Enviorenmental Scanning for Ent

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Environmental ScanningEnvironmental Scanning

UNIT-II

Topic-2



The Environment for New Ventures

The Environment for New Ventures


Refers to the efforts of an owner Refers to the efforts of an owner--entrepreneur takes inentrepreneur takes in

examining the external and internal environmentsexamining the external and internal environments

before making a decision.before making a decision.

External EnvironmentExternal Environment

General environmentGeneral environment

�� Demographic, economic, political/legal, socioDemographic, economic, political/legal, socio--cultural,cultural,

technological, and global segments.technological, and global segments.

Industry environmentIndustry environment

�� New entrants, suppliers, buyers, product substitutes, intensityNew entrants, suppliers, buyers, product substitutes, intensity

of rivalry among competitorsof rivalry among competitors

Competitor environmentCompetitor environment

�� Position of the venture within the industryPosition of the venture within the industry



The External Environment The External Environment

Source: Michael A. Hitt, R. Duane Ireland and Robert E. Hoskisson, Strategic Management 6th ed (South-Western Publishing, 2005), 39.



The Environmental VariablesThe Environmental Variables

Source: Michael A. Hitt, R. Duane Ireland and Robert E. Hoskisson, Strategic Management 6th ed. (South-Western Publishing, 2005), 40.



The Environmental Variables (cont¶d)The Environmental Variables (cont¶d)

Source: Michael A. Hitt, R. Duane Ireland and Robert E. Hoskisson, Strategic Management 6th ed. (South-Western Publishing, 2005), 40.



A Macro View: The Economic andIndustry Environments

A Macro View: The Economic andIndustry Environments

Assessing the Economic EnvironmentAssessing the Economic Environment

Nature of the industryNature of the industry

The regulatory environmentThe regulatory environment

Examining the Industry EnvironmentExamining the Industry Environment

Common industry characteristicsCommon industry characteristics

Barriers to entryBarriers to entry

Competitive analysisCompetitive analysis



I mpact of Regulatory Agencies on the Typical BusinessI mpact of Regulatory Agencies on the Typical Business

Source: Murray L. Weidenbaum, Business, Government and the P ubl ic , 4th ed. (Englewood Cliffs, NJ: Prentice Hall, 1990), 9. Reprinted by permission of Prentice-

Hall, Englewood Cliffs, New Jersey.



The Regulatory Environment The Regulatory Environment

Governmental regulations affect smaller Governmental regulations affect smaller ventures in a variety of ways:ventures in a variety of ways: PricesPrices

Cost inequitiesCost inequities

Competitive restrictionCompetitive restriction

Managerial restrictionManagerial restriction

Mental burdenMental burden



Source: Ronald G. Cook and David Barry, ³When Should the Small Fi rm Be Involved in Public Policy?´ J ournal of Small Business Management

(January 1993): 44.



Examining the Industry Environment Examining the Industry Environment

Environmental AssessmentEnvironmental AssessmentWhat is the structure of the industry, and howWhat is the structure of the industry, and how

is it likely to evolve over time?is it likely to evolve over time?

What is the company¶s relative position in theWhat is the company¶s relative position in theindustry?industry?

Common Industry CharacteristicsCommon Industry Characteristics Technological uncertaintyTechnological uncertainty

Strategic uncertaintyStrategic uncertainty

FirstFirst--time buyerstime buyers

ShortShort--time horizonstime horizons



Elements of I ndustry²The Five Forces Model Elements of I ndustry²The Five Forces Model

Source: Adapted with permission of The Free Press, an imprint of Simon & Schuster Adult Publishing Group, from C ompetitive Advantage: C reating and

S ustaining S uperior Performance by Michael E. Porter, 6. Copyright © 1985, 1998 by Michael E. Porter.



G uide To Using The Five Forces Model For I ndustry AnalysisG uide To Using The Five Forces Model For I ndustry Analysis

Source: Adapted and reprinted by permission of H arvard Business Review. Michael E. Porter, ³How Competitive Forces Shape Strategy,´ H arvard Business Review

February 1979): 137-145. Copyright © 1979 by the Harvard Business School Publishing Corporation: all rights reserved.



C ompetitive

Profile

Analysis

C ompetitive

Profile

Analysis



C omponents of a C ompetitive AnalysisC omponents of a C ompetitive Analysis

Source: Adapted with permission of The Free Press, an imprint of Simon & Schuster Adult Publishing Group, from C ompetitive Strategy: Technique for

Anal yzing Ind ustries and C ompetition by Michael E. Porter, 49. Copyright © 1980, 1998 by The Free Press.



Taking the Right StepsTaking the Right Steps

C l ear l y define the ind ustry for the new vent ure.

Anal yze the competition.

Determine the strength and characteri stic s of suppl ier s.

E stabl i sh the value-added measure of the new

vent ure.

Project the market size for the partic ul ar ind ustry.




CtdCtd«..«..

UNIT-IITopic-2



A Micro View: The Community PerspectiveA Micro View: The Community Perspective

Researching the LocationResearching the Location Community demographicsCommunity demographics

Economic baseEconomic base

Population trendsPopulation trends

Overall business climateOverall business climate



Determining Reliance and DeservednessDetermining Reliance and Deservedness

Questions for evaluating reliance and deservedness:Questions for evaluating reliance and deservedness:

How familiar is the entrepreneur with the community where theHow familiar is the entrepreneur with the community where the

venture will be located?venture will be located?

Will the proposed venture make any special positive or negativeWill the proposed venture make any special positive or negative

impacts on the community during the prestartimpacts on the community during the prestart--up period or duringup period or during

the startthe start--up period?up period?

Does the entrepreneur have special skills in human relations withDoes the entrepreneur have special skills in human relations with

which to nurture key local contacts?which to nurture key local contacts?

What active steps can be taken to strengthen local support andWhat active steps can be taken to strengthen local support andmaximize local opportunities during the startmaximize local opportunities during the start--up period?up period?

What active steps can be taken to reduce local opposition andWhat active steps can be taken to reduce local opposition and

minimize local problems during the startminimize local problems during the start--up period?up period?



Determining Reliance and DeservednessDetermining Reliance and Deservedness

RelianceReliance TheThe strengthstrength of of communitycommunity supportsupport for for aa ventureventure isis

basedbased onon::

�� TheThe strengthstrength of of thethe community¶scommunity¶s reliancereliance onon or or needneed for for thethe

entrepreneur¶sentrepreneur¶s ventureventure

�� TheThe entrepreneur¶sentrepreneur¶s willingnesswillingness toto makemake aa commitmentcommitment toto thethe

communitycommunity

DeservednessDeservedness TheThe strengthstrength of of communitycommunity supportsupport for for aa ventureventure isis

basedbased onon thethe extentextent toto whichwhich thethe communitycommunity perceivesperceives

thatthat thethe entrepreneur entrepreneur deservesdeserves itsits supportsupport



Reliance

Versus

C ommitment:

Development

of Exceptional

C ommunity

Support

Reliance

Versus

C ommitment:

Development

of Exceptional

C ommunity

Support

Source: Adapted fromR

obert C.R

onstadt, Entrepreneur ship (Natick, MA: Lord Publishing, Inc., 1984)), 84.

Reprinted with permission.



Deservedness

VersusI dentification:

Development

of Exceptional

C ommunity

Support

Deservedness

VersusI dentification:

Development

of Exceptional

C ommunity

Support

Source: Adapted from Robert C. Ronstadt, Entrepreneur ship (Natick, MA: Lord Publishing, Inc., 1984), 85. Reprinted with permission.



Examining the Use of IncubatorsExamining the Use of Incubators

Business Incubator Business Incubator A facility with adaptableA facility with adaptable

space that smallspace that small

businesses can lease onbusinesses can lease on

flexible terms and atflexible terms and at

reduced rents.reduced rents.

Types of IncubatorsTypes of Incubators

Publicly sponsoredPublicly sponsored

NonprofitNonprofit--sponsoredsponsored

UniversityUniversity--relatedrelated

Privately sponsoredPrivately sponsored

Services Provided:Services Provided: BelowBelow--marketmarket--rate rentalrate rental

space.space.

No maintenanceNo maintenance

responsibilities.responsibilities.

Sharing of equipment andSharing of equipment andservices.services.

Financial and technicalFinancial and technical

assistance.assistance.

An environment whereAn environment where

small businesses are notsmall businesses are notalone.alone.

Increased visibility to theIncreased visibility to the

community.community.



H ow Does the I ncubator Work? H ow Does the I ncubator Work?



Community Benefits of IncubatorsCommunity Benefits of Incubators

Transformation of underused property into aTransformation of underused property into acenter of productivitycenter of productivity

Creation of opportunities for public/privateCreation of opportunities for public/private

partnershipspartnerships

Diversification of the local economic baseDiversification of the local economic base

Enhancement of the locality¶s image as a center Enhancement of the locality¶s image as a center of innovation and entrepreneurshipof innovation and entrepreneurship

Increased employment opportunitiesIncreased employment opportunities

Enviorenmental Scanning for Ent

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