Ch.4 entrepreneurship

Benchmarking

When one identifies a potential competitive advantage and works with an outside company that is successful in that particular area to learn skill -companies are more than willing to share knowledge as long as you are not a potential competitor

Expanding market range

-Availability of complementary products: Sam Walton used 30-mile strategy by trying to get people to drive up to 30 miles but they could buy everything they needed at Wal-Mart instead of making multiple stops -Diversity of products within the same category: Carry running shoes nobody else carries; specialty running store might have bigger range than typical sporting good store b/c of specialized service -Additional amenities: EX First Monday trade days in canton -Population must be sufficient

Growth rates

-Declining/ growing -barries to entry but not to exit is good -good population -etc.

Identifying competitors

-Define a radius which you believe will draw majority of your customers -See what competitors are in your area (people selling similar products to similar customers in the radius) -create a competitive map by: --visiting all potential competitors --develop a list of criteria one wishes to take away with each visit and see where companies are not performing (Pg. 71 in book)

Industry analysis

-Substitute products -Elasticity of demand -Ease of entry/Exit -Benchmarking -Industry trends -Growth rate

competitor analysis

-Who are they? -What are their strengths? -Why do current customers buy from them? -What are their weaknesses? -Why might current customers be willing to switch? -Where are the gaps?

Market range

Distance a typical customer is willing to travel to purchase product/ service -The more competitors, less range customer will travel

Strategy and competitive advantage

Be different in a valuable way!! -what is different about your business that people will care about? -How can you relieve the customer's "pain" in ways that other competitors can't match? -What can put you ahead and keep you there?

Defining your industry

Comprised of direct competitors selling similar products or services to similar customers within a specified geographic radius that is consistent with customers willingness to travel to purchase product/service

Defining customers

Determine customer in which trying to attract for effective use of marketing budget; Helps small business focus on core customer base -Adults 30-50 -Median income $60,000 -Live within 20 minute drive

Ease of Entry or exit

How easy is it for a new competitor to open up? Are there any exit barriers? -If a business owner cannot easily leave industry owner will likely use predatory pricing to generate cash flow -Better if harder to enter than to exit

Substitute products

If price goes up can lose customers if they don't think the extra cost is worth the product -If gas prices get too high, people take public transportation

Strategic groups

Lay all firms out on the graph to determine more complex competitive analysis -Identify characteristics that differentiate competitive firms from one another -Plot firms on two-variable map using pairs of these differentiating characteristics -Assign firms that fall into the same strategy space into the same strategic group

competitive advantage

Made up of those things that your business does uniquely well, or better than anyone else in your industry -Allows business to charge a price exceeding that of direct competitors -Unorthodox parts of the business should be the focus of energy, money, and time so business can differentiate from competitors (Orthodox/normal parts of the business need to be done well regardless b/c people expect it) -What was once unorthodox leads to imitation and becomes orthodox

Demand threshold

Minimum population required to support a particular type of business -the more specified the business the larger population needed to support it

Elasticity of demand

Refers to how easy it is for a customer to switch to a substitute or not use product all together if prices increase -Product/service that customers will virtually pay anything for has inelastic demand (cancer medicine)

Industry trends

Trends shape the long-term perspective of the industry -Healthy restaurants have gained increasingly popularity lately

fragmented markets

markets in which no one competitor has a substantial share of the market and the means of competition varies widely within the same market space