3920-c4 - New Venture and Small Business Management UNIT 4...

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Unformatted text preview: New Venture and Small Business Management UNIT 4 MODULE 1 Opportunity Recognition NEW VENTURE OPPORTUNITIES ARE... "attractive, durable and timely and anchored in a product or service which creates or adds value for its buyer or end user" TIMMONS Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved NEW VENTURE OPPORTUNITIES ARE... "attractive, durable and timely and anchored in a product or service which creates or adds value for its buyer or end user" TIMMONS NEW VENTURE OPPORTUNITIES ARE... "attractive, durable and timely and anchored in a product or service which creates or adds value for its buyer or end user" TIMMONS Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved NEW VENTURE OPPORTUNITIES ARE... "attractive, durable and timely and anchored in a product or service which creates or adds value for its buyer or end user" TIMMONS NEW VENTURE OPPORTUNITIES ARE... "attractive, durable and timely and anchored in a product or service which creates or adds value for its buyer or end user" TIMMONS Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved 1 New Venture and Small Business Management SCREENING SHOULD IDENTIFY THOSE NEW VENTURE IDEAS WITH... SUCCESS IS A FUNCTION OF HIGH POTENTIAL Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved THE ENTREPRENEUR ! Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved INDUSTRY STRUCTURE consider market... needs l structure l size l growth rate l cost structure l capacity l share attainable l etc... l Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved NVP = f (E, IS, S) Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved INDUSTRY STRUCTURE PRESENTS OPPORTUNITIES WHEN... SIZE STRATEGIC CONSIDERATIONS l l market entry product features basis of competition policies outcome TIME WINDOW OF OPPORTUNITY l early exponential growth l heterogeneous products l shortage of supply l price disequilibrium Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved l l l Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved 2 New Venture and Small Business Management INDUSTRY STRUCTURE STRATEGY STRATEGIC MANAGEMENT PROCESS Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved 3 New Venture and Small Business Management UNIT 4 MODULE 2 Strategy VENTURE SUCCESS Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved GENERAL MANAGEMENT DUTIES OF THE OWNER/MANAGER SET DIRECTION GENERAL MANAGEMENT DUTIES DURING FORMATION NVC ASSESS PERFORMANCE BUILD CAPABILITIES PERFORMANCE IMPLEMENT THE BUSINESS PLAN Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved TIME SET BUILD IMPLEMENT DIRECTION CAPABILITIES PLAN ASSESS PERFORMANCE Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved THE JOB OF THE GENERAL MANAGER IS NEVER COMPLETE ! NVC AP IP BC SD AP SD BC IP AP SD BC IP AP SD ............ SETTING DIRECTION ENHANCES THE DECISION-MAKING PROCESS... SD = set direction BC = build capabilities IP = implement plan Copyright 1999AP Kerr assess performance reserved Jon = and Captus Press Inc. All right Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved 1 New Venture and Small Business Management BY BRINGING COHERENCE TO THE DECISION-MAKING PROCESS NO NO YES YES Planning tools include... l mission statements l statements of vision and values START YES YES YES DESTINATION 'A' l strategy NO NO Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Mission Statements: "why we are in business" WHAT IS STRATEGY ? "an implementable management scheme for achieving corporate ends" Visions & Values: "where we want to go" Strategy: "how we are going to get there" GOALS ACTION RESULTS Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Objectives include... A venture's strategy consists of... l objectives l product/market focus l basis of competition Traditional Measures of Economic Performance l sales volumes l profit l market share l leverage Non-Economic Goals of the Entrepreneur l quality of life l autonomy l challenges Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved 2 New Venture and Small Business Management key is expectations must be rooted in reality A venture's health can be assessed by evaluating performance trends. HEALTHY PERFORMANCE Discontinuance ? TIME Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved UNHEALTHY Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Priorities must be set with respect to objectives to avoid conflicts Product/Market focus includes... Nature of the Product/Service and Specifics of Markets Targeted Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved We can differentiate products on the basis of features or method of delivery Target markets are most commonly segmented on the basis of customer groups and geography Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved 3 New Venture and Small Business Management INCUBATOR ORGANIZATION influences Competition is generally based upon: l price ENTREPRENEUR influences l advertising / promotion l quality PRODUCT/MARKET FOCUS Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved PROSPECTS FOR VENTURES COMPETING ON THE BASIS OF PRICE FIRM A FIRM B FIRM C PROSPECTS FOR VENTURES COMPETING ON THE BASIS OF DIFFERENTIATION FIRM A cost of diff. FIRM B cost of diff. profit costs FIRM C cost of diff. profit costs SELLING PRICE SELLING PRICE WITH DIFFERENTIATION WITHOUT DIFFERENTIATION costs costs costs profit profit profit profit costs above average returns average returns below average returns above average returns average returns below average returns Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved THIS IS THE SUCCESSFUL FIRM ! THIS IS THE 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright SUCCESSFUL FIRM ! VISUALIZING A VENTURE'S STRATEGY OBJECTIVES economic measures non-criteria criteria PRODUCT/MARKET FOCUS features COMPETITIVE STRATEGY delivery segmentation Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved cost differentiation focus 4 New Venture and Small Business Management UNIT 4 MODULE 3 The Strategic Process MASTERING THE STRATEGIC PROCESS POSITIVELY INFLUENCES AN ENTREPRENEUR'S CHANCES OF SUCCESS Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved THE STRATEGIC PROCESS assess opportunities / risks select basis for competition formulate objectives harness resources create the organization control implementation assess results Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Creating a new venture is a strategic decision involving... l setting objectives l establishing a product / market focus l determining a basis for competition Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved THE STRATEGIC PROCESS IN EARLY GROWTH NVC l test product / market choice l gauge response l entrepreneur maintains contact OBSTACLES TO CHANGE l nature of the organization l entrepreneur's commitment to status quo l non-transferable skills / resources FLEXIBILITY Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved 1 New Venture and Small Business Management THE STRATEGIC PROCESS AT STABILITY NVC FORMAL OR INFORMAL, THE KEY IS l commitment to status quo l bureaucracy developing l some resource flexibility PLANNING ! Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved FLEXIBILITY Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved TYPE OF PLANNER FORMAL vs. INFORMAL WHEN TO VISIT THE STRATEGIC PLANNING PROCESS... l prior to start-up ! NUMBER OF STRATEGIES CONSIDERED MORE vs. LESS l periodically, perhaps once a year l in evaluating opportunities / threats l when performance deteriorates Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved RATIO OF GROWTH RATES 2 : 1 Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved THE STRATEGIC PROCESS FORMULATION l assess performance l evaluate current strategy l develop and evaluate alternatives SET DIRECTION THE STRATEGIC PROCESS FORMULATION l assess performance l evaluate current strategy l develop and evaluate alternatives SET DIRECTION IMPLEMENTATION DECIDE IMPLEMENTATION DECIDE l build capabilities l implement the plan l assess performance l build capabilities l implement the plan l assess performance ASSESS PERFORMANCE IMPLEMENT THE PLAN BUILD CAPABILITIES ASSESS PERFORMANCE IMPLEMENT THE PLAN BUILD CAPABILITIES Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved 2 New Venture and Small Business Management INTERNAL CAPABILITIES STRATEGY "link" EXTERNAL ENVIRONMENT INTERNAL CAPABILITIES STRATEGY "link" EXTERNAL ENVIRONMENT IS THERE A FIT ? Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved When there is a lack of `fit' here... LACK OF FIT = RISK INTERNAL CAPABILITIES STRATEGY "link" EXTERNAL ENVIRONMENT there exists ENVIRONMENTAL RISK. Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved When there is a lack of `fit' here... Being conscious of risk allows the entrepreneur to... EXTERNAL ENVIRONMENT INTERNAL CAPABILITIES STRATEGY "link" 1. prepare contingencies 2. compare risk-return for competing opportunities. Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved there exists CAPABILITY RISK. Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved 3 New Venture and Small Business Management INTERNAL CAPABILITIES STRATEGY "link" EXTERNAL ENVIRONMENT INTERNAL CAPABILITIES STRATEGY EXTERNAL ENVIRONMENT resources organization relationships Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved INCUBATOR ORGANIZATION THE ENTREPRENEUR INTERNAL CAPABILITIES STRATEGY EXTERNAL ENVIRONMENT INTERNAL CAPABILITIES STRATEGY "link" EXTERNAL ENVIRONMENT industry environment macroenvironment Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved INCUBATOR ORGANIZATION THE ENTREPRENEUR INCUBATOR ORGANIZATION THE ENTREPRENEUR INTERNAL CAPABILITIES STRATEGY "link" EXTERNAL ENVIRONMENT INTERNAL CAPABILITIES STRATEGY "link" EXTERNAL ENVIRONMENT Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved 4 New Venture and Small Business Management INCUBATOR ORGANIZATION THE ENTREPRENEUR PREFERENCES ARISE FROM... l NEEDS (achievement, security, etc.) EXTERNAL ENVIRONMENT INTERNAL CAPABILITIES STRATEGY "link" l BELIEFS (learned over time) Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved IMPLEMENTATION INTERNAL CAPABILITIES STRATEGY "link" EXTERNAL ENVIRONMENT DOES NOT REPLACE INTUITIVE GENIUS Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved PLANNED STRATEGY REALIZED STRATEGY Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved 5 New Venture and Small Business Management UNIT 4 MODULE 4 Industry Structure INDUSTRY STRUCTURE DETERMINES... l GROWTH AND PROFIT POTENTIAL l ATTAINABLE COMPETITIVE POSITIONS Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved `5-FORCES' MODEL OF INDUSTRY STRUCTURE THREAT OF NEW ENTRANTS `5-FORCES' MODEL OF INDUSTRY STRUCTURE THREAT OF NEW ENTRANTS SUPPLIERS COMPETITIVE RIVALS BUYERS SUPPLIERS COMPETITIVE RIVALS BUYERS SUBSTITUTE PRODUCTS SUBSTITUTE PRODUCTS Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved INDUSTRY ANALYSIS TENDS TO BE A FORMAL AND DISCRETE PROCESS NEW VENTURES CAN USE THEIR STRATEGY AS A FOCUSING TOOL FOR INDUSTRY ANALYSIS Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved 1 New Venture and Small Business Management `5-FORCES' MODEL OF INDUSTRY STRUCTURE THREAT OF NEW ENTRANTS `5-FORCES' MODEL OF INDUSTRY STRUCTURE THREAT OF NEW ENTRANTS SUPPLIERS COMPETITIVE RIVALS BUYERS SUPPLIERS COMPETITIVE RIVALS BUYERS w needs must be satisfied pay price > cost SUBSTITUTE PRODUCTS w must be willing to SUBSTITUTE PRODUCTS Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved INDUSTRY = ATTRACTIVENESS PROFITABILITY SUPPLIERS COMPETITORS BUYERS BUT... What is a new venture's profit potential ? Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved THE VALUE CHAIN Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved `5-FORCES' MODEL OF INDUSTRY STRUCTURE THREAT OF NEW ENTRANTS `5-FORCES' MODEL OF INDUSTRY STRUCTURE THREAT OF NEW ENTRANTS SUPPLIERS COMPETITIVE RIVALS BUYERS w establish industry price SUPPLIERS HOT DOG VENDORS BUYERS SUBSTITUTE PRODUCTS w serve as alternate supply Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved SUBSTITUTE PRODUCTS w food courts w restaurants w "brown bags" 2 New Venture and Small Business Management `5-FORCES' MODEL OF INDUSTRY STRUCTURE THREAT OF NEW ENTRANTS w entrance is a function of perceived profit potential COMPETITIVE BUYERS RIVALS NEW ENTRANTS ENTER WHEN RETURNS > RISKS INVOLVED SUPPLIERS INDUSTRY PARTICIPANTS SUBSTITUTE PRODUCTS Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved NEW ENTRANTS ENTER WHEN RETURNS > RISKS INVOLVED 100% INDUSTRY PARTICIPANTS FIRMS EXIT WHEN RISKS > RETURNS 1000 customers x $1.00 profit/hot dog $1000 INDUSTRY PROFIT Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved A 50% A 33% 1000 customers x $1.00 profit/hot dog $1000 1000 customers x $1.00 profit/hot dog INDUSTRY PROFIT B 50% Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved B C 33% 33% $1000 INDUSTRY PROFIT Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved 3 New Venture and Small Business Management "I'm out of here !" A 1000 customers x $1.00 profit/hot dog NEW ENTRANTS BARRIERS TO ENTRY B C 50% 50% $1000 INDUSTRY PROFIT INDUSTRY PARTICIPANTS Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved NEW ENTRANTS NEW ENTRANTS INDUSTRY PARTICIPANTS BARRIERS TO ENTRY INCLUDE: w brand differentiation w high capital requirements w production economies of scale w access to distribution channels w government regulation... BARRIERS TO ENTRY INDUSTRY PARTICIPANTS Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved SUPPLIERS COMPETITORS BUYERS SUPPLIERS COMPETITORS BUYERS COSTS PRICE THE VALUE CHAIN PRICE - COSTS = VALUE ADDED Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved 4 New Venture and Small Business Management SUPPLIERS SUPPLIERS COMPETITORS BUYERS NEW VENTURES BUYERS ECONOMIC DEPENDENCE ? BUYERS HAVE POWER IF THEY... l purchase large volumes l have a choice of suppliers l can integrate backwards Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved SHARE OF PROFIT... NEW VENTURE BUYER Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved BUYERS CAN NEGOTIATE AWAY PROFITS ! "WHAT'S YOUR BEST PRICE ?" SUPPLIER 1 SUPPLIER 2 SUPPLIER 3 SUPPLIER 1 SUPPLIER 2 SUPPLIER 3 SUPPLIER 1 $22,000 $20,500 $19,300 $19,200 $19,100 $19,050 $19,000 BUYERS MAY INTEGRATE BACKWARDS IF THEY... l have the capital to invest l have access to skills and technology l require sufficient volumes " I'LL BUY ! " Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved SUPPLIERS COMPETITORS BUYERS COMPETITORS BUYERS we see a similar relationship Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved 5 New Venture and Small Business Management COMPETITION... UNIT 4 MODULE 5 The Nature of Competition l determines whether a new venture succeeds l validates the entrepreneur's choice of competitive strategy Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved TO SUCCEED, A NEW VENTURE MUST HAVE SOME FORM OF... COMPETITIVE ADVANTAGE Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved "If you don't have an advantage, you shouldn't compete !" Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved COMPETITIVE POSITIONS DELIVERED COST LOW HIGH HIGH EVERY INDUSTRY HAS CERTAIN... DEGREE OF DIFFERENTIATION LOW S NG RO T GE RA E AV W K EA BASIC COMPETITIVE REQUIREMENTS Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved 1 New Venture and Small Business Management BASIC COMPETITIVE REQUIREMENTS l cart with barbecue and refrigeration l hot dogs, buns and condiments l an operator (cook) l municipal permit l price acceptance in the market Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Approaches to satisfying competitive requirements can lead to differentiation and competitive advantage. COMPETITIVE ADVANTAGE `when a venture has a product that is perceived by the target market to be better' WHAT ARE THE KEY BUYING CRITERIA ? Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved The customers' key buying criteria might be... l location l the hot dog vendor l the condiments l service Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved CUSTOMER SURVEY - BUYING CRITERIA #1 #2 #3 #4 CRITERIA RANKING 1 2 3 4 location location condiments service hot dog hot dog condiments location condiments hot dog service service hot dog condiments service location Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved 2 New Venture and Small Business Management STRATEGIC APPROACHES (BASIC COMPETITIVE REQUIREMENTS) A emphasizes location > condiments > service > hot dogs WHO IS PERCEIVED TO BE BETTER ? B emphasizes service > location > hot dogs > condiments Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved #1 A VS. B 1. 2. 3. 4. #1 A 4 VS. B 3 1. 2. 3. 4. location hot dog condiments service location hot dog condiments service 2 6 1 4 WHERE... VENDOR A emphasizes location > condiments > service > hot dogs VENDOR B Copyright 1999service and Captus Press > hot dogs > condiments emphasizes Jon Kerr > location Inc. All right reserved WHERE... VENDOR A emphasizes location > condiments > service > hot dogs VENDOR B emphasizes service > location > hot dogs > condiments Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved #1 VENDOR `A' WINS BASED ON THE NET DIFFERENCE IN THE SCORE Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved #2 ? ? ? A #3 B #4 Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved 3 New Venture and Small Business Management #1 INDUSTRY PROFIT #2 A $750 #3 B #4 $250 $1000 VENDOR `B' SHOULD STUDY HIS COMPETITOR'S STRATEGY Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved ? CAN HE ELIMINATE THE COMPETITIVE ADVANTAGE OF VENDOR `A' ? Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved COMPETITIVE ADVANTAGES ARE SUSTAINABLE IF THEY ARISE FROM A CAPABILITY GAP. LOOK TO... l the entrepreneur l regulatory / legal factors l the business system Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved THE ENTREPRENEUR... l look to initiative, motivation and ability REGULATORY / LEGAL FACTORS l consider the municipal permit... THE BUSINESS SYSTEM... represents how the entrepreneur can deliver his product or service to the customer Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved There is only one `best' corner ! Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved 4 New Venture and Small Business Management VALUE CHAIN FARMERS PROCESSORS WHOLESALERS VENDORS CONSUMERS Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved VALUE CHAIN FARMERS PROCESSORS WHOLESALERS ENTREPRENEURS TEND TO WANT ABSOLUTE CONTROL VENDORS CONSUMERS Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved BUT, ABSOLUTE CONTROL... l increases fixed costs l increases break-even l reduces flexibility l is almost unimaginable in new ventures ! VALUE CHAIN FARMERS PROCESSORS WHOLESALERS A PRACTICAL ENTREPRENEUR HAS A NARROW BUSINESS SYSTEM FOCUS VENDORS CONSUMERS Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved STRATEGIC COST ANALYSIS ASSESSES COST STRUCTURE RELATIVE TO THE COMPETITION Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved WHERE COST DISADVANTAGES ARE SUPPLIER-RELATED... l renegotiate l replace l substitute l integrate Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved 5 New Venture and Small Business Management WHERE COST DISADVANTAGES ARE DISTRIBUTION-RELATED... l negotiate l integrate WHERE COST DISADVANTAGES ARE IN-HOUSE... l cut costs ! l redesign / re-engineer Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved HOW CAN I SUCCEED ? HOW CAN I BE DIFFERENT ? MANUFACTURER WHOLESALER DISTRIBUTOR RETAILER MANUFACTURER RETAILER ! Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved INNOVATIVE THINKING ALLOWS ENTREPRENEURS TO CREATE NEW FORMS OF COMPETITIVE ADVANTAGE Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved 6 New Venture and Small Business Management COMPETITIVE STRATEGIES UNIT 4 MODULE 6 Generic Competitive Strategies l low cost l differentiation l market segmentation (focus) Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved FOCUS STRATEGIES SEGMENT THE MARKET ON THE BASIS OF... l benefits derived l demographics l geography Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved BENEFIT VARIABLES RECOGNIZE DIFFERENCES IN INDIVIDUALS' WANTS, NEEDS AND PREFERENCES Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved CLOTHING STORE *52&(5< 6725( 6 TYPES OF APPLES 'S 'S EN N M E O D R 'S W IL EN CH M We've got it all ! "I like "I like quality" selection" [email protected]@[email protected] SUE'S BOUTIQUE WOMEN'S CLOTHING 12 TYPES OF APPLES Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved 1 New Venture and Small Business Management SMALL TOWN POINT OF INDIFFERENCE MAJOR CITY FOCUS STRATEGIES DISTANCE = COST AND / OR DIFFERENTIATION COST $3.00 $2.00 $1.00 - GAS VIDEO economic savings of renting locally Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved SMALL BUSINESS LIFECYCLE THE APPROPRIATENESS OF A STRATEGY DEPENDS ON THE NATURE OF THE COMPETITION FORMATION EXPANSION STABILITY l l l l few products limited resources (finances, people) no reputation no economies of scale HERE, FLEXIBILITY IS KEY ! Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved INDUSTRY LIFECYCLE INDUSTRY LIFECYCLE FOCUS and DIFFERENTIATION STRATEGIES INTRODUCTION GROWTH MATURITY DECLINE INTRODUCTION GROWTH MATURITY DECLINE Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved 2 New Venture and Small Business Management INDUSTRY LIFECYCLE LOW-COST STRATEGIES LOW PRICED-BASED COMPETITION HIGH MARKETING-BASED COMPETITION (Differentiation) INTRODUCTION GROWTH MATURITY DECLINE HIGH Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved LOW PRICED-BASED COMPETITION HIGH LOW - PRICED LOW - MARKETING COMPETITION PRICED-BASED COMPETITION LOW HIGH HIGH - PRICED LOW - MARKETING COMPETITION MARKETING-BASED COMPETITION (Differentiation) MARKETING-BASED COMPETITION (Differentiation) HIGH Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved HIGH Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved LOW PRICED-BASED COMPETITION HIGH LOW PRICED-BASED COMPETITION HIGH MARKETING-BASED COMPETITION (Differentiation) LOW - PRICED HIGH - MARKETING COMPETITION MARKETING-BASED COMPETITION (Differentiation) HIGH - PRICED HIGH - MARKETING COMPETITION HIGH Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved HIGH Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved 3 New Venture and Small Business Management RESOURCES CAN LIMIT SMALL FIRMS' COMPETITIVE STRATEGIES, BUT RARELY WITH RESPECT TO CUSTOMER SATISFACTION Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved CUSTOMER SATISFACTION IS NOT A MEANS TO A CERTAIN GOAL... IT IS THE GOAL ! Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved 4 New Venture and Small Business Management UNIT 4 MODULE 7 Opportunities and Threats in the Macroenvironment SOCIAL, POLITICAL, TECHNOLOGICAL AND ECONOMIC CHANGE CREATE MARKET OPPORTUNITIES... Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved THEY ALSO POSE THREATS TO EXISTING INDUSTRY PARTICIPANTS ! SCANNING THE ENVIRONMENT IS... l an informal, on-going, forward-looking process l intended to identify opportunities and threats Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved KEY VARIABLES ? TIME HORIZONS FOR PREDICTIONS SHOULD CONSIDER... l flexibility of the business concept l rate of environmental change Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved 1 New Venture and Small Business Management SMALL BUSINESS LIFECYCLE INDUSTRY LIFECYCLES RESTAURANT CONCEPTS PERSONAL COMPUTERS FLEXIBILITY PLANNING HORIZON Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved YEARS MONTHS Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved WE SCAN THE ENVIRONMENT EVERY DAY BY... l watching T.V. l reading the newspaper l conversing with others l etc... Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved SOCIAL, POLITICAL, TECHNOLOGICAL AND ECONOMIC VARIABLES IMPACT SUPPLIERS IN-HOUSE OPERATIONS BUYERS Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved LET'S LOOK AT SOCIAL VARIABLES ENVIRONMENTAL PROTECTION may limit access to supply HOW MIGHT THEY IMPACT ? SUPPLIER IN-HOUSE OPERATIONS BUYERS SUPPLIERS IN-HOUSE OPERATIONS BUYERS Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved 2 New Venture and Small Business Management EMPLOYMENT EQUITY LAWS could impact on quality of employees SUPPLIER IN-HOUSE OPERATIONS BUYERS SUPPLIER SAFETY STANDARDS may be a key buying criteria IN-HOUSE OPERATIONS BUYERS Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved SOCIAL RESPONSIBILITY GOODWILL ENTREPRENEURS MUST NARROW THEIR SCOPE TO RELEVANT ISSUES LONG-TERM BENEFITS Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved GOVERNMENTS HAVE THE ABILITY TO DRASTICALLY ALTER THE ATTRACTIVENESS OF AN INDUSTRY Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved FORECASTING THE IMPACT OF TECHNOLOGICAL CHANGE IS DIFFICULT, ESPECIALLY WITH RESPECT TO TIMING Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved 3 New Venture and Small Business Management ECONOMIC VARIABLES SUCH AS INFLATION, INTEREST RATES AND EMPLOYMENT IMPACT ON AGGREGATE DEMAND Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved 4 New Venture and Small Business Management UNIT 4 MODULE 8 The Venture's Capabilities DRIVE INTERNAL CAPABILITIES OR STRATEGY CONSTRAIN Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved TWO BASIC QUESTIONS... 1. DO CAPABILITIES ALLOW STRATEGY TO BE IMPLEMENTED ? DO THEY SUPPORT A BASIS FOR COMPETITION ? Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved CAPABILITY REQUIREMENTS l cart with barbecue and refrigeration l hot dogs, buns and condiments l an operator (cook) l municipal permit Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved 2. DISTINCTIVE COMPETENCIES DO THESE RESOURCES SUPPORT A BASIS FOR COMPETITION ? EFFICIENCY QUALITY INNOVATION CUSTOMER RESPONSIVENESS COMPETITIVE ADVANTAGE Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved 1 New Venture and Small Business Management INNOVATION EFFICIENCY LESSON #1 RESOURCES SHOULD BE EVALUATED IN THE CONTEXT OF HOW THEY SUPPORT A SPECIFIC COMPETITIVE STRATEGY. Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved QUALITY CUSTOMER RESPONSIVENESS Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved RESOURCE ANALYSIS INCLUDES... l IDENTIFICATION OF RESOURCE GAPS RESOURCE MATRIX RESOURCES Financial Marketing Operations Accounting Physical Human l ASSESSMENT OF RESOURCE RISKS Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved PHYSICAL RESOURCE NEEDS ARE RELATIVELY STRAIGHTFORWARD SOME RESOURCES CAN BE OF CRITICAL IMPORTANCE ! Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved 2 New Venture and Small Business Management RESOURCE GAP ANALYSIS RESOURCE RESOURCES RESOURCE HELD GAP REQUIREMENTS RESOURCE GAP ANALYSIS RESOURCE RESOURCES RESOURCE REQUIREMENTS GAP HELD PHYSICAL FINANCIAL HUMAN mold/press $225,000 ----$50,000 mold/press $175,000 PHYSICAL FINANCIAL HUMAN mold/press $225,000 ----$50,000 mold/press $175,000 press operator ----- press operator Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved ENTREPRENEURS CAN CLOSE RESOURCE GAPS BY... l reallocating l developing l hiring, buying or borrowing l selling or disposing Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved ENTREPRENEURS' INABILITY TO OVERCOME THESE GAPS CAN LEAD TO DISCONTINUANCE Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved RESOURCE RISK INCREASES WITH... l the number of gaps l the magnitude of the gaps l a weak business concept Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved RESOURCE REQUIREMENTS ARE NOT STATIC, CHANGING THROUGHOUT THE VENTURE'S LIFECYCLE Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved 3 New Venture and Small Business Management FORMATION EXPANSION STABILITY ENTREPRENEURS SEEK TO MINIMIZE RESOURCES WHICH... l reduces capital needs flexibility w innovation w change w flexibility VS. w institutionalized w routine w rigid l maximizes l lowers fixed costs WHERE DOES THE ENTREPRENEUR FIT IN ? Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved RESOURCES STRATEGY ORGANIZATION Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved ORGANIZATIONAL VARIABLES INCLUDE... l structure l management systems style l entrepreneur's Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved ORGANIZATION STRATEGY DETERMINES PERFORMED TASKS DEFINES REQUIRED TASKS GAPS ? Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved WHAT ORGANIZATIONAL VARIABLES SUPPORT A SHORT-RUN, SERVICE-ORIENTED STRATEGY ? Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved 4 New Venture and Small Business Management WE MIGHT SEE..... STRUCTURE l a specialized customer service function MANAGEMENT SYSTEMS l production scheduling ENTREPRENEUR'S STYLE l foster integration Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved WHEN..... PERFORMED TASKS = REQUIRED TASKS PERFORMANCE Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved FORMATION EXPANSION STABILITY AN ENTREPRENEUR'S MANAGEMENT STYLE MANIFESTS ITSELF IN HOW THE ENTREPRENEUR HANDLES... l information STRUCTURE no defined structure SYSTEMS STYLE informal controlling specialized groups formal supportive l decisions l people Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved STYLE... l is not easily changed l may not be consistent with required tasks NEW VENTURES TEND TOWARDS MORE COMPLEX ORGANIZATIONAL VARIABLES AS THEY GROW Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved 5 New Venture and Small Business Management DURING FORMATION AND EARLY GROWTH THE ENTREPRENEUR MAINTAINS CLOSE CONTACT WITH ALL ASPECTS OF THE VENTURE Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved The transition from entrepreneur to owner-manager is a difficult one. Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved Sometimes... THE ENTREPRENEUR DOESN'T FIT IN ! Copyright 1999 Jon Kerr and Captus Press Inc. All right reserved 6 ...
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This note was uploaded on 06/02/2011 for the course AK 3920 taught by Professor Jonkerr during the Winter '10 term at York University.

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