GETTING

STARTED

Part 2 Starting From Scratch or

Joining an Existing
PowerPoint Business by Charlie
Presentation
Cook
The University of West Alabama
Copyright © 2006 Thomson Business & Professional Publishing.
All rights reserved.
 LOOKING AHEAD

AFTER STUDYING THIS CHAPTER, YOU SHOULD BE ABLE TO:

1. IDENTIFY SEVERAL FACTORS THAT DETERMINE WHETHER AN IDEA

FOR A NEW VENTURE IS A GOOD INVESTMENT OPPORTUNITY.
2. GIVE SEVERAL REASONS FOR STARTING A NEW BUSINESS FROM
SCRATCH RATHER THAN BUYING A FRANCHISE OR AN EXISTING
BUSINESS.
3. DISTINGUISH AMONG THE DIFFERENT TYPES AND SOURCES OF
STARTUP IDEAS.
4. DESCRIBE EXTERNAL AND INTERNAL ANALYSES THAT MIGHT
SHAPE NEW VENTURE OPPORTUNITIES.
5. EXPLAIN BROAD-BASED STRATEGY OPTIONS AND FOCUS
STRATEGIES.

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. 3–2
 IDENTIFYING STARTUP
IDEAS
• “STARTUPS WITH PRODUCTS THAT DO NOT
SERVE CLEAR AND IMPORTANT NEEDS CANNOT
EXPECT TO BE ‘DISCOVERED’ BY ENOUGH
CUSTOMERS TO MAKE A DIFFERENCE.”—AMAR
BHIDE
• INFATUATION WITH AN IDEA MAY LEAD TO
AN UNDERESTIMATION OF THE DIFFICULTY OF
DEVELOPING MARKET RECEPTIVITY AND
BUILDING A FIRM TO CAPTURE THE
3–3

OPPORTUNITY.
 IS AN IDEA A GOOD
INVESTMENT
OPPORTUNITY?
• MARKET FACTORS
• IS THERE A CLEARLY DEFINED MARKET
NEED FOR THE PRODUCT OR SERVICE,
AND IS THE TIMING, RIGHT?
• COMPETITIVE ADVANTAGE
• CAN THE PROPOSED BUSINESS ACHIEVE A
DURABLE OR SUSTAINABLE
COMPETITIVE ADVANTAGE?
3–4
 IS AN IDEA A GOOD
INVESTMENT OPPORTUNITY?
(CONT.)
• ECONOMICS
• IS THE VENTURE FINANCIALLY REWARDING, AND
DOES IT HAVE SIGNIFICANT PROFIT AND GROWTH
POTENTIAL?
• MANAGEMENT CAPABILITY
• IS THERE A GOOD FIT BETWEEN ENTREPRENEUR AND
OPPORTUNITY?
• FATAL FLAWS
• IS THERE A FATAL FLAW THAT WILL MAKE THE
VENTURE UNSUCCESSFUL? 3–5
 TWO PATHS TO
ENTREPRENEURSHIP

Startup Buyout
Creating Purchasing
a new an existing
business business
from scratch

Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. 3–6
 REASONS FOR STARTING A
NEW BUSINESS
Developing a commercial market for a recently invented or newly
developed product or service

Taking advantage of available resources, ideal location, advances

in equipment, employees, suppliers, and bankers

Avoiding precedents, policies, procedures, and legal commitments

of existing firms

Wanting the challenge of succeeding or failing on your own 3–7

 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
3–8
 EVALUATION CRITERIA
FOR A STARTUP
• MARKETING FACTORS
(CONT’D.)
• MARKET STRUCTURE
• EMERGING OR MATURE
• MARKET SIZE (KNOWN OR UNKNOWN?)
• MARKET GROWTH (HOW FAST?)
3–9
• COMPETITIVE ADVANTAGE
• COST STRUCTURE
• DEGREE OF CONTROL OVER: PRICE,
COSTS, CHANNELS OF SUPPLY
• BARRIERS TO ENTRY: REGULATORY
PROTECTION, RESPONSE/LEAD-TIME
ADVANTAGE, LEGAL, CONTACTS, AND
NETWORKS
3–10
 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
3–11
 KINDS OF STARTUP IDEAS

• TYPE A
• STARTUP IDEAS CENTERED AROUND PROVIDING CUSTOMERS
WITH AN EXISTING PRODUCT NOT AVAILABLE IN THEIR
MARKET
• TYPE B
• STARTUP IDEAS INVOLVING NEW IDEAS, INVOLVING NEW
TECHNOLOGY, CENTERED AROUND PROVIDING CUSTOMERS
WITH A NEW PRODUCT
• TYPE C
• STARTUP IDEAS CENTERED AROUND PROVIDING CUSTOMERS
WITH AN IMPROVED PRODUCT 3–12
TYPES OF IDEAS THAT DEVELOP
INTO STARTUPS
Type A Ideas Type B Ideas Type C Ideas

New Market New Technology New Benefit

Example: Example:
Using high-tech Example:
Targeting the "New Age" Developing a personal
beverage market by computers to develop a
simulated helicopter ride misting device to keep
selling soft drinks with workers cool
nutritional value
 SOURCES OF STARTUP IDEAS

Family Business
Friends/Relatives 6%
5%

Personal Interest/Hobby
16%

Prior Work
Experience
Suggestion 45%
7%

Education/Courses Source: Data developed and

provided by the National Federation
6% of Independent Business
Foundation and sponsored by
Chance Happening Other American Express Travel3–14
Related
Services Company, Inc.
11% 4%
 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
 SEGMENTS
OF THE
GENERAL
ENVIRONME
NT

3–16
 MAJOR
FACTORS
OFFSETTIN
G
MARKET Threat of New
ATTRACTI Competitors
VE-NESS Threat of Substitute
Products or Services

Intensity of Rivalry Attractiveness and

Among Existing Profitability of a
Products Target Market

Bargaining Power
of Suppliers

Bargaining Power
of Buyers

3–17
 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?
 COMPETITOR ANALYSIS
(CONT.)
• 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?

3–19
 EVALUATING
OPPORTUNITIES…
(CONT’D.)
• 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 AND DIFFICULT
TO QUANTIFY
 EVALUATING
OPPORTUNITIES…
(CONT’D.)
• 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
 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?
EXAMPLES OF SWOT FACTORS
SETTING A DIRECTION FOR THE
STARTUP