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Chapter 4

Chapter 4. Venture Environment Assessment. Villa College. Chapter Outline. The components of Ventures’ Environment Macro Environment Micro Environment Organizational Internal Environment Identify Business Opportunity Evaluation of Business Opportunity . Villa College.

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Chapter 4

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  1. Chapter 4 Venture Environment Assessment Villa College

  2. Chapter Outline The components of Ventures’ Environment Macro Environment Micro Environment Organizational Internal Environment Identify Business Opportunity Evaluation of Business Opportunity Villa College

  3. The meaning of Venture ‘A venture is a major undertaking, synonymous with adventure’ ‘A business project or activity, especially one that involves taking risks’ - Oxford Business Dictionary Villa College

  4. Entrepreneurial Ventures • ‘Organizations that are pursuing opportunities’ • Are characterised by • Innovative practices • Growth and profitability as main goals Villa College

  5. The Environment The term Environment refers to; ‘institutions or forces outside the organization that potentially affect the organization’s performance’ The conditions that affect the behaviour and development of somebody, something; the physical conditions that somebody / something exists in - Oxford business dictionary Villa College

  6. The Ventures’ Environmental Scanning • Environmental scanning refers to the efforts by which an entrepreneur examines the external and internal environment before taking a decision • Often entails evaluating the three environmental components • General (External Macro / Micro & Internal environments) • Industry • Competitor Villa College

  7. The components of Ventures’ Environment Villa College

  8. External-Macro Environment Villa College

  9. Political & Legal • The political arena has a huge influence upon the regulation of businesses, and the spending power of consumers and other businesses • Should consider issues such as: • How stable is the political environment? • Will government policy influence laws that regulate or tax your business? • What is the government's position on marketing ethics? • What is the government's policy on the economy? • Does the government have a view on culture and religion? • Is the government involved in trading agreements such as EU, NAFTA, ASEAN, or others? Villa College

  10. The political & legislative segment of Macro Environment Villa College

  11. Economy • Economic Factors that need to consider the state of a trading economy in the short and long-terms • Should consider • What is the present state of the economy? • How sustainable is economic growth? • What is driving economic growth? • How accurate are the relevant economic indicators? • If real economic growth is likely, will this mean that GDP per head will also rise? • What will happen to exchange rate & inflation rate? • What about the interest rates? • What is the condition of the labour market? Villa College

  12. Socio-Cultural • The social and cultural influences on business vary from country to country • The factors should be considered • What is the dominant religion? • What are attitudes towards various products and services? • Does language impact upon the diffusion of products onto markets? • How much time do consumers have for leisure? • What are the roles of men and women within society? • How long are the population living? • Are the older generations wealthy? • Do the population have a strong/weak opinion on green issues? Villa College

  13. Technology • Technology is vital for competitive advantage, and is a major driver of globalization • Should consider the following points: • Does technology allow for products and services to be made more cheaply and to a better standard of quality? • Do the technologies offer consumers and businesses more innovative products and services such as Internet banking, new generation mobile telephones, etc? • How is distribution changed by new technologies e.g. books via the Internet, flight tickets, auctions, etc? • Does technology offer companies a new way to communicate with consumers e.g. banners, Customer Relationship Management (CRM), etc? Villa College

  14. Ecology The ‘bottom-line’ issues Issues such as pollution, waste disposal, recycling, protection of wild-life, workplace safety etc. Entrepreneurs should be a part of ‘sustainable development’ Villa College

  15. Micro/Industrial Environment

  16. Consumers • Customers Vs. consumers????? • The factors should be considered • Who are the consumers / customers? What are their characteristics? • What do consumers / customers want? • How do consumers / customers make their decisions? • What are their spending patterns? • How much money do they have to spend? • How do other companies in the sector see consumer / customer base & how much are they able to sell to them in reality? • How difficult / easy is to reach potential consumers / customers? • What are the most effective ways to promote the product? • What kind of advertising / promotion works best? Villa College

  17. Competitors • Are the businesses that fulfill the same customer needs or have the potential to serve these customers • The factors to be considered • Which competitors are already operating in the market? • How strong are competitors that are already there/ • How many people do they employ & what is their organizational structure? • Are other competitors entering or planning to enter the market? • What do customers / consumers think about competitors & their products / services? • If competitors failed / succeeded, why? Villa College

  18. Financial Institutions • Are one of the sources for external funding to initiate a new business venture or expanding an existing business • The factors to be considered • Is it possible to finance operations locally? • How stable is the banking system? How high is the risk of collapse? • How efficient is the banking system? • Are banks willing to lend to local private individuals, small & medium-sized enterprises? • What other potential sources of funding (development banks, government agencies etc.) can be tapped in to? Villa College

  19. Governmental Agencies • Government’s involvement on developing entrepreneurship through various policies & institutions • Some factors to be considered • Does the government allow a level playing field? • To what extent do local special-interest groups have influences to businesses? • Does the government protect intellectual property? • Does the government encourage free trade? • To what extent does the government interfere with pricing? • What is the quality of public administration & government bureaucracy? • Who are the key government players who can make or brake plans for a business? Villa College

  20. Industry Environment Analysis Villa College

  21. Competitor Intelligence Analysis Who are they??? What are they doing??? How will they act in future??? What they are doing affect us?? Villa College

  22. Competitor Analysis Components of a competitor analysis Future Goals Current Strategy Competitor’s Response Profile Is the competitor satisfied with its current position? What likely moves or strategy shifts will the competitor make? Where is the competitor vulnerable? What will provide the greatest & the most effective retaliation by the competitor? Assumptions Capabilities Villa College

  23. Internal Environment Villa College

  24. Organizational Structure • ‘The formal framework by which job tasks are divided, grouped & co-ordinated’ • What type of organization design???? • 2 generic models • contingency factors • Contemporary organizational designs • Team based • Matrix & project • Autonomous internal units • Boundryless Organizations • Learning organizations Villa College

  25. Organizational Culture • ‘The spirit, attitude, the behaviour of the organization’ • Culture is formed through; • Vision / mission of the founder • Behaviour of the senior management • Recruitment & training of employees • How the culture is ‘learned’???? • Stories • Rituals • Language • Material symbols Villa College

  26. Types of Organizational Cultures Formal Control Orientation Stable Flexible Internal External Forms of Attention

  27. Bureaucratic Vs. Entrepreneurial cultures • Bureaucratic culture : • Organization that values formality, rules, standard operating procedures & hierarchical coordination • Task responsibilities & authorities for all employees are clearly defined • Everyone believes that they have to “go by the book” • Entrepreneurial culture – • High level of risk taking, dynamism & creativity • There is a commitment to experimentation, innovation & being on the leading edge • Individual initiative, flexibility & freedom foster growth and are encouraged & well rewarded • Innovation and entrepreneurship are valued Villa College

  28. Organizational Culture Bureaucratic Culture vs. Entrepreneurial Culture Villa College

  29. Organizational Resources Villa College

  30. What is a ‘Business Opportunity’???? A business concept that, it turned into a tangible product or service offered by a business enterprise, will result in financial profit - Myzuka (2000) Related with 3 S’s of opportunity Work experience Hobbies Hobbies Villa College

  31. Opportunity and Entrepreneurship An opportunity is a gap in the market. It represents the potential to serve the customers better than they are being served at present The entrepreneur is responsible for scanning the business landscape for unexploited opportunities or possibilities that something important might be done both differently & better!!! The improved way of doing ‘it’ is the innovation that the entrepreneur presents to the market Villa College

  32. Types of Business Opportunity Villa College

  33. Recognition of an opportunity • Sources of Opportunity • The unexpected • The incongruous • The process need • Industry and market structure • Demographics • Change in perception • New knowledge Villa College

  34. Recognition of an opportunity • Sources of Opportunity • The unexpected • The incongruous • The process need • Industry and market structure • Demographics • Change in perception • New knowledge Villa College

  35. Seeing the Business Opportunity Villa College

  36. Sizing the Business Opportunity • Not all opportunities are equally valuable!!!! • Key decisions in screening & selecting opportunities relates to • Size of the opportunity • The investment necessary to exploit it • The rewards that will be gained • The risks likely to be connected Villa College

  37. Seizing the Business Opportunity Villa College

  38. Opportunities and new Firms Villa College

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