SBM18eCh03.ppt

Small Business
Management, 18e
Longenecker/Petty/Palich/Hoy
© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a
license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Starting a Small Business
Chapter 3
© 2017Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain
product or service or otherwise on a password-protected website for classroom use.
Learning Goals:
 Distinguish among the different types
and sources of startup ideas.
 Use innovative thinking to generate
ideas for high-potential startups.
 Describe external and internal
analyses that might shape the
selection of venture opportunities.
 Explain broad-based strategy options
and focus strategies.
© 2017Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain
product or service or otherwise on a password-protected website for classroom use.
Learning Goals (cont.):
 Screen business ideas to identify
those with the greatest potential.
 Assess the feasibility of a startup idea.
© 2017Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain
product or service or otherwise on a password-protected website for classroom use.
Developing Startup Ideas
 Opportunity Recognition
 Identification of potential new products or
services that may lead to promising
businesses
 Entrepreneurial Alertness
 Readiness to act on unnoticed business
opportunities and to pivot quickly away
from flawed initial ideas.
© 2017Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain
product or service or otherwise on a password-protected website for classroom use.
Developing Startup Ideas
(cont.)
 Which Product or Service?
 Serves important consumer needs
 Has readily recognized utility and user
benefits
 Is affordable to a large group of potential
customers
© 2017Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain
product or service or otherwise on a password-protected website for classroom use.
Creating a New Business from
Scratch
© 2017Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a
license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 3–7
To develop a
commercial
market for
new product
or service
Wanting the
challenge of
succeeding
(or failing)
on your own
Motivations
To Start
a Business
To tap into
unique
resources
that are
available
To avoid
undesirable
features of
existing
companies
3–8
© 2017Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on
a password-protected website for classroom use.
Types of Ideas That Develop into Startups
3.1
3–9
© 2017Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on
a password-protected website for classroom use.
Common Sources of Startup Ideas
3.2
Prior work
experience
45%
Personal
interest/hobby
16%
Chance
happening
11%
Suggestion
7%
Education/
Family
business
6% Friends/
relatives
5% Other
4%
Using Innovative Thinking to
Generate Business Ideas
1. Borrow ideas from existing products and
services or other industries.
2. Combine two businesses into one to
create a market opening.
3. Begin with a problem in mind.
4. Recognize a hot trend and ride the wave.
5. Explore ways to improve an existing
product or service’s function.
6. Think of how to streamline a customer’s
activities.
© 2017Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain
product or service or otherwise on a password-protected website for classroom use.
Using Innovative Thinking to
Generate Business Ideas
(cont.)
7. Adapt a product or service to meet
customer needs in different ways.
8. Imagine how market for a product or
service could be expanded.
9. Offer products through a subscription
service.
10. Cash in on the sharing economy.
11. Study a product or service to see if you
can make it “green.”
12. Keep an eye on new technologies.
© 2017Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain
product or service or otherwise on a password-protected website for classroom use.
Using Internal and External
Analyses to Assess Business
Ideas
• Outside-In Analysis
 Studying context of venture to identify
and determine business ideas that
qualify as opportunities.
 General Environment
o Encompasses factors influencing business in a
society.
 Industry Environment
o Factors that impact a firm and all of its competitors.
 Competitive Environment
o Focus on the strength, position, and likely moves
and countermoves of competitors in an industry.
© 2017Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain
product or service or otherwise on a password-protected website for classroom use.
© 2017Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on
a password-protected website for classroom use.
Trends in the General Environment
3.3
© 2017Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a
password-protected website for classroom use.
Major Factors Offsetting Market Attractiveness
3.4
The Competitive Environment
• Who would be the new venture’s current
competitors?
• What unique 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 see and exploit the same
opportunity?
• Are there ways to co-opt potential or actual
competitors by forming alliances?
© 2017Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain
product or service or otherwise on a password-protected website for classroom use.
Evaluating Market
Opportunities
• Inside-Out Analysis
 Assessing the firm’s internal competitive
potential
• Resources
 Basic inputs that a firm uses to conduct
its business
 Tangible resources: visible and easy to
measure.
 Intangible resources: invisible, difficult to
quantify
• Capabilities
 Routines and processes that can
© 2017Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain
product or service or otherwise on a password-protected website for classroom use.
Evaluating Market
Opportunities
• Capabilities
 Routines and processes that can
coordinate the combined use of
productive assets in order to achieve
desired outcomes.
• Core Competencies
 Capabilities that provide a firm with a
competitive advantage over its rivals and
reflect its personality.
© 2017Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain
product or service or otherwise on a password-protected website for classroom use.
Integrating Internal and
External Analyses
• Strengths, Weaknesses,
Opportunities, and Threats (SWOT)
Analysis
 Provides concise overview of firm’s
strategic situation.
 Helps identify opportunities that match
the venture.
© 2017Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain
product or service or otherwise on a password-protected website for classroom use.
© 2017Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on
a password-protected website for classroom use.
Examples of SWOT Factors
3.5
© 2017Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on
a password-protected website for classroom use.
The Entrepreneur’s Opportunity “Sweet Spot”
3.6
Important Strategic Terms
• Strategy
 Plan of action that coordinates resources
and commitments of an organization to
achieve superior performance.
• Strategic Decision
 Regards the direction a firm will take in
relating to its customers and competitors.
• Sustainable Competitive Advantage
 A value-creating industry position likely
to endure over time.
© 2017Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain
product or service or otherwise on a password-protected website for classroom use.
Selecting Strategies That Capture Opportunities
© 2017Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-
protected website for classroom use.
Broad-Based
Strategy Options
Cost-Based
Strategy
Focus
Strategy
Differentiation-
Based Strategy
Focus Strategies
• Focus Strategy Implementation
 Restricting focus to a single subset of
customers.
 Emphasizing a single product or service.
 Limiting the market to a single
geographical region.
 Concentrating on superiority of product
or service.
© 2017Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain
product or service or otherwise on a password-protected website for classroom use.
Focus Strategies (cont.)
• Advantages
 Niche market shields from direct
competition.
 Focus allows development of unique
expertise.
• Disadvantages
 Focus markets can quickly erode if:
 Competitors successfully imitate the strategy.
 Segment erodes or demand disappears.
 Segment loses its uniqueness.
 New firms subsegment the industry.
© 2017Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain
product or service or otherwise on a password-protected website for classroom use.
Factors in Business Idea
Screening
© 2017Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-
protected website for classroom use.
Strength of the
business idea
Industry and
competitive
advantage
Screening
a Business
Idea
Capability of
founders
Capital requirements
and venture
performance
Targeted market
and customers
Is Your Startup Idea Feasible?
© 2017Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-
protected website for classroom use.
Market
Factors
Competitive
Advantage
Judging the
Feasibility of
a Business
Opportunity
Management
Capability
Industry
Attractiveness
Fatal
Flaws
Is Your Startup Idea Feasible?
• Feasibility Analysis
 A preliminary assessment of a business idea
that gauges whether or not the venture
envisioned is likely to succeed
• Fatal Flaws
 A circumstance or development that alone could
render a new business unsuccessful
 Market potential: acceptance, accessibility,
growth, and size
 Power of competitors
 Strength of competitive advantage
 Startup costs
© 2017Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain
product or service or otherwise on a password-protected website for classroom use.
© 2017Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on
a password-protected website for classroom use.
A Feasibility Analysis Framework
3.7
Is Your Startup Idea Feasible
(cont.)?
• New Venture Leadership
 Dimensions of Management Capability
1. Fit of the venture with leader’s mission,
aspirations, and comfort level with risk
involved
2. Leader’s grasp of critical enterprise success
factors and ability to execute on these factors
3. Leader’s connection to others who will be
essential to making the venture work
© 2017Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain
product or service or otherwise on a password-protected website for classroom use.
Key Terms
capabilities
competitive advantage
competitive environment
core competencies
cost-based strategy
differentiation-based strategy
entrepreneurial alertness
fatal flaw
feasibility analysis
focus strategy
general environment
industry environment
intangible resources
new benefit ideas
new market ideas
new technology ideas
opportunity recognition
pivot
resources
serendipity
startups
strategy
SWOT analysis
tangible resources
© 2017Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on
a password-protected website for classroom use.
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SBM18eCh03.ppt

  • 1. Small Business Management, 18e Longenecker/Petty/Palich/Hoy © 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
  • 2. Starting a Small Business Chapter 3 © 2017Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
  • 3. Learning Goals:  Distinguish among the different types and sources of startup ideas.  Use innovative thinking to generate ideas for high-potential startups.  Describe external and internal analyses that might shape the selection of venture opportunities.  Explain broad-based strategy options and focus strategies. © 2017Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
  • 4. Learning Goals (cont.):  Screen business ideas to identify those with the greatest potential.  Assess the feasibility of a startup idea. © 2017Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
  • 5. Developing Startup Ideas  Opportunity Recognition  Identification of potential new products or services that may lead to promising businesses  Entrepreneurial Alertness  Readiness to act on unnoticed business opportunities and to pivot quickly away from flawed initial ideas. © 2017Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
  • 6. Developing Startup Ideas (cont.)  Which Product or Service?  Serves important consumer needs  Has readily recognized utility and user benefits  Is affordable to a large group of potential customers © 2017Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
  • 7. Creating a New Business from Scratch © 2017Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 3–7 To develop a commercial market for new product or service Wanting the challenge of succeeding (or failing) on your own Motivations To Start a Business To tap into unique resources that are available To avoid undesirable features of existing companies
  • 8. 3–8 © 2017Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Types of Ideas That Develop into Startups 3.1
  • 9. 3–9 © 2017Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Common Sources of Startup Ideas 3.2 Prior work experience 45% Personal interest/hobby 16% Chance happening 11% Suggestion 7% Education/ Family business 6% Friends/ relatives 5% Other 4%
  • 10. Using Innovative Thinking to Generate Business Ideas 1. Borrow ideas from existing products and services or other industries. 2. Combine two businesses into one to create a market opening. 3. Begin with a problem in mind. 4. Recognize a hot trend and ride the wave. 5. Explore ways to improve an existing product or service’s function. 6. Think of how to streamline a customer’s activities. © 2017Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
  • 11. Using Innovative Thinking to Generate Business Ideas (cont.) 7. Adapt a product or service to meet customer needs in different ways. 8. Imagine how market for a product or service could be expanded. 9. Offer products through a subscription service. 10. Cash in on the sharing economy. 11. Study a product or service to see if you can make it “green.” 12. Keep an eye on new technologies. © 2017Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
  • 12. Using Internal and External Analyses to Assess Business Ideas • Outside-In Analysis  Studying context of venture to identify and determine business ideas that qualify as opportunities.  General Environment o Encompasses factors influencing business in a society.  Industry Environment o Factors that impact a firm and all of its competitors.  Competitive Environment o Focus on the strength, position, and likely moves and countermoves of competitors in an industry. © 2017Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
  • 13. © 2017Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Trends in the General Environment 3.3
  • 14. © 2017Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Major Factors Offsetting Market Attractiveness 3.4
  • 15. The Competitive Environment • Who would be the new venture’s current competitors? • What unique 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 see and exploit the same opportunity? • Are there ways to co-opt potential or actual competitors by forming alliances? © 2017Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
  • 16. Evaluating Market Opportunities • Inside-Out Analysis  Assessing the firm’s internal competitive potential • Resources  Basic inputs that a firm uses to conduct its business  Tangible resources: visible and easy to measure.  Intangible resources: invisible, difficult to quantify • Capabilities  Routines and processes that can © 2017Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
  • 17. Evaluating Market Opportunities • Capabilities  Routines and processes that can coordinate the combined use of productive assets in order to achieve desired outcomes. • Core Competencies  Capabilities that provide a firm with a competitive advantage over its rivals and reflect its personality. © 2017Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
  • 18. Integrating Internal and External Analyses • Strengths, Weaknesses, Opportunities, and Threats (SWOT) Analysis  Provides concise overview of firm’s strategic situation.  Helps identify opportunities that match the venture. © 2017Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
  • 19. © 2017Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Examples of SWOT Factors 3.5
  • 20. © 2017Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. The Entrepreneur’s Opportunity “Sweet Spot” 3.6
  • 21. Important Strategic Terms • Strategy  Plan of action that coordinates resources and commitments of an organization to achieve superior performance. • Strategic Decision  Regards the direction a firm will take in relating to its customers and competitors. • Sustainable Competitive Advantage  A value-creating industry position likely to endure over time. © 2017Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
  • 22. Selecting Strategies That Capture Opportunities © 2017Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password- protected website for classroom use. Broad-Based Strategy Options Cost-Based Strategy Focus Strategy Differentiation- Based Strategy
  • 23. Focus Strategies • Focus Strategy Implementation  Restricting focus to a single subset of customers.  Emphasizing a single product or service.  Limiting the market to a single geographical region.  Concentrating on superiority of product or service. © 2017Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
  • 24. Focus Strategies (cont.) • Advantages  Niche market shields from direct competition.  Focus allows development of unique expertise. • Disadvantages  Focus markets can quickly erode if:  Competitors successfully imitate the strategy.  Segment erodes or demand disappears.  Segment loses its uniqueness.  New firms subsegment the industry. © 2017Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
  • 25. Factors in Business Idea Screening © 2017Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password- protected website for classroom use. Strength of the business idea Industry and competitive advantage Screening a Business Idea Capability of founders Capital requirements and venture performance Targeted market and customers
  • 26. Is Your Startup Idea Feasible? © 2017Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password- protected website for classroom use. Market Factors Competitive Advantage Judging the Feasibility of a Business Opportunity Management Capability Industry Attractiveness Fatal Flaws
  • 27. Is Your Startup Idea Feasible? • Feasibility Analysis  A preliminary assessment of a business idea that gauges whether or not the venture envisioned is likely to succeed • Fatal Flaws  A circumstance or development that alone could render a new business unsuccessful  Market potential: acceptance, accessibility, growth, and size  Power of competitors  Strength of competitive advantage  Startup costs © 2017Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
  • 28. © 2017Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. A Feasibility Analysis Framework 3.7
  • 29. Is Your Startup Idea Feasible (cont.)? • New Venture Leadership  Dimensions of Management Capability 1. Fit of the venture with leader’s mission, aspirations, and comfort level with risk involved 2. Leader’s grasp of critical enterprise success factors and ability to execute on these factors 3. Leader’s connection to others who will be essential to making the venture work © 2017Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
  • 30. Key Terms capabilities competitive advantage competitive environment core competencies cost-based strategy differentiation-based strategy entrepreneurial alertness fatal flaw feasibility analysis focus strategy general environment industry environment intangible resources new benefit ideas new market ideas new technology ideas opportunity recognition pivot resources serendipity startups strategy SWOT analysis tangible resources © 2017Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.