1. Business Plan Preparation
Frank Moyes Leeds School of Business University of Colorado Boulder, Colorado
FLM background
How many in a business?
How many starting a business in next 6 months?
What kind of businesses? Retail, manufacturing, high-tech, service, non-profit
Ask questions
Market & Industry Analysis

2. Market & Industry Analysis
Tonight’s Agenda
Topics
Market Analysis
Industry Analysis
Competitive Advantage
Opportunity/Need
Segmentation
Financial Comp’s
Model Company
University Parent Business Plan
Hand-in Interview List
Market & Industry Analysis

3. Market & Industry Analysis
Next Week
Topics
Value Proposition
Business Analysis
Customer Research
Read BP pp 11-13, 27
In the Fire - Opportunity/Need
Write Value Proposition
Market & Industry Analysis

4. 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
Market & Industry Analysis

5. Market & Industry Analysis
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
Market & Industry Analysis

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

7. Market & Industry Analysis
Market Analysis
What is the size & growth potential?
Historic and future growth
Must indicate sources
Segment your market
Lot’s of numbers – show in tables
Market & Industry Analysis

8. 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
Geography – see Hecho en Casa business plan
Distribution channels
Sector – industrial (see MRT business plan), consumer, government
Market & Industry Analysis

9. Market & Industry Analysis

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

11. Identify Potential Entry Point
Describe best segment. Why?
Future segments
Market & Industry Analysis

12. Market & Industry Analysis
Industry Structure
Competitive Environment
Competitors
Market & Industry Analysis

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

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

15. Market & 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
Market & Industry Analysis

16. 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
Market & Industry Analysis

17. 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
Tuperware at WalMart
Has office and showroom in Arkansas
Market & Industry Analysis

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

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

20. Market & Industry Analysis
Opportunity
Last section
Make case attractive opportunity - validate
Draw conclusions based on your research, interviews and customer surveys
Describe size and growth. What trends support the opportunity?
Describe compelling need. What problem are you solving?
Explain the evidence that proves there is a market
Describe the target segment
Describe what is unique about your product or service. What are the benefits?
Describe your competitive advantage
Market & Industry Analysis

21. Market & Industry Analysis
Opportunity/Need
What is the pain?
What problem is being solved?
Dissatisfaction with current products/services
Poor quality or service
Must be compelling
Must be easily understood by TM
Needs:
Manage information: Google
Noodles
Crocs
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.
Next Week: In the Fire
Opportunity/Need
Market & Industry Analysis

22. 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
Early stage vs. late stage
Point of departure
Market & Industry Analysis

23. Market & Industry Analysis
Financial COMP’s
Market & Industry Analysis

24. Market & Industry Analysis
Model Company
Identify company in your marketplace
Different segment, products, target market
Has done just what you want to do
Provides credibility
Market & Industry Analysis

25. Business Plans on Website
Metal Removal Technology
Hecho en Casa
Market & Industry Analysis

26. A Model of Competitive Advantage
Resources
Cost Advantage or
Differentiation
Distinctive
Competencies
Value Creation
Capabilities
Market & Industry Analysis

27. 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.
Market & Industry Analysis

28. 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
Market & Industry Analysis

29. 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
Market & Industry Analysis

30. Competitive Advantage Challenges
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
First mover – Allen p 6
Not often successful in technology products. More often it is the second or third
Apple’s Newton lost to Palm Pilots pda
Microsoft Explorer late
Scalable
Difficult for a new venture to scale; lack infrastructure and systems and can’t afford to create. Management experience
Advantages
Makes it more difficult for followers to raise vc
Market & Industry Analysis

31. Sustainable Competitive Advantage
Sustainable Competitive Advantage
Understand the market
Understand the competition
Differentiation
Innovation
Resources & capabilities
Really understand the market & competition
Resources (assets of the company)
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.
Capabilities (organizing and managing resources)
Marketing - differentiation, branding, positioning
Product/service - design features & benefits
Sales & distribution - rep organization
Operational approach - Dell, Wal-Mart
Supply chain management - Asia contacts
Relationships - regulators, politicians, investors
Why is this so hard?
Market & Industry Analysis

32. Competitive Advantages Difficult to Achieve & Sustain
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
Market & Industry Analysis

33. Sustaining Competitive Advantage Is a Dynamic Process
Market, competition, resources, and capabilities are continually changing.
Customers
Opportunity
Market & Industry Analysis