PowerPoint
Presentations for
Small Business Management:
Launching and Growing New Ventures,
Fifth Canadian Edition
Adapted by
Cheryl Dowell
Algonquin College
Chapter 2
Start-up and the Need for
Competitive Advantage
LOOKING AHEAD
After studying this chapter, you should be able to:
1. Give several reasons for starting a new business rather
than buying an existing firm or acquiring a franchise.
2. Identify several factors that determine whether an idea for
a new venture is a good investment opportunity.
3. Distinguish between the different types and sources of
start-up ideas.
4. Define competitive advantage and assess features of the
environment and organization itself that support
competitive advantage.
continued…
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LOOKING AHEAD
After studying this chapter, you should be able to:
5. Evaluate the feasibility of a business.
6. Identify and compare strategy options for building and
sustaining competitive advantage.
7. Define market segmentation and its related strategies.
8. Explain the concept of niche marketing and its importance
to small business.
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THE START-UP:
CREATING A NEW BUSINESS
• Starting from “scratch” WHY?
– based on a recently invented or developed
product/service
– take advantage of an ideal location, equipment,
product/service, employees, suppliers, and
bankers
– avoid undesirable precedents, policies,
procedures, and
– legal commitments of existing firms
LO 1
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THE START-UP: NEXT STEP IS TO ASK
• What are the different types of start-up ideas you
might consider?
• What are some sources for additional new business
ideas?
• How can you identify a genuine opportunity that
promises attractive financial rewards?
• How should you refine your business idea?
• What could you do to increase your chances that the
start-up business will be successful?
• What competitive advantage could your business have
over its rivals?
LO 1
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IDENTIFYING START-UP IDEAS
Market
factors
Competitive
advantage
Economics
Management
capability
Fatal flaws
LO 2
• meet a clearly defined market need
• timing must be right
• a product or service that customers perceive to be superior
to those of its competitors
• profitable
• growth potential
• a good fit between the entrepreneur and the opportunity
• appropriate skills and experience to operate the venture
• no fatal flaw in the venture
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TYPES OF START-UP IDEAS
• Type A
– providing customers with an existing product not
available in their market
• Type B
– involving new ideas, involving new technology,
centered around providing customers with a new
product
• Type C
– providing customers with an improved product
LO 3
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TYPES OF IDEAS THAT
DEVELOP INTO START-UPS
LO 3
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SOURCES OF START-UP IDEAS
LO 3
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USING INTERNAL AND EXTERNAL ANALYSIS
TO EVALUATE AN OPPORTUNITY
Sociocultural
Buyer
Political /
Legal
New
competition
Supplier
Existing
Competition
Technological
Substitutes
Economic
LO 3
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CORE COMPETENCIES AND
ASSESSING THE ORGANIZATION
• Core Competencies
– Value-creating organizational capabilities that are
unique to a firm
• Resources versus Capabilities
– Resources are basic inputs that a firm uses to conduct
business (capital, technology, equipment, employees,
etc.)
• intangible and tangible resources
– Capabilities are the integration of several resources
which are deployed together to the firm’s advantage
LO 4
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VENTURE FEASIBILITY
SCREENING MODEL
• Stage 1: Back-of-the-Envelope concept
– Potential customers, technology available, match to entrepreneur,
financial feasibility
– Decision: go or no go
• Stage 2: Research and Verification
– Detailed analysis of customers, competition, HR required, technical
and financial feasibility
– Decision: go or no go
• Stage 3: Refine the Concept
– Detailed business plan
– Decision: go or no go
• The Leap of Faith
LO 5
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COMPETITIVE ADVANTAGE FACTORS
Unique
Service
Features
Notable
Product
Attributes
Price / Value
Competitive
Advantage
Accessibility
LO 5
Customer
Service
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SELECTING STRATEGIES TO GAIN
COMPETITIVE ADVANTAGE
Cost Advantage
• WestJet Airlines Ltd
• ING Direct
Marketing
Advantage
• Arctic Glacier
LO 6
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SUSTAINABLE COMPETITIVE
ADVANTAGE LIFE CYCLE
Erosion
Sustainable Competitive Advantage
LO 6
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MARKET SEGMENTATION
AND ITS VARIABLES
Multisegmentation
strategy
Market
Segmentation
Single-
segmentation
strategy
LO 7
•
•
•
•
recognizes individual segments
with different preferences
tailor marketing mixes to various segment
risk of spreading resources too thinly among
several marketing efforts
• several distinct market segments exist
• but chooses to concentrate on reaching only one
segment
• specialize and make better use of its limited
resources
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MULTISEGMENT MARKET STRATEGY
LO 7
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NICHE MARKETING
STRATEGIES
•
•
•
•
Restricting focus to a single market segment
Limiting sales to a single geographical region
Emphasizing a single product or service
Concentrating on the superiority of the
product
LO 8
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NICHE MARKETING
EROSION
1. Focus strategy is imitated
2. Target segment becomes structurally unattractive
because of erosion of the structure or because
demand simply disappears
3. Target segment’s differences from other segments
narrow
4. New firms subsegment the industry
LO 8
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