Entrepreneurship Chap 3


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Entrepreneurship Chap 3

  1. 1. copyright 2003 Jack M. Kaplan Analyzing the Market, Customers, and Competition Patterns of Entrepreneurship Chapter 3
  2. 2. copyright 2003 Jack M. Kaplan Session Outline • Niche or target markets • One to One Marketing • Define the Market Segmentation • Evaluate the Competition-Sample Evaluation • Prepare the Pricing Plan • Position the Product or Service
  3. 3. copyright 2003 Jack M. Kaplan Niche or Target Markets  A niche market is a small segment of a large market ignored by other companies  Target marketing -is a strategy to focus on segments of a market and prepare a plan for each market segment.
  4. 4. copyright 2003 Jack M. Kaplan  Identify Customers- Consider the 4 factors Market Identification-Current market and service needs determined Current and Best Customers-to allocate resources to segment the market Potential Customers- target by geographical or industry wide Outside factors -identify changing trends Prepare the Marketing Analysis and Plan
  5. 5. copyright 2003 Jack M. Kaplan One to One marketing Learn the profile or details about customers to identify the most valuable ones. Identify customers -or get them to identify themselves Link customers identifies to their transactions calculate individual customer lifetime value Strengthen a customer satisfaction program
  6. 6. copyright 2003 Jack M. Kaplan Define the Market Segmentation There are Several Ways to Segment a Market Demographic Segmentations-divide the market into groups,based on age,income level and gender Geographic Segmentation- divide people or businesses into regional and by location Psychographic Segmentation-divides into cultural groups,value or social categories Ethnic Segmentation- divide by ethic group
  7. 7. copyright 2003 Jack M. Kaplan  Do potential customer groups have different needs?  Can the customers that fit into a given segment be identified?  Are customers both willing and able to pay?  Is the segment large enough to be profitable?  Can the segment be reached in a cost- effective manner? Questions for Effective Segmentation
  8. 8. copyright 2003 Jack M. Kaplan • It is particularly important to identify which businesses will provide the most significant competition and predict what they will likely do. • Analyze the situation by asking the questions provided below regarding six key areas of competition. Conduct A Competitive Analysis
  9. 9. copyright 2003 Jack M. Kaplan Evaluating the Competition - Marketing Analysis Potential Entrants Threat of New Entrants Industry Competitors Rivalry Among Existing Firms Bargaining Power of Buyers Bargaining Power of Suppliers Business to Consumers Business to Business Internet Companies Suppliers Buyers •Switching Costs of Suppliers •Importance of Volume to Suppliers •Cost Relative to Total Purchases •Impact on Cost or Differentiation •Access to Distribution •Government Policies •Expected Retaliation •Economics of Scale •Proprietary Product Differences •Brand Identity •Buyer Concentration vs. Firm •Buyer Volume •Buyer Switching Costs •Substitute Products •Product Differences •Brand Identity •Impact on Quality/Performance •Buyer Profile •Industry Growth •Product Differences •Brand Identity •Exit Barriers •Diversity of Competitors
  10. 10. copyright 2003 Jack M. Kaplan Evaluating the Competition Sample Evaluation Factors Attractiveness High Low competition among companies competition is minimal but w ill become intense in 1year The industry is declining and is mature The pow er of customers volume is high and w illing to negotiate Customer has few sw itching costs The pow er pow er of suppliers Many substitutes and sources are available Limited supply; products differentiated Internet companies No competition defined on the internet Many companies are entering this market Potential threats Complex barriers and costs are high to enter market Few simple entry barriers to enter the business
  11. 11. copyright 2003 Jack M. Kaplan Measuring the Venture Strengths and Weaknesses Sample Evaluation Factor Attractiveness High Low Management team Proven People w ith right skills not available Financing You have comfortable cushion or can raise capital if needed You have a narrow time horizon to make money Product development Complete product line One product of limited life Sales force Strong contacts; specialist skills Limited contacts; generalist skills Marketing Deep and tightly- focused Untargeted Operations Strategic alliances help improve execution Learning in a vacuum
  12. 12. copyright 2003 Jack M. Kaplan • How is the competitive product or service defined? • How is it similar or different? • Does the competition cater to a mass- or targeted market? • What features of the product are superior? • What strengths or weaknesses of the competition can be exploited? Product and Service Questions
  13. 13. copyright 2003 Jack M. Kaplan Price Questions • What is the competitor’s pricing strategy? • Is the competitor’s price higher or lower? • What is the competitor’s gross margin for similar products? • Does the competitor offer terms, discounts, or promotions
  14. 14. copyright 2003 Jack M. Kaplan Industry Competitors • Define the competition in terms of new, Internet, or potential threats of existing companies. • What are the strengths and weaknesses of each? • How will e-commerce companies affect the business? • How can the suppliers or buyers affect the competition?
  15. 15. copyright 2003 Jack M. Kaplan • How strong is the competitor’s management team? • What is their background or experience? • How do they recruit new key employees? Management team
  16. 16. copyright 2003 Jack M. Kaplan • Is the competitor profitable? • What volume are sales and market shares? • Do they spend money for R&D, Internet, and web development? • Are they properly capitalized? How strong is their cash flow? Financial Questions
  17. 17. copyright 2003 Jack M. Kaplan Prepare the Pricing Plan Pricing Methods Value-Price should not be based simply on cost, plus a modest profit. Instead, price should be based on the value of the product or service. Rationale -why prices differ from those of the competitors.For instance, does the new business perform a function faster or more efficiently?
  18. 18. copyright 2003 Jack M. Kaplan How to Position the Product or Service • One way to charge a high price when competition and substitution are minimal • Another is to “match competition” by pricing slightly under the competitor’s rates to expand one’s own market share (for example, Motorola or Verizon cellular phones). • A third is to substantially under-price the market, so as to exclude competitors altogether