6. Understanding (& Creating) Feasibility
• Proposals MUST to be feasible
o Doable
o Sufficiently rewarding
!
• If you learn during the planning effort that it will not be
feasible
o Adapt your plans, i.e. engineer a different path
o Abandon your plan
o Or assume that it will be (if too late to shift)
!6
8. Where to start?
• Start with assessments where you can learn:
o Fast
o Cheap
!
• Conclude with the more demanding feasibility assessments
o Costs
o Effort
!8
9. Industry analysis
• Will this be a nice industry to operate in?
!9
http://www.ic.gc.ca/eic/site/rubber-caoutchouc.nsf/eng/h_ru01206.html
Rubber production
10. Studying industry margins
• To select your industry
• To select your regional market (Canadian rubber firms trying
to enter the US market, but not vice versa)
• To understand WHY the margins develop as they do
!
• Industry structure
o Entry barriers?
o Few large firms dominating?
o Increasing concentration?
o Do firms grow?
!10
11. Paradoxical expectations
• Industrial economists & policy makers:
o Value competition
• No excess profits
• Pressure on all to improve
• Inefficient firms will be replaced by more efficient firms
• Low entry barriers
!
• Strategy scholars & entrepreneurs:
o Value monopoly
• Unfair competitive advantage
• Exceptional profits
• High entry barriers (also lock out possibly more efficient firms)
!11
15. Just by looking at your competitors
• You can learn what the nature of the competition will be
o Monopoly
• No competition as advantage
o Cartel
• Partnerships as advantage
o Bertrand competition
• “perfect competition”
o Cournot competition
• Concurrent capacity commitment
o Stackelberg competition
• Preemptive moves as advantage
o Bertand Differentiation
• Switching costs as advantage
!15
22. The entrepreneur’s paradox
• A truly attractive industry is one that by definition you can’t
enter:
o If you can enter, there must be low barriers
o If there are low barriers, there will be low profits
!
• Unless you would succeed in erecting entry barriers after
you have entered the industry
!22
25. ANALYZING YOUR OWN VENTURE
EXHIBIT 4.5 Six Forces Analysis for Concentrated and Competitive Industries
Potential
Entrants
Technology
Suppliers BuyersRivals
Substitutes
Number of Buyers
P G
Price Elasticity
P G
P G
P G
Entry Barriers
P G
Number of Rivals
P G
Cost Dispersion
P G
Ease of imitation
G
Technological Opportunity
? P
? P
G
!25
26. Feasible industry?
• Once you understand the industry cost structure and the
demand structure you can understand why and how value
can be created
• May also give direction to your strategic options
!26
27. Researching industry
• Trade magazines
• Trade fairs
• Data from census office
!
• Industry insiders
o Rapid fact-finding
• Success rates of new products
• Usual product life cycle
• Usual market adoption and sales development of new products
• Where will you find the innovators (early adopters)
• Sales developments
• Margin developments
• Role of agents in the value chain
• Etc. !27
31. Competitive analysis
• Look at your competitors as also your customers will look at
your competitors:
!
• As possible suppliers of competing products
o You may not like these products
•that is not for you to decide,
your future clients will decide!
!31
35. Why do Prada and Zara compete?
!35
We like to mix and match
36. How can you understand how customers
choose between competing products?
• By collecting primary data
o Which products do customers consider in making their
choices?
o On what dimensions do they compare?
!36
38. Perceptual Map Elements
• Perceptual dimensions
o Factors that customers use to compare product/services
o May be fewer dimensions than those named (factor
analysis)
• Product positions
o Locate each product in the comparison set in a “perceptual
space”
!38
40. Core Benefit Proposition
• Entrepreneurial opportunity exists in position gaps
o Locations in perceptual space where there is need
o …But no product satisfying them
• Core Benefit Proposition is the particular position gap that
the new business or the new venture satisfies
!40
41. EXHIBIT 5.5 Snake Plot of Small Sedans
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
Chevrolet Prism
Chevrolet Cavalier
Honda Civic
Mazda Protégé
Mercury Tracer
Pontiac Sunfire
Saturn SL2
Suzuki Esteem
Toyota Corolla
Volkswagen Jetta
Fuelefficiency
R
eliability
D
epreciation
Engine
size
Luggage
com
partm
ent
Base
price
EXHIBIT 5.6 Perceptual Map of Small Sedans
!41
42. Competitive analysis
• Goal: Determine if there is a viable entry wedge into an
attractive industry
• Data gathering tool: focus groups
• Data analysis tool: perceptual map
• Output: Defendable core benefit proposition
!42
43. For business plan section on competitive
analysis:
• Provide:
o Script for your focus group
o Identify target market and name list source
o Identify relevant product dimensions
o Develop perceptual map and value map
o Incorporate findings in a refined benefit proposition
• This is a very time consuming assignment!
!43
44. For next session:
• Complete Chapter on value proposition and team
• Start drafting the chapter on industry & competition:
o Industry characteristics
o Competing products
o Important product dimensions
o Value proposition
• For the class on 12-11 you should prepare a 15 minute
presentation on Value & Team
!44
