Class 8 Positioning

Class 8 Positioning - BADM 242 Venture Management...

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BADM 242 – Venture Management University of Connecticut School of Business I Defining the industry 1 The industry in which the business operates 2 The market the business serves 3 The state of the national and international economy 4 The people and business with which the business will interact B A young new industry with many new entrants will present at once a highly competitive environment for the new venture and a chance to gain significant market share if entry is early C A more mature industry may already have passed through the period of “survival of the fittest” and will now consist of a few firms with large market shares (e.g., automobile, semiconductor and airline industries) D Carrying capacity 1 Extent to which the industry can support growth 2 Difficulty in entering a specific industry suggests that the industry may be approaching saturation (i.e., the production capability of the existing firms equals or exceeds the demand by customers for industry products) E Uncertainty 1 AKA dynamism is the degree of certainty or uncertainty in the industry as well as stability or instability 2 A dynamic environment is one that is difficult to predict because it is in a constant of flux 3 Dynamic, even chaotic, environments provide a fertile growing ground for new opportunities and haven given birth to such firms as Amazon, Netscape, etc. F Complexity 1 The number and diversity of inputs and outputs facing an organization 2 Firms that operate in complex industries usually have to deal with more suppliers, customers, and competitors than other industries 3 They also usually produce a greater number of dissimilar products for global markets (a) Telecommunications and biotechnology are industries with a high degree of competition and government regulation and have short product life cycles II Industry structure A Work of Michael Porter provides a framework for looking at the nature of your firm’s industry environment 1 Porter assets that there are five forces in any industry that affect the ultimate profit potential of a venture in terms of long run return on investment: (a) Barriers to new business (b) Power of suppliers (c) Threat of substitute products (d) Power of buyers (e) Degree of rivalry among competitors III Threat of new entrants A Economies of scale 1 Means that the firm’s costs to produce have declined relative to the price of their goods and services January 18, 2007 Page 1 of 9 //home/vdimitrov/6624/f845baf4a5624aa112dca6e6823a0976bf0dbddd.doc
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BADM 242 – Venture Management University of Connecticut School of Business 2 Catch-22: if a firms enters an industry on a large scale it risks retaliation; if it enters on a small scale it may not be able to compete because of high costs relative to those already in the industry. 3
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Class 8 Positioning - BADM 242 Venture Management...

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