BUSINESS PLAN DEVELOPMENT Industry Analysis, Marketing

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BUSINESS PLAN DEVELOPMENTIndustry Analysis,
Marketing Competition

• Professor Alan L. Carsrud
• The Center for Global Entrepreneurship
  Innovation
• FLORIDA INTERNATIONAL UNIVERSITY

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Remember Entrepreneurial Strategies and Business
Plans build on a sound understanding of the
external environment and the needs of customer
groups in the market place.
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An understanding of the competitive landscape and
the strategies employed by others is critical to
the success of your own firms entrepreneurial
growth plans.
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Defining The Firms Overall Business Plan Strategy
Opportunities
Turnaround
Aggressive
Competitive Position (Strong)
Competitive Position (Weak)
Niche
Defensive
Threats
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Key Issues in theIndustry Environment

• New Entrants
• Bargaining Power of Suppliers
• Substitute Products / Services
• Bargaining Power of Buyers
• Rivalry Among Existing Firms
• (Yes this is Michael Porter of Harvard and yes
  you do need to use this as a way of looking at
  the competitive environment)

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In other words, dont forget what you have
already been taught about strategy and
competitive intelligence.For those of you who
are not MBA students, lets quickly review.
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New Entrants

• Will new technology or market demand enable
  competitors to minimize the impact of traditional
  economies of scale?
• Will customers accept our claims of product or
  service differentiation?
• Will potential new entrants be able to match
  capital requirements that currently exist?
• How permanent are the cost advantages?
• Will conditions change so that competitors have
  equal access to marketing channels?
• Is government policy toward competition in the
  industry likely to change?

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Bargaining Power of Suppliers

• How stable are the size and composition of our
  supplier group?
• Are there any suppliers likely to attempt forward
  integration into the industry?
• How dependent will our suppliers be in the
  future?
• Are substitute suppliers likely to become
  available?
• Could we become our own supplier?

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Substitute Products / Services

• Are new substitutes likely?
• Will they be price competitive?
• Could we fight off substitutes by price
  competition or by advertising to sharpen product
  differentiation?
• What actions could we take to reduce the
  potential for having alternative products seen as
  legitimate substitutes?

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Bargaining Power of Buyers

• Can we break free of over commitment to a few
  large buyers?
• How would our buyers react to attempts by us to
  differentiate our products?
• What possibilities exist that our buyers might
  vertically integrate backward?
• Should we consider forward integration?
• How can we make the value of our components
  greater in the products of our buyers?

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Rivalry Among Existing Firms

• Are major competitors likely to undo the
  established balance of power in our industry?
• Is growth in our industry slowing such that
  competition is becoming fiercer?
• What excess capacity exists in our industry?
• How capable are our major competitors of
  withstanding intensified price competition?
• How unique are the objectives and strategies of
  our major competitors?

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TOWS Analysis Diagram
Environmental Opportunities
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Internal Strengths
Internal Weaknesses
-10
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-10
Environmental Threats
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Remember the Characteristics of an Effective
Strategy

• Know your Strengths.
• Know your Weaknesses.
• Understand where how you make money
• Know your Cash-Value chain.
• Know your distribution chain.

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Trends

• Social
• Political
• Economic
• Technological
• Demographic
• Global
• Local

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The External Environment
Macro-Environment
Industry Environment
Demographics
Economic
Competition
FIRM
Suppliers
Customers
Substitutes
Social
Global
Political/Legal Technological
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... and dont forgetCounter-Trends
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Strategically Important Environmental Factors
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Thinking Strategically
Environmental Analysis
Organizational Assessment
External
Internal
Business Plan
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Market Analysis
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Purpose of a Market Analysis
Determining the size and growth potential of a
market enables a firm to predict many things
about the market, particularly with respect to
competition. From a venture capital perspective,
large markets that are growing rapidly, or
smaller untapped markets with great growth
potential are ideal. Market segmentation is
useful in determining which segments and
customers to serve.
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What to Include in a Market Analysis
Estimates of the overall size of the market
A description of the changes in the target market
over the past 5-10 years
A discussion of the likely effect of
opportunities and threats on the number of
customers
A discussion of applications or approaches that
have the potential to redefine the companys
market
Market projections
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Terminology
MARKET
The set of all actual and potential buyers of a
product
POTENTIAL MARKET
The set of consumers who profess a sufficient
level of interest in the market offer
AVAILABLE MARKET
The set of consumers who have interest, income,
and access to a particular market offer
TARGET MARKET
The part of the available market the company
decides to pursue
MARKET DEMAND
The total volume of a product that would be
purchased by a defined customer group in a
defined geographical area in a defined time
period in a defined marketing environment under a
defined marketing program
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Market Segmentation
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Market Segmentation Consumer Markets
Grouping customers is a more practical way of
meeting needs than thinking of customers either
as individuals or as one large mass. Groups
should comprise those customers that respond to
your products and services in similar ways. By
planning a business around these customer groups,
needs can be served effectively.
Geographic
Demographic
Psychographic
Behavioral
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Consumer Markets Geographic Variables
Pacific, Mountain, West North Central, West South
Central, East North Central, East South Central,
South Atlantic, Middle Atlantic, New England
Region
Under 4,999 5,000-19,999 20,000-49,999 . .
. 1,000,000-3,999,999 4,000,000 and over
City ormetro size
Density
Urban, rural, suburban
Climate
Northern, southern
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Consumer Markets Demographic Variables
Age
Gender
Occupation
Family size
Education
Nationality
Religion
Income
Ethnicity
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Consumer MarketsPsychographic Variables
Lifestyle
Personality
Hobbies
Compulsive
TV viewing habits
Outgoing
Social activities
Authoritarian
Club memberships
Ambitious
Vacation preferences
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Consumer MarketsBehavioral (Product Usage)
Variables
Occasions
Regular occasion, special occasion
Quality, service, economy, speed
Benefits
Nonuser, ex-user, potential, first-time, regular
User status
Light user, medium user, heavy user
Usage rate
Loyalty status
None, medium, strong, absolute
Buyer-readiness stage
Unaware, aware, informed, interested, intends to
buy
Attitude toward product
Enthusiastic, positive, indifferent, negative,
hostile
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Consumer Markets Product Adoption
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Rate of adoption
13.5
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2.5
Late majority
Early majority
Early adopters
Innovators
Laggards
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Market Segmentation Business Markets
Business markets can be segmented with many
ofthe same variables employed in consumer market
segmentation, such as geography, benefits
sought,and usage rate. Yet business marketers
also use several other variables.
Demographic variables
Purchasing approaches
Personal characteristics
Operating variables
Situational factors
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Business Market Segmentation
Demographic Variables
Industry
Company size
Location
Operating Variables
Technology
User status
Customer capabilities
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Business Market Segmentation
Purchasing Approaches
Purchasing-function organization
Power structure
Nature of existing relationships
General purchase policies
Purchasing criteria
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Business Market Segmentation
Situational Factors
Urgency
Specific application
Size of order
Personal Characteristics
Buyer-seller similarity
Attitude toward risk
Loyalty
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Industry Analysis
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Checklist For TheMarketing Plan

• 1. List information on the industry that the
  business will compete in
• Current Size
• Growth Potential
• Geographic Locations
• Industry Trends
• Seasonal Factors
• Profit Potential
• Sales Patterns (single, bulk, direct, etc.)

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Development of New Product / Customers/Markets
Customers or Markets
Nature of Technology
Old
New
Old
No Brainer
Promising
Great Potential
New
Risky
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Checklist For TheMarketing Plan

• 2. What is the profile of the customer or various
  customer groups?
• Include age, sex, profession, income, geographic
  location and other demographics.
• 3. Describe the benefits provided to the
  customer?
• What problems are you solving?

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Checklist For TheMarketing Plan

• 4. Describe the customers need for the product /
  service.
• How much will they save?
• What return will the customer receive on the
  dollars they spend?
• Will they have to change their ways of doing
  things?
• Will they be required to purchase other goods /
  services to utilize yours?
• Will they have to change their work habits?

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Checklist For TheMarketing Plan

• 5. Describe the new ventures market niche.
• A particular appeal, identify, or place in the
  market that the product / service has.

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Checklist For TheMarketing Plan

• 6. Describe the target market(s) and the
  potential dollar volume of each that the business
  has selected for penetration
• Prioritize the list by naming the best target
  markets first.
• Note that your target market might not be the end
  user but instead your distribution channels.

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Checklist For TheMarketing Plan

• 7. Describe approach for selling the product /
  service to the end user.
• Distribution channels, sales representatives,
  direct sales force, direct mail, telemarketing
• 8. List the costs for penetrating each target
  market
• Dollars and Time (sales, lead time needed, etc.)

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Checklist For TheMarketing Plan

• 9. What advertising / promotion media will be
  used for the distribution system and for the end
  users?
• Address each area that will be used
• radio, newspaper, trade journals magazines, and
  / or television advertising
• Include a sample of the advertising (if possible)
  and list costs.

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Checklist For TheMarketing Plan

• 10. How will the packaging and labeling enhance
  name identification and brand loyalty?
• If possible, include sample of packaging
• 11. What kind of service, warranties, and
  guarantees will be offered?
• How will these be promoted?
• How many of these will affect profits?

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Checklist For TheMarketing Plan

• 12. What are the reactions to the product /
  service from prospective customers?
• Include any testimonials, market surveys, focus
  group studies, etc.
• 13. State why the market efforts are unique or
  different from competitors
• Avon pioneered door-to-door cosmetics

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Checklist For TheMarketing Plan

• 14. What is the role of trade show?
• Which trade shows will be best for exhibiting the
  product / service?
• Give name, location, date, booth size, etc
• 15. Explain opportunities in future markets.
• Include size, method of penetration, costs, etc.

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Checklist For Competition

• 1. List direct competition by product and
  geographic market.
• Who is directly seeking the same money you are?
• Specialty retail stores compete with specialty
  stores, not department stores
• 2. List the indirect competitors by product and
  geographic market.
• Movie theaters are indirect competitors of video
  stores

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Checklist For Competition

• 3. List emerging competitors entering the
  industry or market.
• Video rental stores, supermarkets entering video
  business.
• 4. Describe the competitors strengths and
  weaknesses by product and market segment
• List in chart form, tie these back to your
  strengths and weaknesses.

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Checklist For Competition

• 5. Describe the competitors share of the market
  by product.
• List by percentages or in unit or dollar volume
• 6. Discuss relevant background information
  concerning major competitors
• Include profiles of their management team,
  company history, financials
• Show where they are strong or weak

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Checklist For Competition

• 7. On what basis will the product / service
  compete with them?
• Product superiority, price, advertising, etc.
• 8. How is this venture superior to that of the
  competition?
• Operations, management, product / service, price,
  service, delivery, etc.

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Checklist For Competition

• 9. How does this product / service compare with
  the competition in the eyes of customers?
• Include some customer reactions from a small
  sample you have taken
• 10. Does this venture threaten the major
  strategic objectives or self-image of the
  competition?
• Will they attempt to destroy the venture at any
  cost?

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Checklist For Competition

• 11. If the competition tries to destroy your
  position in the marketplace, how will you
  retaliate?
• What marketing exclusionary tactics can you
  anticipate?
• 12. List sources to evaluate product / services
  against competition
• Agencies, ind. firms, publications, etc.
• Include statements and testimonials

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Checklist For Competition

• 13. What is the basis upon which the industry
  competes?
• Price, quality, promotion, personal selling,
  innovation, legal, franchises, etc.
• 14. What has been the history of the industry
  treatment of new enterprises?
• How easy is it to enter the industry?

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Checklist For Competition

• 15. What has been the fate of new firms in the
  industry?
• Have other new firms successfully entered the
  industry?
• 16. What are the entry barriers?
• - What keeps others out?
• 17. What are the exit barriers?
• - What will keep you and others from leaving