1 Industry Analysis Business Plan Preparation Frank Moyes Leeds School of Business University of Colorado Boulder, Colorado

2 Industry Analysis Tonight's Agenda  Topics  Industry Analysis  Competitive Advantage  Value Chain  Read  BP pp 11-13, 27  Business Model Assignment  In the Fire & Hand-in  Opportunity/Need  Value Proposition  like-a-metal-scouring-pad-for-your-teeth php like-a-metal-scouring-pad-for-your-teeth php like-a-metal-scouring-pad-for-your-teeth php

3 Industry Analysis Next Week  Topics  Product/Service  Features & Benefits  Margins  Elevator Speech  Investor Presentations  Read BP pp 6-7  Practice Elevator Speech  In the Fire  Preliminary Market Analysis Results  Preliminary

4 Industry Analysis Business Model  Present March 14 PowerPoint 10 minutes, 10 slides  Hand-in 3 ring binder  Market Analysis - draft  Industry Analysis - draft  Product/Service Description - draft  Value Chain analysis  Competitive matrix  Financial COMP’s  Revenue Model  20 interview Call Reports

5 Industry Analysis Market & Industry  Market: “group of current and potential customers having the willingness and ability to buy product/services to satisfy a need.”  Industry: “group of sellers that offer product/services that are similar and close substitutes for one another.” JW Mullins, New Business Road Test

6 Industry Analysis Market & Industry Section Market Market  Market size & growth  Trends  Target Market  Channels of distribution Industry  Industry Structure  Competitive Environment  Competition Opportunity

7 Industry Analysis Industry Structure  Organization – how & where are products/services produced and delivered?  Supply chain

8 Industry Analysis Sources Suppliers Manfg Distrib Retailers Consumer Goods Information Funds A T Kearney, Integrating the Supply Chain Supply Chain Supply Chain

9 Industry Analysis Competitive Environment  How do companies compete – quality, price, new products, customer service  Degree of rivalry  Response to new entries

10 Industry Analysis Control  Setting prices – bargaining strength of customers  Lowering costs – technology, process design, resources, bargaining strength of competitors  Channels of distribution – access, creating new channel

11 Industry Analysis Barriers to Entry?  Economies of scale: manufacturing, marketing, technological  Customer loyalty: well established brands, long established relationships  Agreements with customers, suppliers, strategic partners  Switching costs  Capital requirements: high investment

12 Industry Analysis Barriers to Entry (continued)  Access to distribution channels: exclusive distribution agreements, dominant position of competitors  Intellectual property: patents, trade secrets, copyrights, trademarks, know-how  Government regulations: defense contracts, import restrictions  Industry hostility to new entrants. Will use all means to drive out new competition: pricing, legal, spreading rumors

13 Industry Analysis Competition  Describe key competitors  Direct, indirect, future  Prepare a competitive matrix  Product/Services  Marketing  Management  Financial  Image – website, brochures, literature, advertisements  Inertia

14 Industry Analysis Opportunity  Last section  Make case attractive opportunity - validate  Draw conclusions based on your research, interviews and customer surveys

15 Industry Analysis A Model of Competitive Advantage Resources Distinctive Competencies Capabilities Value Creation Cost Advantage or Differentiation Advantage

16 Industry Analysis Identify Your Resources  Financial: access to capital (equity & debt), cash reserves, government grants, etc.  Physical assets: plant & equipment, raw materials, location, working capital, etc.  Human: social, employee knowledge, experience, accumulated wisdom, labor cost and skills, etc.  Intangible: patents, trade secrets, know-how, copyrights, databases, etc.  Organizational: culture, contacts, policies, Boards of Directors & Advisors, suppliers, service providers, etc.

17 Industry Analysis Identify Your Capabilities  World class management (serial entrepreneur)  Network - well developed, high-quality, accessible contacts that take years to build  Marketing - differentiation, branding, positioning  Product/service - design features & benefits  Sales & distribution - rep organization  Total operational approach - Dell, Wal-Mart  Supply chain management - Asia contacts  Relationships - regulators, politicians, investors

18 Industry Analysis What Barriers Can You Establish?  Intellectual property: patents, trade secrets, copyrights, trademarks, etc  Switching costs to your target market  Customer loyalty  Agreements with customers, suppliers, strategic partners  Control of the distribution channel

19 Industry Analysis Competitive Advantage Challenges  Intellectual property  Agreements with customers or suppliers  Long term contracts  Control of costs  Control of prices  Control of channel  Location  Differentiation  First to market  World class management  Expertise  Development lead time  Brand  Quality  Service  Execution  Relationships

20 Industry Analysis Sustainable Competitive Advantage  Understand the market  Understand the competition  Differentiation  Innovation  Resources & capabilities  Really understand the market & competition Why is this so hard?

21 Industry Analysis Competitive Advantages Difficult to Achieve & Sustain  Most are easily copied  Entrepreneur ignorant of or ignores competition  Entrepreneur is not realistic about own resources & capabilities  Entrepreneur ignores future  Entrepreneur must be intellectually honest

22 Industry Analysis Market, competition, resources, and capabilities are continually changing. Sustaining Competitive Advantage Is a Dynamic Process