extent to which the enterprise might exploit this potential market Determine the opportunities and risks associated with the venture. Analysing the marketability Are there customers for seal fur coats ? Native Greenlanders say yes!

24. X -axis: viability of a venture’s ability to generate revenue and profit. Y -axis measures the venture’s durability – ability to sustain itself over time. Size of circle measures the credibility – ability of the venture’s founders and management team to exploit the opportunity. This results in seven kinds of ventures . Analysing the positioning

25. Key concepts (Close your books.) Describe how you would evaluate a new business opportunity. ?