© Inge Hill Start Up, Palgrave 2015

Scanning the environment – researching the industry CHAPTER 4 Scanning the environment – researching the industry © Inge Hill Start Up, Palgrave 2015

© Inge Hill Start Up, Palgrave 2015 The purpose of Start Up So many start-ups fail because… No or insufficient research carried out Forecasts for sales too high Too little time spent on business modelling – finding optimal ways of production and delivery – therefore, costs too high Too much stock bought too early Insufficient amount of marketing A sustainable start-up only closes when the founder(s) want to do so – and is/are not forced to do it. The Start Up Cube offers a solution to create a sustainable start-up offering principles and doable practices. © Inge Hill Start Up, Palgrave 2015

© Inge Hill Start Up, Palgrave 2015 Learning outcomes Differentiate industry and market Discover effective ways to research and analyze an industry Discuss ways to gather competitive intelligence Explore the phase the potential industry to enter is in Examine the external environment for the start-up applying PESTLE framework Evaluate an industry with Porter’s Five Forces model Draw conclusions about the industry Establish position in the value chain © Inge Hill Start Up, Palgrave 2015

Applying the cube face external environment © Inge Hill Start Up, Palgrave 2015

© Inge Hill Start Up, Palgrave 2015 Definitions Industry: a grouping of businesses that interact in a common environment as part of the value chain or distribution channel Market: a grouping of customers that an entrepreneur targets © Inge Hill Start Up, Palgrave 2015

© Inge Hill Start Up, Palgrave 2015 Industry life cycles Understanding the phase your potential industry is in you plan to enter helps to see how much money can be made. Industries and products move through a life cycle that includes: Birth Growth and adaptation Differentiation and competition Shakeout Maturity and decline © Inge Hill Start Up, Palgrave 2015

Framework to collect data on the external environment Well-known framework PESTLE or SLEEPT Summarising six areas in the external environment – impacting on a start-up Political factors Economic factors Social and cultural factors Technological factors Legal factors Environmental factors © Inge Hill Start Up, Palgrave 2015

Sources of industry information Key Note Mintel Euromonitor Company annual reports Company profiles Industry associations © Inge Hill Start Up, Palgrave 2015

© Inge Hill Start Up, Palgrave 2015 Competitors Direct Indirect Businesses that serve the same customers with the same resources Coca Cola – competitor is Pepsi with its Cola products Businesses that serve the same customers with different goods/services Coca Cola – sparking drinks manufacturers that also offer coffeinated drinks; energy drinks such as Monster, Red Bull © Inge Hill Start Up, Palgrave 2015

Michael Porter’s Five Forces A tool for identifying where power lies - business, competitors, suppliers and customers A way to understand if the industry is profitable and to what extent Porter gives stars to each factor to indicate the strengths © Inge Hill Start Up, Palgrave 2015

Learn from Michael Porter http://www.youtube.com/watch?v=2FzYhdS4pqM Interview with Michael Porter, 13 minutes, Harvard Business © Inge Hill Start Up, Palgrave 2015

Conclusions Five Forces © Inge Hill Start Up, Palgrave 2015

Conclusions to applying Five Forces Conclusions to draw for each industry: For each of the Five Forces indicate if you think based on your research that the Force is Low / medium / high And draw an overall conclusion Is this an industry that it is useful to enter ? © Inge Hill Start Up, Palgrave 2015

© Inge Hill Start Up, Palgrave 2015 Learning outcomes Drawing conclusions about the industry © Inge Hill Start Up, Palgrave 2015

Supply chain - positioning © Inge Hill Start Up, Palgrave 2015

© Inge Hill Start Up, Palgrave 2015 Summary Drawing conclusions on the industry is essential for the sustainable start-up. It is important to know how many companies there are, how many were founded / closed recently, and how the turnover and profit developed over the last five years. Only when an industry is profitable, it is worth entering. A declining industry might still offer some short-term profit for the well experienced entrepreneur only. © Inge Hill Start Up, Palgrave 2015

© Inge Hill Start Up, Palgrave 2015 Questions? © Inge Hill Start Up, Palgrave 2015