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Entry Strategies MBAX 6100 Entrepreneurship & Small Business Management Frank Moyes Leeds School of Business University of Colorado Boulder, Colorado
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Entry Strategies Today’s Agenda Entry strategies ICEDELIGHTS case
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Entry Strategies Next Week Opportunity Recognition Read BZ-2 M-1 & 2 Download Feasibility Plan Noodles Case
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Entry Strategies Develop a new product or service Develop a similar product or service Competitive approaches Buying a business Franchise Joint venture – customer or supplier
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Entry Strategies Develop a New Product or Service Proprietary First to market Growth markets Risks High failure rate Pioneer Time to market – missionary selling New design doesn’t work Underestimate resources One trick pony
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Entry Strategies Develop a Similar Product or Service Market is well defined Customer understands the product & is already buying Value chain is established Risks Can’t compete with the pros Time to profitability Underestimate the marketing required Retaliatory action of competitors
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Entry Strategies Competitive Approaches Cost Superiority Differentiation Niche Strategy K. Allen, Launching New Ventures
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Entry Strategies Cost Superiority Lean & mean Tight cost controls (low overheads?) New production process/technologies Quantity targets Emerging industry – everyone has same disadvantage Risks Don’t have economies of scale Don’t have infrastructure K. Allen, Launching New Ventures
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Entry Strategies Differentiation Distinguished by Product/process innovation Unique marketing or distribution Creates brand loyalty Substitute products less of a threat Higher margins Less price sensitive Focus is not on the cost of your product/service Risk? K. Allen, Launching New Ventures
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Entry Strategies Niche Strategy Select a segment of the market Focus is on customer, product design, price, service, packaging, geography, distribution Allows you to compete without going head-to-head with the major companies Gives you time to develop & become stronger Risks Not sustainable over long term If successful, will attract competitors K. Allen, Launching New Ventures
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Entry Strategies Advantages to Buying a Business?
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Entry Strategies Good Reasons for Selling? FASTTRAC, Planning and Growing a Business Venture
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Entry Strategies Bad Reasons for Selling? FASTTRAC, Planning and Growing a Business Venture
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Entry Strategies Where to Look Newspapers Industry trade magazines Banks Business brokers Chambers of Commerce SBA and development agencies Bankruptcy listings Network FASTTRAC, Planning and Growing a Business Venture
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Entry Strategies Franchising “Arrangement in which an owner of a trademark, trade name, or copyright has licensed others to use it in selling goods or services.” 26% of small companies started 3,000 franchise chains 500,000 outlets Kuratko, Entrepreneurship
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Entry Strategies Franchising Advantages? Training and Guidance Brand Name Appeal Proven Track Record Financial Assistance Kuratko, Entrepreneurship
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Entry Strategies Franchising Fees Celluland (cellular telephones) Fee $25,000 Royalty 5% Store Costs $80,000 to $250,000 Papyrus (greeting cards) Fee $29,500 Royalty 6% Store Costs $70,000 to $150,000 Kuratko, Entrepreneurship
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Entry Strategies Franchising Fees Valvoline (auto oil change) Fee $35,000 Royalty 6% Store Costs $55,000 to $100,000 Pizza Franchise $325,000 Starbucks? Noodles? Kuratko, Entrepreneurship
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Entry Strategies Franchising Disadvantages Franchise Fees Dependent on Franchisor for product, services, training Control exercised by the Franchisor Advertising not free Time consuming reports
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Entry Strategies Franchising Risks Concept may not be proven – franchisor is a start-up Franchisor reputation and resources Trade name with no drawing power No assistance Unfilled promises Economics don’t work – can’t get the volume Overlapping territories - Subway You must get customers
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Entry Strategies Franchise Conclusions Different kind of risk Need to do due-diligence Must write a business plan
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Entry Strategies Entry Strategies Conclusions Lots of ways Must be proactive Sentry strategy
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Entry Strategies Alternative Entry Strategies Sentry strategy Observation of a need Spin-offs Company outsourcing Customer in hand Desperation – no job, no money Hobbies Home based business Non-profit
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