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Part III – Developing the Part III – Developing the Entrepreneurial Plan Entrepreneurial Plan
Chapter 7 – Environmental Assessment: Chapter 7 – Environmental Assessment: Preparation for a New Venture Preparation for a New VentureChapter 8 – Marketing Research forChapter 8 – Marketing Research for New Ventures New VenturesChapter 9 – Financial Preparation forChapter 9 – Financial Preparation for Entrepreneurial Ventures Entrepreneurial VenturesChapter 10 – Developing an EffectiveChapter 10 – Developing an Effective Business Plan Business Plan
Copyright (c) 2004 by South-Western, a division of Thomson Learning. All rights reserved.
Chapter 7 – EnvironmentalChapter 7 – Environmental Assessment: Assessment: Preparation for a Preparation for a New Venture New Venture
The Environment for The Environment for New VenturesNew Ventures
Environmental ScanningEnvironmental Scanning
• Refers to the efforts by which an owner-Refers to the efforts by which an owner-entrepreneur examines the external and entrepreneur examines the external and internal environments before making a internal environments before making a decision.decision.– Task environmentTask environment
– Societal environmentSocietal environment
Environmental VariablesEnvironmental Variables
TASK TASK ENVIRONMENTENVIRONMENT
(Industry)(Industry)
INTERNALINTERNALENVIRONMENTENVIRONMENT
SOCIETAL ENVIRONMENTSOCIETAL ENVIRONMENT
EconomicEconomicForcesForces
TechnologicalTechnologicalForcesForces
Political/LegalPolitical/LegalForcesForces
SocioculturalSocioculturalForcesForces
SuppliesSupplies
Employees/Employees/Labor UnionsLabor Unions
CompetitorsCompetitors
TradeTradeAssociationsAssociations
CommunitiesCommunities
CustomersCustomers
CreditorsCreditors
SpecialSpecialInterestInterestGroupsGroups
GovernmentsGovernments
StockholdersStockholders
StructureStructureCultureCultureResourcesResources
A Macro View: The A Macro View: The Economic and Industry Economic and Industry
EnvironmentsEnvironments
Assessing the Economic Assessing the Economic EnvironmentEnvironment
Understanding the Understanding the Regulatory EnvironmentRegulatory Environment
Governmental Regulations Affect Smaller Governmental Regulations Affect Smaller Ventures in a Variety of Ways:Ventures in a Variety of Ways:
• PricesPrices
• Cost inequitiesCost inequities
• Competitive restrictionCompetitive restriction
• Managerial restrictionManagerial restriction
• Mental burdenMental burden
Trends in Policy FormationTrends in Policy Formation
• The Regulatory Flexibility ActThe Regulatory Flexibility Act
• The Equal Access to Justice ActThe Equal Access to Justice Act
• The Congressional Review ActThe Congressional Review Act
• The Small Business Regulatory Enforcement The Small Business Regulatory Enforcement Fairness ActFairness Act
• The Paperwork Reduction ActThe Paperwork Reduction Act
• The Unfunded Mandates Reform ActThe Unfunded Mandates Reform Act
Examining the Industry Examining the Industry EnvironmentEnvironment
Elements of Industry – The Five Forces ModelElements of Industry – The Five Forces Model
SuppliersSuppliers BuyersBuyers
NewNewEntrantsEntrants
SubstitutesSubstitutes
IndustryIndustryCompetitorsCompetitors
Intensity ofIntensity ofRivalryRivalry
BargainingBargainingPower ofPower ofSuppliersSuppliers
BargainingBargainingPower ofPower ofBuyersBuyers
Threat of New EntrantsThreat of New Entrants
Threat of SubstitutesThreat of Substitutes
Common Industry CharacteristicsCommon Industry Characteristics
• Technological UncertaintyTechnological Uncertainty
• Strategic UncertaintyStrategic Uncertainty
• First-Time BuyersFirst-Time Buyers
• Barriers to EntryBarriers to Entry
• Competitive AnalysisCompetitive Analysis
Components of Competitive AnalysisComponents of Competitive Analysis
Future GoalsFuture Goals Current StrategyCurrent Strategy
What Drives the CompetitorWhat Drives the CompetitorWhat the Competitor is DoingWhat the Competitor is Doing
and Can Doand Can Do
Held about itself andHeld about itself andthe industrythe industry
Both strengths andBoth strengths andweaknessesweaknesses
AssumptionsAssumptions CapabilitiesCapabilities
Competitor’s Competitor’s Response ProfileResponse Profile
A Micro View:A Micro View:The Community The Community
PerspectivePerspective
Researching the LocationResearching the Location
• Community DemographicsCommunity Demographics
• Economic BaseEconomic Base
• Population TrendsPopulation Trends
• Overall Business ClimateOverall Business Climate
Determining Reliance Determining Reliance and Deservednessand Deservedness
Reliance Versus Commitment:Reliance Versus Commitment:Development of Exceptional Development of Exceptional Community SupportCommunity Support
Community’s “RelianceCommunity’s “Reliance(or Need) for the Venture(or Need) for the Venture
Entrepreneur’s Willingness to CommitEntrepreneur’s Willingness to Committo Local Community (Loyalty)to Local Community (Loyalty)
LowLow HighHigh
HighHigh
Exceptional Support UnlikelyExceptional Support Unlikely
Some Support LikelySome Support Likely
Exceptional Support LikelyExceptional Support Likely
Deservedness vs. Identification:Deservedness vs. Identification:Development of Exceptional Development of Exceptional Community SupportCommunity Support
Perception of Entrepreneur’sPerception of Entrepreneur’sDeservednessDeservedness
Community Identification with the VentureCommunity Identification with the VentureLowLow HighHigh
HighHigh
Exceptional Support UnlikelyExceptional Support Unlikely
Some Support LikelySome Support Likely
Exceptional Support LikelyExceptional Support Likely
Examining the Use of IncubatorsExamining the Use of Incubators
Business incubatorBusiness incubator is a facility is a facility with adaptable space that small with adaptable space that small businesses can lease on flexible businesses can lease on flexible
terms and at reduced rents.terms and at reduced rents.
Types of IncubatorsTypes of Incubators1.1. Publicly SponsoredPublicly Sponsored
2.2. Nonprofit-sponsoredNonprofit-sponsored
3.3. University-relatedUniversity-related
4.4. Privately sponsoredPrivately sponsored
How Does the Incubator Work?How Does the Incubator Work?
•Potential to growPotential to grow•Ability to create jobsAbility to create jobs•Ability to pay op.Ability to pay op. Expenses Expenses•Business planBusiness plan•Market analysisMarket analysis•Cash-flowCash-flow statement statement
CommercialCommercialHigh TechHigh Tech
Research &Research &DevelopmentDevelopment
ServiceServiceBusinessBusiness
LightLightManufact.Manufact.
WholesalerWholesaler
RetailerRetailer
Mail OrderMail Order
Import/Import/ExportExport
NonprofitNonprofit
BusinessBusinessEnteringEntering
thetheIncubatorIncubator
BusinessBusinessDevelopingDeveloping
Well-Well-EstablishedEstablished
BusinessBusiness
BusinessBusinessGrowthGrowth
RequiresRequiresMove OutMove Out
of Incubatorof Incubator