Introduction to Entrepreneurship Launching New Ventures Allen 5th Edition Chapter 6 Analyzing the Industry and Market Entrepreneurs should collect data that answers How is the industry described Is the industry growing Where are the opportunities Status of new technology Who are the opinion leaders in the industry What does the future look like What are the typical margins in the industry Are there threats to the industry Are there successful young new firms in the industry How much do companies in the industry spend on research development wise to begin industry research by looking at sources of secondary data NAICS NORTH AMERICAN INDUSTRY CLASSIFICATION SYSTEM organization identifies industries and allows for common standards and statistics includes industries in U S Canada and Mexico Collecting Info wise to begin industry research by looking at sources of secondary data Check business press Talk to trade associations Consult trade association journal Check organizations that list government agency resources Primary sources Industry observers Suppliers distributors in the industry Customers Employees of key firms in the industry Professionals from the service organizations in the industry Trade shows Industries are constantly evolving not static stable Industry Life Cycle Birth Growth Maturity Decline SHAKEOUT when competition is most intense firm grows more rapidly and becomes more productive to pick up slack temporary efficiency gains eliminates possibility of competition and increases social loss from decrease competition Main Forces that affect the ultimate profit potential of a venture in terms of long run investments costs to produce declines relative to the price of goods services found Porter s 5 Forces 1 Barriers to Entry 2 Supplier Bargaining Power 3 Competitive Rivalry 4 Buying Bargaining Power 5 Threat of Substitutes Other forces 1 ECONOMIES OF SCALE in more mature industries 2 Brand Loyalty 3 Capital Requirements 4 Switching costs for buyers 5 Access to distribution channels 6 Proprietary factors 7 Government regulations PEST ANALYSIS examining the environment in which new venture will operate examines aspect of macroeconomic environment 1 Political Factors government regulatory and legal 2 Economic Factors cost of capital inflation customer purchasing employment rate 3 Sociocultural Factors demographic and cultural 4 Technological Factors R D and rate of change Goals of Market Research Identify profile first customer Estimate potential demand Identify subsequent customer segments target market research MOST IMPORTANT DATA to identify 1st customer Market Research Process Assess information needs Research secondary data sources first internet good source of secondary data Measure target market with primary data sources research Forecast demand for product service Primary data is most important for information on potential customers Observation Interviews opportunity for clarification discussion observe nonverbal communication high response rate open ended questions networking opportunities Focus Groups Surveys CUSTOMER PROFILE great detailed description of primary customer critical to marketing strategy Identifies Income level 1 Age 2 3 Education 4 Buying habits where they buy and how often much 5 Where they find product services 6 How they like to purchase products services Gathering Competitive Intelligence 1 Identify the competition Direct serve same needs with same resources Indirect serve same needs with different resources Substitute substitutes for products services 2 Find information about competitors Visit websites outlets where their products are sold Buy products and understand differences similarities between yours and theirs Use internet to see what customers are saying Find info on public companies to serve as benchmarks for the industry
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