Difference between feasibility analysis and business plan a feasibility analysis is primarily a test of a new concept s viability in the market place will anybody buy it A business plan is more comprehensive and discusses the operational and financial aspects of a new business It focuses on execution of the concept and the building of a company Porter by Focus Model industry chapter Barriers to Entry if high they may present a significant challenge to the entrepreneur Economics of scale hard for a new venture to achieve Brand Loyalty not easy to get loyal customers to switch Capital requirements R D or plant and equipment Switching cost for the buyer time and effort to switch starting over the learning process with a new company Access to distribution channels Ex Will retailers sell your product Proprietary factors ex Must stick with a supplier who holds the patent to make the product you need Government regulations licensing of airwaves zoning FDA approval Threats from substitute products products services which accomplish the same function In a different way or at a different price Bowling alleys compete with a miniature golf courses Threats from buyers bargaining power The more larger buyer understand the nature of the industry and the more products are standardized the greater the likelihood that these buyers will have significant bargaining power WalMart Threats from supplier s bargaining power If the number of these suppliers is few relative to the size of the industry or the industry is not the primary customer of the suppliers the suppliers potential power to raise prices or change the product quality of goods services supplied to manufacturers and distributors is greater Intel Competitive rivalry among existing firms In general a highly competitive industry will drive down profits and ultimately the rate of return on investment Cell Phone service provider Common Start up Pricing Strategies Demand based Pricing find out what customers are willing to pay at different demand levels and price accordingly Premium Pricing high price reflects unique product service and a significant competitive advantage Independent contractors IC own their own businesses entrepreneur avoids paying medical benefits payroll taxes etc Employees are usually the single biggest expense of any business Definitions Patents primary means of protecting an original invention Types of Patents Utility protect functional part of machines processes Design Protect new original ornamental designs for manufactured articles Business Method Protect fundamentally different ways of doing business whereby the embedded process must produce a useful tangible and concrete result new 1990 s Amazon com murky waters here Trademark symbol logo word sound color design or other device that is used to identy a business of product in commerce it has a longer life than a patent as you have exclusive right to it as long as you have continued to use it Intellectual properties Group of legal rights associated with patents trademarks copyrights and trade secrets Trade Secret a formula device idea process pattern or compilation of information that gives the owner a competitive advantage in the marketplace A novel idea that is not common knowledge and is kept in a confidential state Copyrights protects the form of the original works of authors composers screenqritiers and computer programmers doesn t protect that idea itself a written program for word processing software but not the concept of word processing itself Breakeven How much to sell to make no profit or income check definition Working Capital current assets minus current liability Gross Profit sales revenue minus cost of good sole Net Income if it is product based Gross Profit minus all other expenses Net Income if not product based revenue minus expenses Dead Income divided by sales Profit Margin Gross Margin Gross profit divided by sales Mistakes in Developing the Business Plan Projecting rapid growth beyond the capabilities of the founding team Developing a plan whose success is 100 reliant on the efforts of one entrepreneur investors prefer teams to solo entrepreneurs and like to see multiple functional areas of expertise represented on the team Projecting performance that exceeds industry averages Underestimating the venture s need for capital Mistaking tactics for strategy Using price as a marketing strategy for a product service The entrepreneur not investing in the business 5 Impacts of Insufficient Resources on Product Development 4 Types of Change that can occur within an industry Poor execution when critical due diligence and market analysis are bypassed in favor of speed execution typically suffers Time to market increases not enough people to do the work or the need to re do the work because under or unqualified people did it the first time First to market opportunities are missed game changer opportunities are more expensive and may be bypassed in favor of a cheaper opportunity involving only incremental innovation Projects are made simpler so that more can be done with less projects are dumbed down or key features are deleted Team morale declines its stressful to feel you must accomplish the impossible on a shoestring budget Progressive Change most common type of change companies in the industry grow geographically companies increase profits through innovations in operations processes distribution and technology Ex Walmart Southwest Airlines Intermediating Change Industry change that comes about when there are major shifts in the value chain in the form of backward of forward integration strategic partners and developing new ways to transact business with customer Ex Manufacturers bypassing traditional retailers and just sell products directly to customers via internet Radical Change Occurs when an innovation results in the obsolescence of previous technology and drives old line companies out of business Ex The PC quickly drove most typewriter manufacturers out of business Creative Change Found in industries where resources turn over frequently and most continually be replaces Ex Film and music industries Proper Opportunity Recognition have you identified a nice that has not been served Technical feasibility analysis does the product service currently exist Does it have an application in the market Can the product be produced For how much and how long will it take Design and development of Platform ideally a platform product will provide for many derivative