1. 102106 - ENTREPRENEURSHIP STARTUP IDEAS & EVALUATION
Chapter – II
STARTUP IDEAS
&
EVALUATION
Dr.BALAMURUGAN MUTHURAMAN
Summer Semester

2. Dr.BALAMURUGAN MUTHURAMAN
LEARNING OUTCOME
Identify several factors that determine whether an idea for a new venture is a good investment opportunity.
Give several reasons for starting a new business from scratch rather than buying a franchise or an existing business.
Distinguish among the different types and sources of startup ideas.
Describe external and internal analyses that might shape new venture opportunities.
Explain broad-based strategy options and focus strategies.
Dr.BALAMURUGAN MUTHURAMAN
Summer Semester

3. STAGES IN THE LIFE CYCLE OF AN ENTREPRENEURIAL FIRM.
Management - Chapter 6
Dr.BALAMURUGAN MUTHURAMAN
Summer Semester

4. BREAKING INTO THE MARKET
Three Ways
Offer a totally new product
Offer an existing product to a different market
Offer a product or service similar to those existing in the same market
Dr.BALAMURUGAN MUTHURAMAN
Summer Semester

5. IDENTIFYING STARTUP IDEAS
Opportunity Recognition
Identification of potential new products or services that may lead to promising businesses
Entrepreneurial Alertness
Readiness to act on existing, but unnoticed, business opportunities
Good 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.
Dr.BALAMURUGAN MUTHURAMAN
Summer Semester

6. IS AN IDEA A GOOD INVESTMENT OPPORTUNITY?
Market Factors
Fatal Flaws
Judging a Business Opportunity
Competitive Advantage
Management Capability
Economics
Dr.BALAMURUGAN MUTHURAMAN
Summer Semester

7. CREATING A NEW BUSINESS FROM SCRATCH
To develop a commercial market for new product or service.
To tap into unique resources that are available
Motivations To Start a Business
Wanting the challenge of succeeding (or failing) on your own
To avoid undesirable features of existing companies
Dr.BALAMURUGAN MUTHURAMAN
Summer Semester

8. BASIC QUESTIONS ABOUT STARTUPS
What other startup types might be considered?
What are some sources for more new ideas?
How to identify a genuine opportunity that creates value, for both the company and the company’s owners?
How should the idea be refined?
What can be done to increase the chances that the business will be successful?
What competitive advantage does the business have over its rivals?
Dr.BALAMURUGAN MUTHURAMAN
Summer Semester

9. EVALUATION CRITERIA FOR A STARTUP
Marketing Factors
Need for product
Identified or unfocused
Customers
Reachable or not, brand loyal
Value created for customer
Significant or insignificant
Life of product
Recovery of cost by customer
Dr.BALAMURUGAN MUTHURAMAN
Summer Semester

10. EVALUATION CRITERIA FOR A STARTUP
Marketing Factors (cont’d)
Market structure
Emerging or mature
Market size (known or unknown?)
Market growth (how fast?)
Competitive Advantage
Cost structure
Control over price, costs, channels of supply
Barriers to entry: regulatory protection, response/ lead-time advantage, legal, contacts and networks
Dr.BALAMURUGAN MUTHURAMAN
Summer Semester

11. EVALUATION CRITERIA FOR A STARTUP
Economics
Return on investment?
Investment requirements
Break-even point
Management Capability
Diverse skills or solo entrepreneur with no related experience
Fatal Flaws
Dr.BALAMURUGAN MUTHURAMAN
Summer Semester

12. TYPES OF IDEAS THAT DEVELOP INTO STARTUPS
Dr.BALAMURUGAN MUTHURAMAN
Summer Semester

13. Dr.BALAMURUGAN MUTHURAMAN
KINDS OF STARTUP IDEAS
Type A
Are centered around providing customers with an existing product not available in their market.
Type B
Involve new ideas, involve new technology, centered around providing customers with a new product.
Type C
Are centered around providing customers with an improved product.
Dr.BALAMURUGAN MUTHURAMAN
Summer Semester

14. 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.
Dr.BALAMURUGAN MUTHURAMAN
Summer Semester

15. CHANGE-BASED SOURCES OF ENTREPRENEURIAL OPPORTUNITIES
Change Factor
Definition
Industry 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.
Dr.BALAMURUGAN MUTHURAMAN
Summer Semester

16. APPLYING INNOVATIVE THINKING TO BUSINESS IDEAS
Borrow ideas from existing products and services or other industries.
Combine two businesses into one to create a market opening.
Begin with a problem in mind.
Recognize a hot trend and ride the wave.
Explore ways to improve a product or service’s function.
Think of how to streamline a customer’s activities.
Adapt a product or service to meet customer needs in a different way.
Imagine how the market for a product or service could be expanded.
Keep an eye on new technologies.
Dr.BALAMURUGAN MUTHURAMAN
Summer Semester

17. EVALUATING ENTREPRENEURIAL OPPORTUNITIES
Outside-In Analysis
Studying the context of the venture to identify business ideas and determine which ideas qualify as opportunities.
General Environment
A broad environment, encompassing factors that influence most businesses in a society.
Industry Environment
The combined forces that directly impact a given firm and its competitors.
Competitive Environment
The environment that focuses on the strength, position, and likely moves and countermoves of competitors in an industry.
Dr.BALAMURUGAN MUTHURAMAN
Summer Semester

18. SEGMENTS OF THE GENERAL ENVIRONMENT
Dr.BALAMURUGAN MUTHURAMAN
Summer Semester

19. MAJOR FACTORS OFFSETTING MARKET ATTRACTIVENESS
Threat of New Competitors
Threat of Substitute Products or Services
Intensity of Rivalry Among Existing Competitors
Attractiveness and Profitability of a Target Market
Bargaining Power of Suppliers
Bargaining Power of Buyers
Dr.BALAMURUGAN MUTHURAMAN
Summer Semester

20. Dr.BALAMURUGAN MUTHURAMAN
COMPETITOR ANALYSIS
Who are the new venture’s current competitors?
What resources do they control?
What are their strengths and weaknesses?
How will they respond to the new venture’s decision to enter the industry?
How can the new venture respond?
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?
Dr.BALAMURUGAN MUTHURAMAN
Summer Semester

21. EVALUATING OPPORTUNITIES…
Inside-Out Analysis
Assessing the firm’s internal competitive potential
Resources
Basic inputs that a firm uses to conduct its business
Tangible resources: visible and easy to measure.
Intangible resources: invisible, difficult to quantify
Capabilities
Integration of various organizational resources that are deployed together to the firm’s advantage.
Core Competencies
Resources and capabilities that provide a firm with a competitive advantage over its rivals.
Dr.BALAMURUGAN MUTHURAMAN
Summer Semester

22. INTEGRATING INTERNAL AND EXTERNAL ANALYSES
Strengths, Weaknesses, Opportunities, and Threats (SWOT) Analysis
A type of assessment that provides a concise overview of a firm’s strategic situation.
Helps identify opportunities that match the venture.
Seeking 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?
Dr.BALAMURUGAN MUTHURAMAN
Summer Semester

23. EXAMPLES OF SWOT FACTORS
Dr.BALAMURUGAN MUTHURAMAN
Summer Semester

24. IMPORTANT STRATEGIC TERMS
Strategy
A plan of action that coordinates the resources and commitments of an organization to achieve superior performance.
Strategic Decision
A decision regarding the direction a firm will take in relating to its customers and competitors.
Sustainable Competitive Advantage
A value-creating industry position that is likely to endure over time.
Dr.BALAMURUGAN MUTHURAMAN
Summer Semester