Environmental Analysis and Strategies for companies medium and large

1. Chapter 4
Strategies That Capture
Opportunities

2. Business Opportunity
 Occurs when there is room to offer a
product or service in a particular market
which fulfills customers’ demands.
 2 (Two) Situations
 For Example: A high volume of ladies
that demand diet and beauty nowadays

3. Business Opportunities vs.
Environment
 Interconnected
 Factors in environment:
1. General Environment
- Economy
- Demographic
- Social and Cultural
- Politic and Legal
- Technology

4. General Environment
Sociocultural

5. Business Opportunities vs.
Environment (Cont’d)
2. Industry Environment
- Threat of new entrants
- Threat of substitute products or service
- Intensity of rivalry among existing
competitors
- Bargaining power of suppliers
- Bargaining power of buyers

6. Porter’s Five Forces Model
Industry
Competitors
Rivalry Among
Existing Firms
Suppliers
Bargaining
Power
of Suppliers
Potential Entrants
Threat of New Entrants
Buyers
Bargaining
Power
of Buyers
Substitutes
Threat of Substitute
Products or Services

7. Adhesive Heat Strip
“The Company’s mission is to provide
value to major coffee chain(s) and its
consumers with a heat strip resident on
every disposable paper cup for a more
pleasurable experience in
consuming hot beverages”
Extremely Hot Very Hot Consume Warm Cold

8. Competitive
Rivalry
No Direct
Competitors
Bargaining
Power of
Suppliers
American Thermal
Instruments
Porter’s 5 forces model of industry
attractiveness
Bargaining
Power of
Buyers
Starbucks
Threat of
Substitutes
Styrofoam Cup
Threat of
New Entrants
Government Regulation,
Capital Requirement

9. Wednesday, March 27,
2024 9
IDENTIFYING ENTREPRENEURIAL OPPORTUNITIES
Assessing Potentials in the External Environment
THE INDUSTRY ENVIRONMENT
1. Threat of new competitors
 Barrier to entry include obstacles such as limited access
to necessary materials, control of proprietary
technologies, and restricted access to channels of
distribution.
 High barriers discourage the entry of new rivals and thus
protect market space from competition, which translates
into higher profits for firms in the industry.
 The threat of entry is also influenced by such factors as the
uniqueness of competing products, switching costs,
and government policies.
 High mobility barriers discourage competition by turning
back potential rivals from other segments of the industry,
thus shielding profits in the protected market niche.

10. 10
IDENTIFYING ENTREPRENEURIAL OPPORTUNITIES
Assessing Potentials in the External Environment
THE INDUSTRY ENVIRONMENT
2. Threat of substitute products or services
 Can impact potential profits in an industry by placing a
ceiling on prices.
 If prices rise too high, consumers are likely to turn to
substitutes, especially if the cost of switching is low.
3. Intensity of rivalry among existing competitors
 The number and size of competitors, the market demand
for the product or service, and forces called exit
barriers, which can keep rivals in an industry even after
they become unprofitable.
 Rivalry is intense (and profits are usually low) when the
industry is populated by a large number of firms of
similar size, demand for the product or service is stable
or declining, and barriers deter rivals from exiting the
industry.

11. 11
IDENTIFYING ENTREPRENEURIAL OPPORTUNITIES
Assessing Potentials in the External Environment
THE INDUSTRY ENVIRONMENT
4. Bargaining power of suppliers
 Determined by the number and size of alternative
suppliers,
the level of differentiation of their products or services,
and the cost of switching between them.
 The bargaining power declines as the number of
alternative
suppliers grows, the product or services become more
similar, and unfavorable changes in switching costs
occur.

12. 12
COMPETITIVE ADVANTAGES OF
ENTREPRENEURIAL FIRMS
1. Customer focus.
2. Quality performance
3. Integrity and responsibility
4. Innovation
5. Low-cost production
1. Customer Focus
 Small firms have a greater potential to achieve good
customer service.
 Creating customer satisfaction and loyalty.
 Less bureaucracy or policies.
 Customers are personally acquainted with entrepreneur
and the employees.

13. 13
COMPETITIVE ADVANTAGES OF ENTREPRENEURIAL FIRMS
2. Quality Performance
 Easy to insist on high level of quality.
3. Integrity and Responsibility
 Reputation for honesty and dependability.
 Can earn the loyalty of skeptical public.
4. Innovation
 Many entrepreneurs are innovators.
 Studies suggested that 50% of all innovations and 94%
of all radical innovations since World War II have come
from new small firms.
 More creative ideas.
5. Low-Cost Production
 Can find ways to operate that has a cost advantage.

14. The Process in Business
Opportunity
 Identifying the needs and wants of
customers
 Scanning the environment and
evaluating of self and the community
 Screening of business opportunity
 Selecting a business opportunity and
preparing a business plan

15. Selecting Strategies that
Capture Business Opportunities
 Cost-based Strategy
A plan of action that required a firm to be the lowest cost
producer within its market
 Differentiation-based Strategy
A plan of action designed to provide a product or service with
uniqueness that are valued by consumers
 Focus Strategy
A plan of action that isolates an enterprise from competitors
and other market by targeting a restricted market segment

16. Matching Environmental and
Organizational Potentials
 Strengths
 Weaknesses
 Opportunities
 Threats
SWOT: a type of assessment that provides a concise overview of
a firm’s strategic situation

17. The Most Common Idea
Stoppers
 “Where do you get these weird ideas?”
 “Can’t” (said with a shake of the head and an
air of finality)
 “That’s the dumbest thing I’ve ever heard”
 “We already tried that – years ago.”
 “I don’t see anything wrong with the way we’re
doing it now.”
 “Let’s get back to reality.”

18. Pitfalls in Selecting New
Venture
 Lack of Objective Evaluation
 No Real Insight into the Market
 Poor Financial Understanding
 Lack of Venture Uniqueness
 Ignorance of Legal Issues

19. Risks
 Business Risks
 Financial Risks

20. Sources of Startup Ideas
 Prior Work Experience (45%)
 Personal Interest/Hobby (16%)
 Chance Happening (11%)
 Suggestion (7%)
 Education/Courses (6%)
 Family Business (6%)
 Friends/Relatives (5%)
 Others (4%)

21. Class Assignment
 What are the differences in Business
Risks & Financial Risks?