4 Entrepreneurship What Entrepreneurs Need to Know Before They Start: Acquiring and Interpreting Information about Markets, Competitors, and Government.

4Entrepreneurship

What Entrepreneurs Need to Know Before They Start: Acquiring and

Interpreting Information about Markets, Competitors, and Government

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“Information can tell us everything. It has all the answers. But they are answers to questions we have not asked, and which doubtless don’t even arise.”

--Jean Baudrillard

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Information You Need

• Potential markets• Existing and potential competitors• Ability to launch and run a new

business• Government regulations and policies• Capital needs

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Components of Feasibility

• Answers the question: Is the idea viable?

• Product or service feasibility• Industry/market feasibility• Organizational feasibility• Financial feasibility

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Concept Test

Show or demonstrate a product or service to potential users to measure interest

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Competitor Analysis

• Reputation

• Physical resources

• Advertising/marketing resources

• Financial resources

• Technical resources

• Human resources

• Relative product quality

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Direct Techniques

• Survey

• Perceptual mapping

• Focus groups

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Customer Surveys

• Potential customers compare your product with existing ones

• Target group rates different dimensions of the product on a scale from low to high

• Assumes you know the dimensions customers use to evaluate products

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Perceptual Mapping

A map that reveals the key dimensions along which potential customers perceive products and evaluate them

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Perceptual Maps for Object Locators

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Focus Groups

• Groups of 8 to 12 people similar to potential customers

• Meet for one to two hours to describe their perceptions of and reactions to relevant products

• Identify the key dimensions along which focus group members perceive and evaluate various products

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Repertory Grid

• Each product is listed on a separate index card

• Three cards are chosen

• Group members describe ways in which any two products are similar and the third is different

• Identifies dimensions along which people perceive the product

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Indirect Techniques

Examine secondary data including

• Sales of competing products

• Demographic data

• Trends (economic, lifestyle, etc.)

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Government Policies and Regulations• May make it harder or

easier to start and run a new venture

• Gather relevant information on the government policies and regulations that will affect a new business

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Reduction of Marginal Tax Rates

Growth of New Ventures

Taxes

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Legal Forms and Taxes

• Regular C corporation—profits and losses remain in the company and the corporation pays taxes

• Sub-Chapter S Corporation—profits and losses flow through to shareholders, and they pay taxes

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Tax Incentives

• Depreciation

• Location in certain geographic regions

• Renovation and improvement of older buildings

• Tax credits for research and development

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Government Policy

• Small Business Regulatory Enforcement Fairness Act

• Unfunded Mandates Reform Act

• Small Business Innovation Research (SBIR) program

• 8(a) Business Development Program

• HubZone Empowerment Contracting Program

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Health and Safety

Occupational Safety and Health Act of 1970 (OSHA) requires employers to

• Provide safe and healthy work environment

• Comply with specific standards

• Keep records of occupational injuries and illnesses

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Discrimination

• Title VII of the Civil Rights Act of 1964 prohibits employers from basing employment decisions on race, color, religion, sex, or national origin

• Americans with Disabilities Act of 1990 prohibits discrimination against persons with disabilities

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Americans with Disabilities Act

• Protects persons with disabilities who are able to perform the essential functions of the job

• Requires employers to provide reasonable accommodation for such persons

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Group Decision Making Pitfalls

• Group polarization—tendency to shift toward more extreme views

• Groupthink—groups gathers around a specific decision, rejecting contrary information

• Biased processing of information

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Improving Group Decisions

• Devil’s advocate technique

• Authentic dissent

• Appoint individuals with technical or business experience to a Board of Advisors