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  • We start out with an Business Mission and Vision quite often, and Analyze the best approach. Too often we forget to ask What business are we in? Has the environment changes and we need to evolve or business model. Many companies change business missions and models… Enron, etc.

Mex Accel Program Bus Models.ppt Mex Accel Program Bus Models.ppt Presentation Transcript

  • Creating the Business Model for Early Stage International Companies
    • Hiram Willis
    • Director Venture Capital Resources
  • Agenda
    • Introduction
      • Business Model Failures & Success
      • Business Model Importance
    • The Situation: Early Stage Companies & Business Models
      • Definitions
      • The Roles of Business functions in the Business Models
      • The Value Proposition & Money
    • Solutions & Approaches to Successful Models
      • Approaches & Key Elements to Business Model
      • Analysis & Strategies and Implementation
    • Summary
      • Benefits to Early Stage International Companies
  • The Basic Business Model Your Company Processes & Rules Inputs from Company Strategic Outputs from Company to Key Management Strategic Inputs from Environment Strategic Outputs from Company to Market and Customers
  • Business Model Failures
    • Web Van, Inc. (Internet Ordering & Home Delivery)
    • Net-Zero, Inc.
    • Osborne Computers
    • NTT-DoCoMo iMode USA
    • Generic Beer
    • Things They All Had in Common
    • $$$ Can not fix a Bad Business Model
    • More importantly disagreement on Where & How to Make Money
  • Why New Ventures Fail
    • Product/Market Problems
    • Financial Difficulties
    • Managerial Problems
  • Types and Classes of First-Year Problems
    • 1. Obtaining external financing
    • 2. Internal financial management
    • 3. Sales/marketing
    • 4. Product development
    • 5. Production/operations management
    • 6. General management
    • 7. Human resource management
    • 8. Economic environment
    • 9. Regulatory environment
  • External Problems Experienced by Entrepreneurs
  • External Problems Experienced by Entrepreneurs
  • Determinants of New-Venture Failures
    • Lack of mgt. skill
    • Poor mgt. strategy
    • Lack of capitalization
    • Lack of vision
    • Poor product design
    • Key personnel incompetent
    • Lack of mgt. skill
    • Poor mgt. strategy
    • Lack of capitalization
    • Poor external market conditions
    • Poor product design
    • Poor product timing
    Entrepreneur Rank Entrepreneur Rank 1 2 3 4 5 6 1 2 3 4 5 6
  • Business Model Successes
    • Food – Gatorade (Sports Drink)
    • Communications Airespace (WiFi)
    • Medical – Incyte (or WedMD)
    • IT - Google
    • Software - BEA
    • Things They All Had in Common
    • $$$ Amplified the Business Model
    • Management & employees Know How the company Makes Money
  • Critical Factors for New-Venture Development
    • Uniqueness
    • Investment
    • Sales Growth
      • Lifestyle ventures
      • Small profitable ventures
      • High-growth ventures
    • Product Availability
    • Customer Availability
  • Sources of Venture Opportunities
    • Demographic trends
    • Social trends
    • Technological trends
    • Business trends
    • Launchpad jobs
    • Moonlighting
    • Invention related
  • Agenda
    • Introduction
      • Business Model Failures & Success
      • Business Model Importance
    • The Situation: Early Stage Companies & Business Models
      • Definitions
      • The Roles of Business functions in the Business Models
      • The Value Proposition & Money
    • Solutions & Approaches to Successful Models
      • Approaches & Key Elements to Business Model
      • Analysis & Strategies and Implementation
    • Summary
      • Benefits to Early Stage International Companies
  • MOTIVATIONS FOR INTERNATIONAL EXPANSION
    • PROACTIVE (pulled by good foreign markets)
      • Firm specific advantage
      • Resource availability
      • Economies of scale
      • Economic and political factors
    • REACTIVE (pushed by bad domestic markets)
      • Domestic competition
      • Poor domestic market
      • Follow customers
  • Business Model & Strategies The Marketing Strategy The Organization Strategy The Customer Service Strategy The Financial Strategy The Product Strategy
    • Fry’s Electronics
    • Wal-Mart
    • Tiffany’s
    • Cable TV
    • Citibank
    • Cisco Systems
    • Microsoft
    • Warner Bros.
    • Mercedes & Porsche Dealerships
    • Gucci’s, Neiman Marcus
  • CORE COMPETENCIES & COMPETENCE GAPS Strategy Environment Key Success Factors Core Competencies Competency Gap Internal Development Acquisition Strategic Alliance © by Geringer, Frayne & Associates, Inc.
  • Agenda
    • Introduction
      • Business Model Failures & Success
      • Business Model Importance
    • The Situation: Early Stage Companies & Business Models
      • Definitions
      • The Roles of Business functions in the Business Models
      • The Value Proposition & Money
    • Solutions & Approaches to Successful Models
      • Approaches & Key Elements to Business Model
      • Analysis & Strategies and Implementation
    • Summary
      • Benefits to Early Stage International Companies
  • Analysis
  • Criteria For Analysis
    • The window of opportunity
    • Depth and breadth of market
    • Size of total market
    • Protection from competitors
    • Investment requirements
    • Return on investment
    • Ability to spread risks
  • Informal Analysis
    • The “Aha” factor
    • 10:1 ratio
    • Look alike test
    • If it’s so great, why hasn’t someone else done this before
    • Friendly banker test
    • Prototype pre-test
  • Strategic Internal Problems for Early Stage Companies Market Size Competitive Position Business Model Cashflow Strength of Management IP & Product Development Channel Alliances Customer Acquisition SEED A B C D - PwC Paths to Valuation
  • strengths Advantages of proposition? Capabilities? Competitive advantages? USP's (unique selling points)? Resources, Assets, People? Experience, knowledge, data? Financial reserves, likely returns? Marketing - reach, distribution, awareness? Innovative aspects? Location and geographical? Price, value, quality? Accreditations, qualifications, certifications? Processes, systems, IT, communications? Cultural, attitudinal, behavioral? Management cover, succession? weaknesses Disadvantages of proposition? Gaps in capabilities? Lack of competitive strength? Reputation, presence and reach? Financials? Own known vulnerabilities? Timescales, deadlines and pressures? Cashflow, start-up cash-drain? Continuity, supply chain robustness? Effects on core activities, distraction? Reliability of data, plan predictability? Morale, commitment, leadership? Accreditations, etc? Processes and systems, etc? Management cover, succession? opportunities Market developments? Competitors' vulnerabilities? Industry or lifestyle trends? Technology development and innovation? Global influences? New markets, vertical, horizontal? Niche target markets? Geographical, export, import? New USP's? Tactics - surprise, major contracts, etc? Business and product development? Information and research? Partnerships, agencies, distribution? Volumes, production, economies? Seasonal, weather, fashion influences? threats Political effects? Legislative effects? Environmental effects? IT developments? Competitor intentions - various? Market demand? New technologies, services, ideas? Vital contracts and partners? Sustaining internal capabilities? Obstacles faced? Insurmountable weaknesses? Loss of key staff? Sustainable financial backing? Economy - home, abroad? Seasonality, weather effects? Typical Strategic Analysis Model: SWOT, and Look at Others……
  • Developing the Business Model & Strategy for Early Stage Companies Mission & Goals Analysis, e.g. SWOT Internal Analysis External Analysis Key Operational Strategies Financial Product & IP Marketing & Sales Organization Controls & Management Budgets
  • Business Mission & Objectives WOTS Internal WOTS External (Refined) Goals & Objectives Formulation Strategy Formulation Implementation Feedback & Controls Building Sound Business Strategies: Processes Start Here ?….. Start Here….?. Start Here ?…..
  • Sound Business Strategy From Sound Analysis
    • Vision
    • Values
    • Mission/Purpose
    • Strategic Goals
    • Strengths Assessment
    • Market share
    • Organizational Expertise
    • Product & Technology / IP
    • Channel Position
    • SCA
    • External Assessment
    • Business Environment
    • Industry Analysis (Suppliers,Subs & Buyers
    • Opportunities/Threats
      • Internal Assessment
    • Resources/Assets
    • Strengths/Weakness
    • Strategic Relationships
    Expls: Michael Porter, Framework for Industry Analysis Kotler, Marketing Management Expls: David Acker, Marketing Michael Porter, Competitive Advantage
    • Opportunity Assessment
    • Market Segmentation
    • Competitive Intensity
    • Market Growth Rate
    • Market Size
    • Market Attractiveness Scoring
  • -M. Porter, Competitive Advantage Sound Business Strategy Starts with Industry Analysis Potential Entrants Suppliers Industry Competitors Rivalry Among Firms Substitutes Buyers Threat of Substitute Products & Services Bargaining Power of Buyers Bargaining Power of Suppliers New Entrants & Barriers to Entry
  • Five-Forces
    • Developed by Michael Porter: forces that shape and influence the industry or market the organisation operates in.
      • Strength of Barriers to Entry - how easy is it for new rivals to enter the industry?
      • Extent of rivalry between firms – how competitive is the existing market?
      • Supplier power – the greater the power, the less control the organisation has on the supply of its inputs.
      • Buyer power – how much power do customers in the industry have?
      • Threat from substitutes – what alternative products and services are there and what is the extent of the threat they pose?
  • INTENSITY OF RIVALRY
    • Industry growth rate
    • Diversity of competitors
    • Concentration & balance (existence of industry leader)
    • Fixed or storage costs / value added
    • Product differentiation
    • Brand identity
    • Overcapacity (how much, how long, capacity increments)
    • Switching costs
    • Corporate stakes
    • Exit barriers
    • Informational complexity
  • Bringing it all Together…
    • Business / Operational Strengths
    • Sales / Profit / Cashflow Potential
    • Growth Rate
    • Competitive Situation
    • Market Traction Ease
    • Channel Risks
    Business Model Scores Model 1 Model 2 Model 3 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ Business Strategy 1 Business Strategy 2 Business Strategy 3
    • Company Strengths
    • Financial Program
    • Technology Base & Product Strategy
    • Marketing Capabilities
    • Organizational Strengths
    • Special Strengths
  • Business Model #1: Differentiation
    • A differentiation strategy is based on perceived quality, fashion, reliability, so that in the eyes of the customer, product differences can justify a higher price. International marketing should emphasize brand name image, use upscale distribution outlets, stress high fashion.
  • Business Model #2: Cost Leadership
    • A cost leadership strategy is achieved through systematic reductions in costs (production, sales, materials), lower profit margins or both. International marketing should emphasize low prices, source low cost inputs worldwide, use low cost distribution channels, look for ways to coordinate advertising campaigns across markets.
  • Business Model #3: Focus
    • A focus strategy concentrates on a market niche or segment or particular geographic segments. An international marketing strategy should be tailored for each niche market.
  • SWOT
    • Strengths – identifying existing organisational strengths
    • Weaknesses – identifying existing organisational weaknesses
    • Opportunities – what market opportunities might there be for the organisation to exploit?
    • Threats – where might the threats to the future success come from?
  • PEST
    • Political: Local, national and international political developments – how will they affect the organisation and in what way/s?
    • Economic: what are the main economic issues – both nationally and internationally – that might affect the organisation?
    • Social: what are the developing social trends that may impact on how the organisation operates and what will they mean for future planning?
    • Technological: changing technology can impact on competitive advantage very quickly!
  • Types of Strategy
  • STRATEGIC DECISIONS RE: ENTRY INTO FOREIGN MARKETS
    • Whether to become an international company?
    • What products/activities to internationalize?
    • Which countries to enter?
    • What objectives to set for the target countries?
    • Which entry mode (s) to use?
    • What marketing plan for penetrating target market?
    • What organizational & implementation issues to manage?
    copyright © by Geringer, Frayne & Associates, Inc .
  • Corporate Culture
  • WHICH PRODUCTS/ACTIVITIES TO INTERNATIONALIZE?
    • Value chain/business system analysis
    • How can entry configuration yield competitive advantage?
      • Versus single-nation competition
      • Versus multinational competitors
  • DIFFERENCES: DOMESTIC vs. INTERNATIONAL ENVIRONMENTS
    • Domestic International
    • Single Currency Currencies differing (stability,value&convertibility)
    • Uniform climates (financial, accounting & Variety of economic climates & systems
    • business)
    • Relatively homogeneous markets Fragmented & diverse markets
    • Uniform legal framework Diverse legal systems (e.g., common law, civil law)
    • Relatively stable political climate Political change is often discontinuous
    • Cultural mores & values are well understood Cultural mores & values must be identified & understood
    • Data are available & collection is relatively Collection of accurate data is formidable
    • easy & sometimes impossible
    • Familiar language(s) whether unilingual/ Numerous languages
    • bilingual
    copyright © by Geringer, Frayne & Associates, Inc .
  • INTERNATIONAL DIFFERENCES: IMPLICATIONS FOR STRATEGY
    • Added costs, risks & complexity of int’l business
    • Host-country firms typically have advantages over foreign firms
    • Strategies successful in one nation may fail in another
    • Governments can be allies or enemies
    • Competitors from different environments
    • Need for international competitive advantages
    copyright © by Geringer, Frayne & Associates, Inc .
      • 1. Internal development
        • Often takes considerable time & resources
        • May lack ability to easily build operations in some markets
      • 2. Acquisition
        • Fast, but often costly
        • Usually not very precise
          • Capacity you don’t want
          • Product lines you can’t sell
          • Personnel you don’t need
          • Cultures that don’t mesh
      • 3. Alliances
        • Fewer up-front costs than an acquisition
        • May improve focus on areas of weakness
        • Can bridge gaps in short term & enable learning over long term
        • Hard to successfully structure & manage
    How to Become an Early Stage INTERNATIONAL COMPANY? © by Geringer, Frayne & Associates, Inc.
  • INTERNATIONAL ENVIRONMENT, STRATEGY & COMPETENCIES: SUMMARY
    • Questions to address:
      • Is the industry attractive?
      • How to compete and position?
      • Where to compete?
      • Ability to compete?
      • How and where to focus efforts?
    Copyright © Geringer, Frayne & Associates, Inc.
  • Entry Strategy: A Comprehensive Plan for Entering International Markets
    • To guide your international operations & provide a base for sustainable growth
      • Need plan for each product in each market
      • Must integrate individual plans
    • Seems elaborate, expensive
      • “Can’t afford to plan”
      • Ad hoc “sales” approach vs strategic competition
  • Strategic Decisions Regarding Entry into Foreign Markets
    • Whether to become an international company?
    • What products/activities to internationalize?
    • Which countries to enter?
    • What objectives to set for the target countries?
    • Which entry mode(s) to use?
    • What marketing plan for penetrating target markets?
    • What organizational & implementation issues to manage?
  • To Expand International You Must Increase Your focus
    • When your firm decides to expand, you must systematically evaluate possible markets to identify which specific Target-Markets have the greatest potential
    • To do this, you’ll need a method for screening the most promising from less promising prospects
      • minimize risk in face of uncertainty
      • monitor developments worldwide
  • Common Errors of Early Stage Companies Entering International Markets
    • Ignore markets with real potential for your products or services
    • Devote too many resources to investigating Markets with poor potential
    • Inability to Translate Current Model to International Model
    • Inability to Localize
    • 1. Exporting
    • 2. International licensing
    • 3. International franchising
    • 4. Specialized entry modes
    • 5. Foreign direct investment (FDI)
    • 6. Joint ventures
  • Segmenting the market
    • Attractiveness criteria
      • (distinct, size, measurable, stable, identifiable)
    • Bases for segmentation
      • (products, groups, benefits, sensitivity to marketing, cost differences)
  • Market attractiveness factors
    • Rivalry among direct competitors
    • Entry barriers
    • Customer power
    • Supplier power
    • Indirect substitutes
  • Business Strategy for Early Stage New International Ventures
  • Strategic Questions
    • How important is it to be first?
    • How important is it to be different?
    • Is it ok to “jump in?”
    • Is entrepreneurial strategy different from other strategy?
  • Pioneer or Follower?
    • Critique of past research
    • Advantages of Pioneers
    • Advantages of Followers
    • “Early Leaders”
  • Go for Gold? Settle for Bronze?
    • “No failure like success?”
    • “Wheel of retailing”
    • Strategic innovation/Disruptive innovation
  • Discontinuous Innovations
    • What is a discontinuous innovation?
    • Limits of conventional marketing research.
    • Probe, Learn, Iterate
  • Modes of Entry into International Business
  • CHOOSING A MODE OF ENTRY: DUNNING’S ECLECTIC THEORY
    • Ownership advantages
    • Location advantages
    • Internalization advantages
  • OTHER FACTORS AFFECTING MODE OF ENTRY
    • Need for control (desire to reduce uncertainty and maintain full control over the foreign operation)
    • Resource availability (lack of access to financial capital may mean that entry by ownership is impossible so that non-equity or partial equity modes are preferable; most likely for small firms)
    • Global strategy (global integration vs. national responsiveness; if the former, more likely to use ownership routes since EOS and scope & synergies are better achieved through internal market/hierarchy)
    • external licensing equity joint wholly owned
    • market venture subsidiary
    • __________________________________________
    • low control <---------------------------> high control
    • low resource cost high resource cost
  • MODES OF ENTRY #1: EXPORTING TO FOREIGN MARKETS
    • Advantages of Exporting as Mode of Entry
      • low financial cost (but have startup costs)
      • risk limited to value of exports
      • can enter foreign market gradually (ease of startup, less chance of mistakes, gain experience)
      • gain information about and expertise in foreign market
      • export success breeds more export success
    • Disadvantages of Exporting
      • difficulty in identifying customer needs
      • potential problems with local distributors
      • selecting the local distributor, how to split the profits with the local firm, differences in motivation, and time horizon
      • logistical considerations (costs of warehousing, transport, distribution, longer supply lines, difficulties in communication)
  • Agenda
    • Introduction
      • Business Model Failures & Success
      • Business Model Importance
    • The Situation: Early Stage Companies & Business Models
      • Definitions
      • The Roles of Business functions in the Business Models
      • The Value Proposition & Money
    • Solutions & Approaches to Successful Models
      • Approaches & Key Elements to Business Model
      • Analysis & Strategies and Implementation
    • Summary
      • Benefits to Early Stage International Companies
  • Business Model & Strategy Development Check List Summary (see handout)
    • The Initial Mission & Objectives
    • Internal Audit & Review of the Company
    • External Audit & Review of the Business Environment
    • Business Summary based on analysis
    • Fine Tuning Objectives
    • Business Strategies to Achieve the Objectives
    • Implementation of the Business Strategies