Part III – Developing the Entrepreneurial Plan Chapter 7 – Environmental Assessment: Preparation for a New Venture Chapter 8 – Marketing Research for New Ventures Chapter 9 – Financial Preparation for Entrepreneurial Ventures Chapter 10 – Developing an Effective Business Plan Copyright (c) 2004 by South-Western, a division of Thomson Learning. All rights reserved.

Chapter 7 – Environmental Assessment: Preparation for a New Venture

The Environment for New Ventures

Environmental Scanning Refers to the efforts by which an owner- entrepreneur examines the external and internal environments before making a decision.Refers to the efforts by which an owner- entrepreneur examines the external and internal environments before making a decision. –Task environment –Societal environment

Environmental Variables TASK ENVIRONMENT (Industry) INTERNAL ENVIRONMENT SOCIETAL ENVIRONMENT Economic Forces Technological Forces Political/Legal Forces Sociocultural Forces Supplies Employees/ Labor Unions Competitors Trade Associations Communities Customers Creditors Special Interest Groups Governments Stockholders StructureCultureResources

A Macro View: The Economic and Industry Environments

Assessing the Economic Environment

Understanding the Regulatory Environment

Governmental Regulations Affect Smaller Ventures in a Variety of Ways: PricesPrices Cost inequitiesCost inequities Competitive restrictionCompetitive restriction Managerial restrictionManagerial restriction Mental burdenMental burden

Trends in Policy Formation The Regulatory Flexibility ActThe Regulatory Flexibility Act The Equal Access to Justice ActThe Equal Access to Justice Act The Congressional Review ActThe Congressional Review Act The Small Business Regulatory Enforcement Fairness ActThe Small Business Regulatory Enforcement Fairness Act The Paperwork Reduction ActThe Paperwork Reduction Act The Unfunded Mandates Reform ActThe Unfunded Mandates Reform Act

Examining the Industry Environment

Elements of Industry – The Five Forces Model Suppliers Buyers New Entrants Substitutes Industry Competitors Intensity of Rivalry Bargaining Power of Suppliers Bargaining Power of Buyers Threat of New Entrants Threat of Substitutes

Common Industry Characteristics Technological UncertaintyTechnological Uncertainty Strategic UncertaintyStrategic Uncertainty First-Time BuyersFirst-Time Buyers Barriers to EntryBarriers to Entry Competitive AnalysisCompetitive Analysis

Components of Competitive Analysis Future Goals Current Strategy What Drives the Competitor What the Competitor is Doing and Can Do Held about itself and the industry Both strengths and weaknesses Assumptions Capabilities Competitor’s Response Profile

A Micro View: The Community Perspective

Researching the Location Community DemographicsCommunity Demographics Economic BaseEconomic Base Population TrendsPopulation Trends Overall Business ClimateOverall Business Climate

Determining Reliance and Deservedness

Reliance Versus Commitment: Development of Exceptional Community Support Community’s “Reliance (or Need) for the Venture Entrepreneur’s Willingness to Commit to Local Community (Loyalty) Low High High Exceptional Support Unlikely Some Support Likely Exceptional Support Likely

Deservedness vs. Identification: Development of Exceptional Community Support Perception of Entrepreneur’s Deservedness Community Identification with the Venture Low High High Exceptional Support Unlikely Some Support Likely Exceptional Support Likely

Examining the Use of Incubators Business incubator is a facility with adaptable space that small businesses can lease on flexible terms and at reduced rents.

Types of Incubators 1.Publicly Sponsored 2.Nonprofit-sponsored 3.University-related 4.Privately sponsored

How Does the Incubator Work? Potential to growPotential to grow Ability to create jobsAbility to create jobs Ability to pay op. ExpensesAbility to pay op. Expenses Business planBusiness plan Market analysisMarket analysis Cash-flow statementCash-flow statement Commercial High Tech Research & Development Service Business Light Manufact. Wholesaler Retailer Mail Order Import/ Export Nonprofit Business Entering the Incubator Business Developing Well- Established Business Business Growth Requires Move Out of Incubator