Topic 5,6,7

Business Plan, Industry, Competitive Analysis

Section 3: Industry Analysis

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Industry Analysis
This section should being by describing the industry the business will enter in terms of its size, growth rate, and sales projections. Items to include in this section:
Industry size, growth rate, and sales projections. Industry structure. Nature of participants. Key success factors. Industry trends. Long-term prospects.

What is Industry Analysis?

Industry
An industry is a group of firms producing a similar product or service, such as airlines, fitness drinks, furniture, or electronic games.

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

Three Key Questions

When studying an industry, an entrepreneur must answer three questions before pursuing the idea of starting a firm.
Question 1 Is the industry accessiblein other words, is it is realistic place for a new venture to enter? Question 2 Question 3 Are there positions in the industry that avoid some of the negative attributes of the industry as a whole?

Does the industry contain markets that are ripe for innovation or are underserved?

Techniques Available to Assess Industry Attractiveness

Assessing Industry Attractiveness

Study Environmental and Business Trends

The Five Competitive Forces Model

Studying Industry Trends

Environmental Trends
Include economic trends, social trends, technological advances, and political and regulatory changes. For example, industries that sell products to seniors are benefiting by the aging of the population.

Business Trends
Other trends that impact an industry. For example, are profit margins in the industry increasing or falling? Is innovation accelerating or waning? Are input costs going up or down?

P.E.S.T

P.E.S.T

The Five Competitive Forces Model

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Explanation of the Five Forces Model

The five competitive forces model is a framework for understanding the structure of an industry. The model is composed of the forces that determine industry profitability. They help determine the average rate of return for the firms in an industry.

Michael Porter 5 Forces Competition Model

5 Forces Model

First Application of the Five Forced Model

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Assessing Industry Attractiveness Using the Five Forces Model

Second Application of the Five Forced Model

2 of 2 Using the Five Forces Model to Pose Questions to Determine the Potential Success of a New Venture in an Industry

Industry Types and the Opportunities They Offer

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Emerging Industries
Industries in which standard operating procedures have yet to be developed.
Opportunity: First-mover advantage.

Fragmented Industries
Industries that are characterized by a large number of firms of approximately equal size.
Opportunity: Consolidation.

Industry Types and the Opportunities They Offer

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Mature Industries
Industries that are experiencing slow or no increase in demand.
Opportunities: Process innovation and after-sale service innovation.

Declining Industries
Industries that are experiencing a reduction in demand.
Opportunities: Leadership, establishing a niche market, and pursuing a cost reduction strategy.

Industry Types and the Opportunities They Offer

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Global Industries
Industries that are experiencing significant international sales.
Opportunities: Multidomestic and global strategies.

Section 4: Market Analysis

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Market Analysis
The market analysis breaks the industry into segments and zeros in on the specific segment (or target market) to which the firm will try to appeal. Items to include in this section:
Market segmentation and target market selection. Buyer behavior. Competitor analysis.

Competitor Analysis
What is a Competitor Analysis?
A competitor analysis is a detailed analysis of a firms competition. It helps a firm understand the positions of its major competitors and the opportunities that are available. A competitive analysis grid is a tool for organizing the information a firm collects about its competitors.

Identifying Competitors
Types of Competitors New Ventures Face

5 Things About Competitors

1. 2. 3. 4. WHO are our Competitors? WHAT are their Strategies? WHAT are their Objectives? WHAT are their Strengths & Weaknesses? 5. WHAT are their Reaction Patterns?

Sources of Competitive Intelligence

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Collecting Competitive Intelligence

To complete a competitive analysis grid, a firm must first understand the strategies and behaviors of its competitors. The information that is gathered by a firm to learn about its competitors is referred to as competitive intelligence. A new venture should take care that it collects competitive intelligence in a professional and ethical manner.

Sources of Competitive Intelligence

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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 competitors product.

Competitor Analysis
Future Objectives
How do our goals compare to our competitors goals? Where will emphasis be placed in the future? What is the attitude toward risk?

What drives the competitor?

Competitor Analysis
Future Objectives
How do our goals compare to our competitors goals? Where will emphasis be Current Strategy placed inHow are they currently the future? What is the attitude toward competing? risk? Does this strategy support changes in the competitive structure?

What is the competitor doing? What can the competitor do?

Competitor Analysis
Future Objectives

How do our goals compare to our competitors goals? Where will emphasis be Current Strategy placed in the future? How are we currently What is the attitude toward competing? Assumptions risk? Does thisDo we assume the future strategy support changes in the competition will be volatile? structure? What assumptions do our competitors hold about the industry and themselves? Are we assuming stable competitive conditions?

What does competitor believe about itself and the industry?

Competitor Analysis
Future Objectives

How do our goals compare to our competitors goals? Where will emphasis be Current Strategy placed in the future? How are we currently What is the attitude toward competing? Assumptions risk? Does this strategy support future Do we assume the changes will becompetition in the volatile? structure? What assumptions do our competitors hold about the Capabilities industry and themselves? What are my competitors Are we operating under a strengths and weaknesses? status quo? How do our capabilities compare to our competitors?

What are the competitors capabilities?

Dynamic Head-to-Head Rivalry

Future Objectives
How do our goals compare to our competitors goals? Where will emphasis be Current Strategy placed in the future? How are we currently What is the attitude toward competing? Assumptions risk? Does this strategy support future Do we assume the changes will becompetition in the volatile? structure? What assumptions do our Capabilities competitors hold about the industry and themselves? What are my competitors Are we operating under a strengths and weaknesses? status quo? How do our capabilities compare to our competitors?

Response
What will our competitors do in the future? Where do we have a competitive advantage? How will this change our relationship with our competition?

Section 6: Operations Plan

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Operations Plan
Outlines how your business will be run and how your product or service will be produced. A useful way to illustrate how your business will be run is to describe it in terms of back stage (unseen to the customer) and front stage (seen by the customer) activities. Items to include in this section:
General approach to operations. Business location. Facilities and equipment.

Section 7: Product (or Service) Design and Development Plan

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Product (or Service) Design and Development Plan

If youre developing a completely new product or service, you need to include a section that focuses on the status of your development efforts. Items to include in this section:
Development status and tasks. Challenges and risks. Intellectual property.

Section 8: Financial Projections

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Financial Projections
The final section of a business plan presents a firms pro forma (or projected) financial projections. Items to include in this section:
Sources and uses of funds statement. Assumptions sheet. Pro forma income statements. Pro forma balance sheets. Pro forma cash flows. Ratio analysis.

Presenting the Business Plan to Investors

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The Oral Presentation

The first rule in making an oral presentation is to follow directions. If youre told you have 15 minutes, dont talk for more than the allotted time. The presentation should be smooth and well-rehearsed. The slides should be sharp and not cluttered.

Questions and Feedback to Expect from Investors

The smart entrepreneur has a good idea of the questions that will be asked, and will be prepared for those queries.

Presenting the Business Plan to Investors

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Twelve PowerPoint Slides to Include in an Investor Presentation

1. 2. 3. 4. 5. 6.

Title Slide Problem Solution Opportunity and target market Technology Competition

7. Marketing and sales 8. Management team 9. Financial projections 10. Current status 11. Financing sought 12. Summary

Presenting the Business Plan to Investors

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Its also important to look sharp when presenting a business plan. This new venture team is going over its PowerPoint slides one last time before an investor presentation.