© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. PowerPoint Presentation by Charlie Cook, The University of West Alabama Getting Started PART 2 Starting from Scratch or Joining an Existing Business

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 3–2 1.Distinguish among the different types and sources of startup ideas and identify the most common sources of startup ideas. 2.Use innovative thinking to generate ideas for high-potential startups. 3.Describe external and internal analyses that might shape the selection of venture opportunities. 4.Explain broad-based strategy options and focus strategies. 5.Assess the feasibility of a startup idea before writing a business plan. Looking Ahead After studying this chapter, you should be able to:

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 3–3 Identifying Startup Ideas Opportunity RecognitionOpportunity Recognition  Identification of potential new products or services that may lead to promising businesses Entrepreneurial AlertnessEntrepreneurial Alertness  Readiness to act on existing, but unnoticed, business opportunities Good Investment QualitiesGood Investment Qualities  Products that serve clear and important needs  Products that customers know about  Products that customers can afford  A good idea is not the same as a good opportunity.

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 3–4 Creating a New Business from Scratch To tap into unique resources that are available To avoid undesirable features of existing companies To develop a commercial market for new product or service. Wanting the challenge of succeeding (or failing) on your own Motivations To Start a Business

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 3–5 Exhibit 3.1 Types of Ideas That Develop into Startups

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 3–6 Exhibit 3.2 Common Sources of Startup Ideas Source: Data developed and provided by the National Federation of Independent Business and sponsored by the American Express Travel Related Services Company, Inc.

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 3–7 Exhibit 3.3 Change-Based Sources of Entrepreneurial Opportunities Change Factor Definition Industry or Enterprise Factors The unexpected Unanticipated events lead to either enterprise success or failure. The incongruous What is expected is out of line with what will work. Process needs Current technology is insufficient to address an emerging challenge. Structural change Changes in technology, markets, etc., alter industry dynamics. Human and Economic Factors Demographics Shifts in population size, age structure, ethnicity, and income distribution impact product demand. Changes in perception Perceptual variations determine product demand. New knowledge Learning opens the door to new product opportunities with commercial potential.

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 3–8 Applying Innovative Thinking to Business Ideas 1.Borrow ideas from existing products and services or other industries. 2.Combine two businesses into one to create a market opening. 3.Begin with a problem in mind. 4.Recognize a hot trend and ride the wave. 5.Explore ways to improve a product or service’s function. 6.Think of how to streamline a customer’s activities. 7.Adapt a product or service to meet customer needs in different ways. 8.Imagine how market for a product or service could be expanded. 9.Use “green” technologies to make the product or service more environmentally friendly 10.Keep an eye on new technologies.

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 3–9 Evaluating Entrepreneurial Opportunities Outside-In AnalysisOutside-In Analysis  Studying context of venture to identify and determine business ideas that qualify as opportunities.  General Environment –Encompasses factors influencing business in a society.  Industry Environment –Combined forces impacting a firm and its competitors.  Competitive Environment –Focus on the strength, position, and likely moves and countermoves of competitors in an industry.

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 3–10 Exhibit 3.4 Trends in the General Environment

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 3–11 Exhibit 3.5 Major Factors Offsetting Market Attractiveness

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 3–12 Competitor Analysis Who are the new venture’s current competitors?Who are the new venture’s current competitors? What unique resources do they control?What unique resources do they control? What are their strengths and weaknesses?What are their strengths and weaknesses? How will they respond to the new venture’s decision to enter the industry?How will they respond to the new venture’s decision to enter the industry? How can the new venture respond?How can the new venture respond? Who else might be able to observe and exploit the same opportunity?Who else might be able to observe and exploit the same opportunity? Are there ways to co-opt potential or actual competitors by forming alliances?Are there ways to co-opt potential or actual competitors by forming alliances?

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 3–13 Evaluating Opportunities… (cont’d) Inside-Out AnalysisInside-Out Analysis  Assessing the firm’s internal competitive potential ResourcesResources  Basic inputs that a firm uses to conduct its business  Tangible resources: visible and easy to measure.  Intangible resources: invisible, difficult to quantify CapabilitiesCapabilities  Integration of various organizational resources that are deployed together to the firm’s competitive advantage. Core CompetenciesCore Competencies  Resources and capabilities that provide a firm with a competitive advantage over its rivals.

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 3–14 Integrating Internal and External Analyses Strengths, Weaknesses, Opportunities, and Threats (SWOT) AnalysisStrengths, Weaknesses, Opportunities, and Threats (SWOT) Analysis  Provides concise overview of firm’s strategic situation.  Helps identify opportunities that match the venture. Seeking Competitive InsightSeeking Competitive Insight  Will the opportunity lead to others in the future?  Will the opportunity build skills that open the door to new opportunities in the future?  Will pursuit of the opportunity be likely to lead to competitive response by potential rivals?

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 3–15 Exhibit 3.6 Examples of SWOT Factors

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 3–16 Selecting Strategies That Capture Opportunities Cost-Based Strategy Focus Strategy Broad-Based Strategy Differentiation- Based Strategy Strategies That Capture Opportunities

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 3–17 Important Strategic Terms StrategyStrategy  Plan of action that coordinates resources and commitments of an organization to achieve superior performance. Strategic DecisionStrategic Decision  Regards the direction a firm will take in relating to its customers and competitors. Sustainable Competitive AdvantageSustainable Competitive Advantage  A value-creating industry position likely to endure over time.

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 3–18 How Feasible Is My Idea? Market Factors Competitive Advantage Judging a Business Opportunity Management Capability Industry Attractiveness Fatal Flaws

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 3–19 Exhibit 3.9 A Feasibility Analysis Framework

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 3–20 Key Terms opportunity recognition opportunity recognition entrepreneurial alertness entrepreneurial alertness startups startups Type A ideas Type A ideas Type B ideas Type B ideas Type C ideas Type C ideas serendipity serendipity general environment general environment industry environment industry environment competitive environment competitive environment resources resources tangible resources tangible resources intangible resources intangible resources capabilities capabilities competitive advantage competitive advantage core competencies core competencies SWOT analysis SWOT analysis strategy strategy cost-based strategy cost-based strategy differentiation-based strategy differentiation-based strategy focus strategy focus strategy strategic decision strategic decision feasibility analysis feasibility analysis fatal flaw fatal flaw