Presentation on theme: "Dr.Daleep Parimoo ENTREPRENEURSHIP. Part of setting a business will involve identifying opportunities in the market on which a particular idea, product,"— Presentation transcript:
Part of setting a business will involve identifying opportunities in the market on which a particular idea, product, or service, can capitalize. This will help in offering the means of developing a business idea. It can also gives an entrepreneur to better understand where an existing business idea might stand, and to look at the future potential for that idea. Opportunities don't just exist in an economic upturn; sometimes a recession or downturn economy can present an opportunity or gap that didn't seem viable previously. A successful entrepreneur should be able to assess opportunities no matter the economic climate.
THE SEVEN DOMAINS MODEL Developed by John Mullins
Markets and industries are not the same things Both macro-and micro level considerations are necessary: markets and industries must be examined at both levels. The keys to assessing entrepreneurs and entrepreneurial teams aren’t simply found on their resumes or in assessments of their entrepreneurial character. Basic Assumption
THE SEVEN DOMAINS FRAMEWORK The Seven Domains Model offers the ability to identify both key strengths and key questions, as well as absolute deal-breakers, with regards to product or service TARGET MARKET Market research is the collection and analysis of data in order to better understand both the customers and competitors. INDUSTRY ANALYSIS Industry analysis helps to find out where the industry is going and what is the potential COMPETITOR ANALYSIS Competitor analysis involves the identification of the strengths and weaknesses of the competition in order to better evaluate the situation of a product or service in relation to others.
The Seven Domains Model offers the ability to identify both key strengths and key questions, as well as absolute deal- breakers, with regards to product or service The Seven-domains framework has many advantages for both new and established ventures. It helps identify the deal- breakers, and raises key questions to be answered. It also provides avenues for reshaping the opportunity, identifies key strengths, and is a crucial tool in telling story to resource providers.
What do we mean by market? A market consists of a group of current and/or potential customers having the willingness and ability to buy products - goods or services - to satisfy a particular class of wants or needs. Thus, markets consist of buyers - people or organizations and their needs - not products. Example: One such market, for example, consists of businesspeople who get hungry between meals during their workday. We'll call this the market for workplace snacks. “ markets consist of buyers, not products ”
What do we mean by industry? An industry consists of sellers - typically organizations - that offer products or classes of products that are similar and close substitutes for one another. Example: What industries serve the market for workplace snacks? At the producer level, there is the salty snack industry, the candy industry and the fresh produce industry, to name but three. There are also industries providing the distribution of these products to workplaces, including the supermarket industry, the restaurant industry, the coin operated vending machine industry, the coffee bar industry and so on. Clearly, these industries offer varying bundles of benefits to hungry workers. Some of these industries are more attractive than others to would-be entrants seeking to serve the workplace snack market. “ an industry consists of sellers ”
Market, Industry - why care about the difference? Why is the market-industry distinction important? Because judgments about the attractiveness of the market one proposes to serve may be very different from judgments about the industry in which one would compete. This should not be - but often is - surprising, for the questions asked to assess market attractiveness are different from those for industry attractiveness, a point easily obscured when words like 'sector' and 'space' are used indiscriminately or carelessly in the opportunity assessment process. (Does the user of these terms mean 'market' or 'industry'?) So, if market and industry attractiveness are both important, how should each be assessed?
Understanding the Seven Domains Macro Market - Market Attractiveness How attractive is the overall potential market for your product/service? How attractive will it be in the future, judging by macro trends? potential market product/service Macro Industry – Industry Attractiveness Judging by the level of competition, the threat of new entrants and substitutes, and buyer and supplier power, is this an industry you ’ d like to play in? competition
Micro Market - Target Segment Benefits and Attractiveness Does your idea offer clear, compelling benefits - which are superior to what’s already available - to a big enough, specific market segment at an acceptable price? Micro Industry - Sustainable Advantage Can you defend your position through IP or particular organizational processes? Can you make enough money out of your idea to cover start- up and ongoing operating costs well into the future? Team Mission Aspirations, Propensity for Risk Team Ability to Execute on CSFs (Critical Success Factors) Team Connectedness up and down Value Chain
TARGET MARKET Market research is the collection and analysis of data in order to better understand both their customers and competitors. When you analyze your market opportunities apply careful and thorough evaluation and don't bias your opportunities! Market research involves the collection and subsequent analysis of data, and the transformation of this data into information for use in strategic and/or practical problem solving for businesses. It essentially helps businesses to better understand both their customer needs and the competitive set in which they are operating. MARKET RESEARCH
Why is market Research Important It allows business to become customer-led, informs product design It validates the business proposition to investors It validates the business proposition to yourself It helps you win grants or loans It helps to build credibiliy in your sales pitch It will enable you to find customers It will enhance your decision making
When it comes to competitor analysis, there are 12 points the CEO of company must be able to answer: 1.Who are the sweet spot customers for our product(s)? What are their important characteristics? How well do we really know them? 2.What pain do our target customers have. Why does this pain exist? 3.What is the measurable value of eliminating or reducing our target customers' pain? How do we explain this in a way that our customers can understand? 4.Do we understand all elements of the whole product solution for our customer's pain? Does a solution depend on other complementary products or services? 5.What are the key marketing and sales decisions over the next 6-12 months? How will we make them? COMPETITOR ANALYSIS Competitor analysis involves the identification of the strengths and weaknesses of the competition in order to better evaluate the situation of a product or service in relation to others.
6. What are the key drivers of our company's sales? Do we understand them? How could we double our sales? 7. What are our most effective ways to generate leads? How do we validate them? 8. How much does it cost us in time and resources to secure each new customer? How much to close each sale? 9. What is the sales life cycle of our products? Do we understand it? What factors drive success rates and speed in closing sales? 10. Do we have the sales capacity (internal and external) to be able to deliver our sales targets? 11. Do we have a sales pipeline that provides visibility of sales performance? Does it allow us to identify problems early and take corrective action? 12. How reliably can we predict our sales? What impact does this have on our business?
IDENTIFYING AND ASSESSING NEW BUSINESS OPPORTUNITIES In analyzing your business ideas you must be able to pass them through a test to determine if they truly are valid opportunities. All of your ideas must have a demonstrated need, ready market, and ability to provide a solid return on investment. Is the idea feasible in the marketplace? Is there demand? Can it be done? Are you able to pull together the persons and resources to pull it off before the window of opportunity closes? These questions must be considered and answered. Opportunity-focused entrepreneurs start with the customer and the market in mind. They analyze the market to determine industry issues, market structure, market size, growth rate, market capacity, attainable market share, cost structure, the core economics, exit strategy issues, time to breakeven, opportunity costs, and barriers to entry. Below are two models that entrepreneurs use to evaluate their business ideas and plans.
To evaluate opportunities, entrepreneurs ask the following questions: 1. What is the need you fill or problem you solve? (Value Proposition) 2. Who are you selling to? (Target Market) 3. How would you make money? (Revenue Model) 4. How will you differentiate your company from what is already out there? (Unique selling proposition) 5. What are the barriers to entry? 6. How many competitors do you have and of what quality are they? (Competitive Analysis) 7. How big is your market in dollars? (Market Size) 8. How fast is the market growing or shrinking? (Market Growth) 9. What percent of the market do you believe you could gain? (Market Share) 10. What type of company would this be? (Lifestyle or High Potential, Sole Proprietorship or Corporation) 11. How much would it cost to get started? (Start-up Costs) 12. Do you plan to use debt capital or raise investment? If so, how much and what type? (Investment needs) 13. Do you plan to sell your company or go public (list the company on the stock markets) one day? (Exit Strategy) 14. If you take on investment, how much money do you think your investors will get back in return? (Return on Investment )
The above fourteen questions can be putinto an easy model that can used to evaluate your business ideas you come up with. This is called the RAMP model. R Discuss Exit Strategy (acquisition or IPO) R Is it profitable? Will your revenues be higher than your expenses? R Time to breakeven (how long before cash flow positive? How long until the company begins to have an aggregate net income) R Investment Needed. How much money will it take to start-up this venture. Will it be $20,000, $200,000, or $2,000,000? The RAMP Model The first letter, R, which stands for Return. Return really is return on investment.
A Look at cost structure (suppliers, what each element will cost to source or manufacture) A Barriers to entry (large competitors, regulations, patents, large capital requirements. If there are many barriers to entry, it will be difficult to enter a market. The higher the barriers to entry, the more disadvantaged you will be. A Intellectual Property. Do you have a proprietary advantage such as a patents or exclusive licenses on what you will be selling. A Distribution Channel. How will you be selling your product? Will you sell it direct to the consumer via the Internet, sell it to wholesales, sell it to businesses, or sell it to retail stores. If can develop a unique distribution channel this can surely be an advantage. A stands for advantages.
M The Need. Is there a big need for this product or service. Try to avoid ideas that sound cool but there is no real need for. Make sure your product or service fills and need or solves a problem. M Target market (who are you selling to? businesses? consumers? what demographics?) M Analyze target market (who are you selling to? businesses? consumers? what demographics?) M Pricing (what you they charge, what will be the price, will there be a high enough markup). MAnalyze market size M stands for Market.
P Risk vs. Reward. How risky is the opportunity? If it is very risky, it there a chance for the business to do very well. Will there be a high reward for the founders and investors if the company succeeds? P The Team. Is the team right for the business. Do you have knowledge in this area. P Timing. Is the market ready for your product. You may have a great idea for flying cars, but if consumers are not ready for your product you may not be able to turn your idea into a successful business. P Goal Fit. Does the business concept fit the goals of the team to create a high potential or lifestyle business? P stands for potential. Ramp Model adopted from Ryan P. Allis CEO of Broadwick Corp.
Guidelines On How To Evaluate A New Business Opportunity Some businesses have much more growth potential than others. The ones to avoid are "mom and pop" businesses where you are the one who has to do all the work or personally perform the service. Personal service businesses like hair styling, dentistry, copy writing, design, interior decorating, consulting, etc., are difficult to grow because practically everyone will want the personal attention of the owner rather than his or her assistant. Look for a business where you can hire the expert help you are likely to need. Don't ever buy work with money. If you do, all you will be doing is exchanging one type of employment for another. In fact, you should never buy or start a business with the intention of doing all the work yourself. While it may be necessary to do everything yourself in the beginning, the best way to grow the business is to graduate from owner/operator to owner/manager as quickly as possible. A chain is only as strong as its weakest link, so when you hire people, be sure to hire the best and be willing to pay the most. Since you have a business and a reputation to build, you cannot afford poor service or shoddy workmanship. If you only pay peanuts, all you are likely to be able to hire are monkeys.
If your intention is to become rich before you get to be too old to really benefit from your success, money and power, being an inventor or a pioneer is not the way to go. Catering to an existing need is lot easier than having to educate the market on the benefits of your new product or service. Find a niche and fill it. Find out what's in demand and what is selling well. If you are not already an expert in your chosen trade or profession, you must become one. Either go to work for a competitor for a short while and and learn all you can while being paid, or study those businesses which are obviously successful to determine exactly why they are successful. Then try to think of how you might be able to compete by offering a cheaper service, a better service, or by offering some connected additional service your competitors do not provide. If you are thinking about buying an existing business, remember all the seller needs is one eye, whereas the buyer needs at least six! If your intention is to become rich before you get to be too old to really benefit from your success, money and power, being an inventor or a pioneer is not the way to go. Catering to an existing need is lot easier than having to educate the market on the benefits of your new product or service. Find a niche and fill it. Find out what's in demand and what is selling well. If you are not already an expert in your chosen trade or profession, you must become one. Either go to work for a competitor for a short while and and learn all you can while being paid, or study those businesses which are obviously successful to determine exactly why they are successful. Then try to think of how you might be able to compete by offering a cheaper service, a better service, or by offering some connected additional service your competitors do not provide. If you are thinking about buying an existing business, remember all the seller needs is one eye, whereas the buyer needs at least six!
Porter's five forces 1.Existing competitive rivalry between suppliers 2.Threat of new market entrants 3.Bargaining power of buyers 4.Power of suppliers 5.Threat of substitute products (including technology change)
New Market Entrants, eg: entry ease/barriers geographical factors incumbents resistance new entrant strategy routes to market Supplier Power, eg: brand reputation geographical coverage product/service level quality relationships with customers bidding processes/capabilities Competitive Rivalry, eg: number and size of firms industry size and trends fixed v variable cost bases product/service ranges differentiation, strategy Buyer Power, eg: buyer choice buyers size/number change cost/frequency product/service importance volumes, JIT scheduling Product and Technology Development, eg: alternatives price/quality market distribution changes fashion and trends legislative effects