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

Tonight’s Agenda Market & Industry Analysis Competitive Advantage Segmentation Financial Comp’s Model Company Hand in Interview List F2F-R Step 2 Reality Test 2

Market & Industry Analysis Next Week Topic - Value Proposition Read BP pp 11-13, 27 Locomotion Business Plan Write Value Proposition In the Fire session – focus on why this is a good opportunity & validation Hand in F2F-R Step 3 Sniff Test 3

Business Plan Elements Executive Summary Company Overview Market & Industry Analysis Product/Service Description Marketing Plan Operations Plan Development Plan Management Competitive Advantage Financial Plan Funding 4 Market & Industry Analysis

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

Market Analysis Market size & growth Trends Entry Point 6 Market & Industry Analysis

Market Size & Growth Segment your market Historic and future growth Must indicate sources Lot’s of numbers – show in tables 7 Market & Industry Analysis

Market Segmentation Groups of customers – (demographics & psychographics) baby boomers, grandparents Products – features, benefits, prices Benefits – enhance image, trend setter, weather protection, save money (see Duo business plan) Geography – see Hecho en Casa business plan Distribution channels Sector – industrial (see MRT business plan), consumer, government 8 Market & Industry Analysis

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Trends What changes are taking place – economic, socio-cultural, political/legal, global, environmental, demographic, technological Positive and negative trends Must provide sources 10 Market & Industry Analysis

Identify Potential Entry PointIdentify Potential Entry Point Describe best segment. Why? What problem are you solving? Need must be: Recognized & understood by TC Compelling – take action Future segments 11 Market & Industry Analysis

Industry Analysis Industry Structure Competitive Environment Barriers to entry Competitors 12 Market & Industry Analysis

Sources Suppliers Manfg Distrib Retailers Consumer Goods Information Funds A T Kearney, Integrating the Supply Chain Industry Structure Supply Chain 13 Market & Industry Analysis

Competitive Environment How do companies compete – quality, price, new products, customer service Degree of rivalry Response to new entries 14 Market & Industry Analysis

Barriers to Entry You Face 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 15 Market & 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 16 Market & 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, bargaining strength of channel 17 Market & Industry Analysis

Competition Describe key competitors Direct, indirect, future Prepare a competitive matrix (Nut Check, Product/Services Marketing Management Financial Image/positioning – website, brochures, literature, advertisements Inertia 18 Market & Industry Analysis

Market Market size & growth Trends Entry Point Industry Industry Structure Competitive Environment Competition Opportunity 19 Market & Industry Analysis

Opportunity Last section Draw conclusions based on your research, interviews and customer surveys This is an attractive opportunity 20 Market & Industry Analysis

Financial COMP’s Company in your marketplace. NAIC code Publicly traded Industry ratios – see Selected Resources Guide Library Key financial measures to compare when developing strategy and projections Reality test 21 Market & Industry Analysis

Financial COMP’s 22Market & Industry Analysis

Needs Market & Industry Analysis23 Physical: food, warmth, shelter, sleep, etc. Physiological: health, cleanliness, comfort, fitness, safety, etc. Emotional: euphoria, love, prestige, stress, etc Social: ethical, honesty, power, competitiveness, integrity, friendship, etc. Intellectual: achievement, better decisions, artistry, etc. Economic: revenues, productivity, cost savings, maintenance, etc. Financial: ROI, DCF, payback, burn rate, etc.