1 Industry Analysis Business Plan Preparation Frank Moyes Leeds School of Business University of Colorado Boulder, Colorado.

1Industry Analysis

Business Plan PreparationBusiness Plan PreparationBusiness Plan PreparationBusiness Plan Preparation

Frank MoyesFrank MoyesLeeds School of BusinessLeeds School of BusinessUniversity of ColoradoUniversity of ColoradoBoulder, ColoradoBoulder, Colorado

2Industry Analysis

Tonight's AgendaTonight's Agenda

TopicsTopics Industry AnalysisIndustry Analysis Competitive AdvantageCompetitive Advantage Value ChainValue Chain

Discuss MRP & Hecho en Casa Business PlansDiscuss MRP & Hecho en Casa Business Plans ReadRead

BP pp 11-13, 27BP pp 11-13, 27 Business Model AssignmentBusiness Model Assignment

In the Fire & Hand-inIn the Fire & Hand-in Opportunity/NeedOpportunity/Need Value PropositionValue Proposition

3Industry Analysis

Next WeekNext Week TopicsTopics

Features & BenefitsFeatures & Benefits MarginsMargins Elevator SpeechElevator Speech Investor PresentationsInvestor Presentations

Read BP pp 6-7Read BP pp 6-7 Practice Elevator SpeechPractice Elevator Speech In the Fire In the Fire Preliminary Market Analysis ResultsPreliminary Market Analysis Results

Preliminary Interview ResultsPreliminary Interview Results

Week Number 1 to 3 4 5 6 7 8 9 10 11 12 13 14 15Market & Industry Analysis

Market Research Market ResearchInterviews InterviewsModel Company Model CompanyCOMP's COMP'sOpportunity/Need Opport/Need Opp/Need (rev)Value Proposition Value PropositionWrite-up Write-up

Product/Service Product/ServiceFeatures & Benefits Features & Benefits

Marketing PlanCustomer Surveys Customer SurveysTarget Market Target MarketPositioning PositioningChannel ChannelProduct/Service Strategy Prod/Service StragegyPricing PricingE-commerce E-commerceRevenue Model Revenue ModelCommunications CommunicationsWrite-up Write-up

Operations PlanWalk an Order Walk an Order

Development PlanMilestones Milestones

Management Plan

Competitive Advantage Competitive Advantage

Financial PlanIncome Statement 5 yr Income Statement 5 yrBalance Sheet & Cash Flow 5 yr Bal Sheet & Cash Flow Monthly & Qrtly Statements Monthly & Qrtly StmtsAssumptions AssumptionsCustomer Acquisition Costs Cust Acq CostsRisks Risks

Funding PlanValuation ValuationOffering OfferingSource & Uses Source & Uses

Company Overview Company Over

Executive Summary Exec Summ

Publish & Present Publish & PresentElevator Speech Elevator SpeechInvestor Presentation Investor Pres Investor PresQ & A In the Fire SessionsRevise BP sections Revise BP sections

Funding Plan

Market & Industry Analysis

Opertations Plan

Financial Plan

Marketing Plan

Development Plan

Management Plan

5Industry Analysis

Business ModelBusiness Model

Present Oct 24 PowerPoint 10 minutes, 10 slidesPresent Oct 24 PowerPoint 10 minutes, 10 slides Hand-in 3 ring binderHand-in 3 ring binder

Market Analysis - draftMarket Analysis - draft Industry Analysis - draftIndustry Analysis - draft Product/Service Description - draftProduct/Service Description - draft Value Chain analysisValue Chain analysis Competitive matrixCompetitive matrix Financial COMP’sFinancial COMP’s Revenue ModelRevenue Model 20 interview Call Reports20 interview Call Reports

6Industry Analysis

Market & IndustryMarket & Industry

Market: “group of current and potential customers Market: “group of current and potential customers having the willingness and ability to buy having the willingness and ability to buy product/services to satisfy a need.”product/services to satisfy a need.”

Industry: “group of sellers that offer product/services Industry: “group of sellers that offer product/services that are similar and close substitutes for one another.”that are similar and close substitutes for one another.”

JW Mullins, New Business Road Test

7Industry Analysis

Market & Industry SectionsMarket & Industry Sections

MarketMarket Market size & growthMarket size & growth TrendsTrends Target MarketTarget Market Channels of distributionChannels of distribution

IndustryIndustry Industry StructureIndustry Structure Competitive EnvironmentCompetitive Environment CompetitionCompetition

Opportunity

8Industry Analysis

Industry StructureIndustry Structure

Organization – how & where are products/services Organization – how & where are products/services produced and delivered?produced and delivered?

Supply chain Supply chain

9Industry Analysis

Sources

SuppliersManfg

Distrib

Retailers

Consumer

Goods

Information

Funds

A T Kearney, Integrating the Supply Chain

Supply ChainSupply Chain

10Industry Analysis

Competitive EnvironmentCompetitive Environment

How do companies compete – quality, price, new How do companies compete – quality, price, new products, customer serviceproducts, customer service

Degree of rivalryDegree of rivalry Response to new entriesResponse to new entries

11Industry Analysis

Control Control

Setting prices – bargaining strength of customersSetting prices – bargaining strength of customers Lowering costs – technology, process design, Lowering costs – technology, process design,

resources, bargaining strength of competitorsresources, bargaining strength of competitors Channels of distribution – access, creating new channelChannels of distribution – access, creating new channel

12Industry Analysis

Barriers to EntryBarriers to Entry

Economies of scale: manufacturing, marketing, technologicalEconomies of scale: manufacturing, marketing, technological Customer loyalty: well established brands, long established Customer loyalty: well established brands, long established

relationshipsrelationships Agreements with customers, suppliers, strategic partnersAgreements with customers, suppliers, strategic partners Switching costsSwitching costs Capital requirements: high investmentCapital requirements: high investment

13Industry Analysis

Barriers to Entry (continued)Barriers to Entry (continued)

Access to distribution channels: exclusive distribution Access to distribution channels: exclusive distribution agreements, dominant position of competitorsagreements, dominant position of competitors

Intellectual property: patents, trade secrets, copyrights, Intellectual property: patents, trade secrets, copyrights, trademarks, know-howtrademarks, know-how

Government regulations: defense contracts, import Government regulations: defense contracts, import restrictionsrestrictions

Industry hostility to new entrants. Will use all means to Industry hostility to new entrants. Will use all means to drive out new competition: pricing, legal, spreading drive out new competition: pricing, legal, spreading rumorsrumors

14Industry Analysis

CompetitionCompetition

Describe key competitors Describe key competitors Direct, indirect, futureDirect, indirect, future InertiaInertia Prepare a competitive matrixPrepare a competitive matrix

Product/ServicesProduct/Services MarketingMarketing ManagementManagement FinancialFinancial

Image – website, brochures, literature, advertisementsImage – website, brochures, literature, advertisements

15Industry Analysis

OpportunityOpportunity

Last section Last section Make case attractive opportunity - validateMake case attractive opportunity - validateDraw conclusions based on your research, Draw conclusions based on your research,

interviews and customer surveysinterviews and customer surveys

16Industry Analysis

Sustainable Competitive AdvantagesSustainable Competitive Advantages

Resources and capabilitiesResources and capabilities InnovationInnovation Differentiation Differentiation TechnologyTechnology

17Industry Analysis

A Model of Competitive AdvantageA Model of Competitive Advantage

Resources

DistinctiveCompetencies

Capabilities

Value Creation

Cost Advantage or Differentiation Advantage

18Industry Analysis

Identify Your ResourcesIdentify Your Resources

Financial:Financial: access to capital (equity & debt), cash reserves, access to capital (equity & debt), cash reserves, government grants, etc.government grants, etc.

Physical assets:Physical assets: plant & equipment, raw materials, location, plant & equipment, raw materials, location, working capital, etc.working capital, etc.

Human:Human: social, employee knowledge, experience, accumulated social, employee knowledge, experience, accumulated wisdom, labor cost and skills, etc.wisdom, labor cost and skills, etc.

Intangible:Intangible: patents, trade secrets, know-how, copyrights, patents, trade secrets, know-how, copyrights, databases, etc.databases, etc.

Organizational:Organizational: culture, contacts, policies, Boards of Directors & culture, contacts, policies, Boards of Directors & Advisors, suppliers, service providers, etc.Advisors, suppliers, service providers, etc.

19Industry Analysis

Identify Your CapabilitiesIdentify Your Capabilities World class management (serial entrepreneur)World class management (serial entrepreneur) Network - well developed, high-quality, accessible contacts that Network - well developed, high-quality, accessible contacts that

take years to buildtake years to build ExpertiseExpertise

Sales and marketing Sales and marketing Science or technologyScience or technology Supply chain Supply chain Product/service design Product/service design

Sales & distribution organizationSales & distribution organization Total operational approach (e.g. Dell, Wal-Mart)Total operational approach (e.g. Dell, Wal-Mart)

20Industry Analysis

What Barriers What Barriers Can You Establish?Can You Establish?

Intellectual property: patents, trade secrets, copyrights, Intellectual property: patents, trade secrets, copyrights, trademarks, etctrademarks, etc

Switching costs to your target marketSwitching costs to your target market Customer loyaltyCustomer loyalty Agreements with customers, suppliers, strategic Agreements with customers, suppliers, strategic

partnerspartners Control of the distribution channelControl of the distribution channel

21Industry Analysis

Competitive Advantage ChallengesCompetitive Advantage Challenges

Intellectual propertyIntellectual property Agreements with customers Agreements with customers

or suppliersor suppliers Long term contractsLong term contracts Control of costs Control of costs Control of pricesControl of prices Control of channelControl of channel LocationLocation

First to marketFirst to market World class managementWorld class management ExpertiseExpertise Development lead timeDevelopment lead time BrandBrand QualityQuality ServiceService ExecutionExecution RelationshipsRelationships

22Industry Analysis

Sustainable Competitive AdvantageSustainable Competitive Advantage

Understand the marketUnderstand the market Understand the competitionUnderstand the competition SustainableSustainable

InnovationInnovation DifferentiationDifferentiation Resources & capabilitiesResources & capabilities

Really understand the market & competitionReally understand the market & competition

Why is this so hard?

23Industry Analysis

Competitive Advantages Difficult to Competitive Advantages Difficult to Achieve & SustainAchieve & Sustain

Most are easily copiedMost are easily copied Entrepreneur ignorant of or ignores competitionEntrepreneur ignorant of or ignores competition Entrepreneur is not realistic about own resources & Entrepreneur is not realistic about own resources &

capabilitiescapabilities Entrepreneur ignores futureEntrepreneur ignores future Entrepreneur must be intellectually honestEntrepreneur must be intellectually honest

24Industry Analysis

Market, competition, resources, and capabilities are continually changing.

Sustaining Competitive Advantage Sustaining Competitive Advantage Is a Dynamic ProcessIs a Dynamic Process