MGT 3302 01
Entrepreneurship
Week 2: Part 2
Conducting a Feasibility Analysis and
Crafting a Winning Business Plan
Brahim Allali, Ph.D.
Group Exercise
1. Give three reasons for starting a new
business rather than buying an existing firm
or acquiring a franchise.
2. Distinguish the different types and sources
of start-up ideas.
3. Describe the characteristics of successful
start-up companies.
Alternative Routes to
Small Business Ownership
Types
Types of
of Ideas
Ideas that
that Develop
Develop into
into
Start-ups
Start-ups
Kinds
Kinds of
of Start-up
Start-up Ideas
Ideas
• Type A
– Start-up ideas centered around providing customers with
an existing product not available in their market
• Type B
– Start-up ideas, involving new ideas, involving new
technology, centered around providing customers with a
new product
• Type C
– Start-up ideas centered around providing customers with
an improved product
Sources
Sources of
of Start-up
Start-up Ideas
Ideas
Characteristics
Characteristics of
of Successful
Successful
High-Growth
High-Growth Start-ups
Start-ups
• Begin as a team effort
• Are in service and manufacturing industries
• Have competent founders who:
– have related experience.
– have started other businesses.
– share in ownership of business.
• Are somewhat better financed
• Do not limit themselves to local markets
Venture Feasibility Assessment Model
• Stage 1: Back-of-the-Envelope concept
» Decision: go or no go
• Stage 2: Research and Verification
» Decision: go or no go
• Stage 3: Refine the Concept
» Decision: go or no go
• The Leap of Faith
Competitive Advantage
Unique Service
Price/Value
Features
Competitive
Advantage
Notable Product
Accessibility
Attributes
Customer
Service
Laying the Foundation to
Competitive Advantage
• Competitive Advantage
– To establish competitive advantage, the owner needs to
understand the nature of the environment within which
he or she will be operating.
– A benefit that exists when a firm has a product or service
that is seen by its target market as better than those of
competitors.
Assessing The Environment
• The Macroenvironment
– A broad environment with its multiple factors
that affect most businesses in a society
• Industry Environment
– The combined forces that
directly impact a given firm
and its competitors
Major Factors
Offsetting
Market
Attractiveness
Concept by
Michael Porter Threat of New
Competitors
Threat of Substitute
Products or Services
Rivalry Attractiveness and
Among Existing Profitability of a
Products Target Market
Bargaining Power
of Suppliers
Bargaining Power
of Buyers
Competitor Analysis of and by
an Organization
• Who are the new venture’s current competitors?
• What resources do they control?
• What are their strengths and weaknesses?
• How will they respond to the new venture’s decision to
enter the industry?
• How can the new venture respond?
• Who else might be able to observe and exploit the same
opportunity?
• Are there ways to co-opt potential or actual competitors by
forming alliances?
Core Competencies and
Assessing the Organization
• Core Competencies
• Value-creating organizational capabilities that are
unique to a firm
• Resources versus Capabilities
– Resources are basic inputs that a firm uses to conduct
business (capital, technology, equipment, employees,
etc.)
• intangible and tangible resources
– Capabilities are the integration of several resources
which are deployed together to the firm’s advantage.
Examples of SWOT Factors
Internal External
• Strengths • Opportunities
– Core Competencies – Untapped market potential
– Financial strength – Favourable shift in market
– Well-planned strategy – Emerging technologies
– Skilled management – New product
• Weaknesses • Threats
– Production inefficiencies – New competition
– Inadequate financial – Rising demand
resources – Increased government
– Poor management regulations
– Poorly planned strategy
Strategies that Capture Opportunities
• Broad-Based Strategy Options
–Seek an advantage in cost or competition.
• Cost-Advantage Strategy and Options
Requires the firm to be the lowest-cost producer.
• Marketing-Advantage Strategy
Emphasizing the uniqueness of the firm’s product
or service
Market Segmentation
and its Variables
• Market Segmentation
– division of a market into several smaller groups
with similar needs or buying behavior
• Market
– a group of customers or potential customers
who have purchasing power and unsatisfied
needs.
Ingredients of a Market
Ingredient 1 Ingredient 2
Customers: Purchasing
People or power:
businesses Money/credit
Ingredient 3
Unsatisfied
needs
Market Segmentation Variables
• Segmentation Variables
– The parameters used to distinguish one form of market behaviour
from another
• Geographic Variables
– Defining a market by its location, size, or extent
• Benefit Variables
– Specific characteristics that distinguish market segments according to
the benefit sought
• Demographic Variables
– Specific characteristics that describe customers and their purchasing
power.
• Psychographic Variables
– Lifestyle trends such as fitness, diet, political and sexual orientation
Types of Market Segmentation
Strategies
• Unsegmented Strategy (Mass Marketing)
– A strategy that defines the total market as the target
market
• Multisegmented Strategy
– A strategy that recognizes different preferences of
individual market segments and develops a unique
marketing mix for each
• Single-Segmentation Strategy
– A strategy that recognizes the existence of several distinct
segments but focuses on only the most profitable segment