KSU ENTR 27056 - Chapter 6: Analyzing the Industry & the Market

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2/18/14Chapter 6: Analyzing the Industry & the Market- Industry: a grouping of similar businesses that interact in a common environment- Market: a grouping of customers that an entrepreneur targets- Primary Customer: represents that segment of the marketplace that needs the product or service mostInterview Analysis:- How is the industry described?- Is the industry growing?- Where are the opportunities? - What does the future look like?- Are there any threats to the industry?- What are the typical margins in the industry?Frameworks for Understanding Industries:- Birth- Growth & adaptation- Differentiation & competition- Shakeout- Maturity & decline Industry Trajectories (4 changes in industry):- Progressive Change (most common): companies grow geographically, increase profits through innovations Ex: Wal-Mart, Southwest airlines - Intermediating Change: change that comes when there are major shifts in thevalue chain in the form of backward or forward integration, strategic partners & developing new ways to transect business with customers Ex: card swipes for in-home work done - Radical Change: occurs when an innovation results in the obsolescence of previous technology & drives old-line companies out of business Ex: iPod took CDs out of business- Creative Change: found in industries where resources turn over frequently & must continually be replaced Ex: film & music industries Porter’s Five Forces Model:-Barriers to entry (if high, they may present a significant challenge to the entrepreneur):- Economies of scale (hard for new venture to achieve)- Brand loyalty (not easy to get loyal customers to switch)- Capital requirements (R&D or plant & equipment)- Switching costs for the buyer (time & effort to switch, starting over the learning process with a new company)- Access to distribution channels (will retailers sell your product?)- Proprietary factors (must stick with supplier who holds patent to make the product you need)- Government regulations (licensing of airwaves, zoning, FDA approval…)-Threats from substitute products: - Products/services which accomplish same function in different way or at a different price (bowling alleys compete with miniature golf courses)-Threats from buyers’ bargaining power-Threats from suppliers’ bargaining power -Competitive rivalry among existing firms:- A highly competitive industry will drive down profits  Random fact: companies pay to have their brand placed on shelves in the average customers line of sight…when’s the last time a “Kroger brand” was the first thing you’ve seen on a shelf?Characterizing the Target Market:Step in Market Research: identify & profile customerPrimary research techniques- Mail/phone surveys- Internet- In personOverview: Market Industry Radical change Creative change Intermediating change Progressive change Porters five force model Primary


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KSU ENTR 27056 - Chapter 6: Analyzing the Industry & the Market

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