1. Entrepreneurship Canadian Edition William D
Entrepreneurship Canadian Edition William D. Bygrave, Andrew Zacharakis, Sean Wise

2. UNDERSTANDING YOUR BUSINESS MODEL AND DEVELOPING YOUR SRATEGY
Chapter 4

3. Learning Objectives The Business Model The First-Mover Myth
Learning Objective 4.1 Describe the two components of the business model.
The First-Mover Myth
Learning Objective 4.2 Explain why the first-mover advantage is a myth.
Long Tail Theory
Learning Objective 4.3 Describe the long tail theory.
Formulating a Winning Strategy
Learning Objective 4.4 Describe the components required to formulate a winning business strategy.

4. Today’s Key Concepts Business Model Better, Faster or Cheaper?
Revenue Model
The World is Flat
Starting Strategy
Entry Strategy
Differentiation
Expansion Strategy
Low cost
Niche
Business Model Canvas
First Mover Advantage
First Mover Myth

5. Your First Steps Are to…
Select a business model
Determine a basic strategy category
Differentiation
Low cost
Niche

6. What Is a Business Model?
A business model describes the rationale of how an organization creates, delivers, and captures value, in economic, social, cultural or other contexts.
Business model = revenue model – cost model
The revenue model breaks down all the sources of revenue that your business will generate.
The cost model identifies how you are spending your resources to make money. It includes your cost of goods sold (COGS) and your operating expenses.
Business Model has 9 components

7. 9 Parts of a Business Model
Key partners – Who are our suppliers and service providers
Key activities – What do we do with our resources?
Value proposition – What problems need to be solved? What product does it best?
Customer relationships – How do we interact with our customers?
Customers – Who are our users and who are our paying customers?
Channels – How do our customers find, buy, and use the product?
Revenue – Where does revenue come from?
Key resources – What goods, services, and infrastructure do we use?
Costs – What is the total cost of production?

8. Building a Business Model

9. Business Model Canvas

10. Lean Startup Canvas

11. Create a Business Model
Cost Model
Cost of Goods Sold
Operating Expenses
Revenue Model
Sources of Revenue

12. Amazon’s Revenue and Cost Model Requires High Volume
Revenues just exceed costs
48.1
14.8
(14.2)
(18.3)
(23.0)

13. To succeed as a successful first mover you must…
Be first (or very early) into the market
Capture a large percentage of the market quickly
Create switching costs so customers stick with you
First movers rarely win and it’s an expensive strategy to take

14. First Mover’s Are Often Surpassed
Industry
First Mover
Current Leader
Social Networking
Friendster
Facebook
Video Games
Atari
Nintendo
Web Browser
Mosaic
Google
Internet Search Engine
Excite
Word Processing Software
WordStar
Microsoft Word
Personal Computer
Altair
Dell
Juno
Yahoo Mail
Diet Soda
No-Cal
Diet Coke
Presentation Software
Harvard Graphics
Microsoft PowerPoint
Online Bookseller
Book Stacks Unlimited
Amazon
ATM Machines
Docutel
Diebold

15. To win, your strategy must be to be one, or more, of these…
Faster
Better
Cheaper
And one of these must be 10x

16. People Are the Advantage
Values
Structure
Selection
Founders need to create a culture and align the employees they select with the values and structure of the company

17. Develop Entry Strategy
Benchmark
Devise Initial Market Test
Create a Platform

18. Benchmark the Competition: The JetBlue Example

19. Drive Growth Three Ways
Geographic expansion
Product mix expansion
Franchising

20. Franchising Has Three Main Benefits
Replicability
Established and proven methods
New sources of revenue
Royalties and fees from franchisees
New capital funds growth
Franchising works best with service businesses that are easy to replicate. Be sure to monitor franchisees to maintain brand purity

21. Top Franchisors Do Well

22. Drive Growth with Product Mix
Tangents and adjacencies
What makes sense with current offerings?
Spread current costs
New products  revenues more than costs
Maintain same distribution channels
Build on the base that was already created from existing products. Share resources, relationships and channels with current lines?

23. Mimic proven success strategies Vendors Can you use the same vendors?
Three Items to Consider before Expanding Geographically
Customers
Go where they are
Mimic proven success strategies
Vendors
Can you use the same vendors?
Any new costs? Leverage volume for better pricing
Distribution
Same channels?
Leverage volume

24. Friends and Family of Alumni
Global 2.0
It used to be, conquer the homeland before going aboard
But today’s startups are global from day 1
The World is Flat, but you can still choose a beachhead
e.g. Facebook
Harvard
Ivey League
Any School
Alumni
Friends and Family of Alumni
All English Speakers
Anyone
Beachhead
Mass Adoption

25. There are 8 basic ways to expanded internationally

26. International expansion has risks
Means
Pros
Cons
Technology Transfer
- Reduces entry costs
- Risk of losing the technology
Technology Licensing
- Creates revenue, conserves resources
- Doesn’t extend the brand
Outsourcing
- Cost-saving
- Managing partners
Exporting
Cheap and easy
Extra sales and transport costs
Moral hazard
Foreign Direct Investment
- Physical presence
- Control of assets
- Expensive
Franchising
- Licenses an operational system
- Risk of damaging the brand name
Venture financing
- Enabling and enacting mechanism
- Can lead to mergers and acquisitions with foreign companies
Mergers and acquisitions
- Established infrastructure
- Company can grow quickly
- Very expensive

27. Case: Zumba Fitness Discussion Questions
1. What business models could Zumba use?
2. Develop a revenue and cost model diagram for each of the options.
3. Which of these models would you recommend that they implement and why?
4. What are the key revenue and cost drivers for your recommended model?
5. What do you feel are the key aspects to implementing this model?

28. Recap Determine revenue and cost structure Choose a strategy
Find a Beachhead
Create a culture
Seek and select people who fit culture and goals
Plan entry approach, including benchmarks
Plan growth drivers

29. COPYRIGHT
Copyright © 2015 John Wiley & Sons Canada, Ltd. All rights reserved. Reproduction or translation of this work beyond that permitted by Access Copyright (The Canadian Copyright Licensing Agency) is unlawful. Requests for further information should be addressed to the Permissions Department, John Wiley & Sons Canada, Ltd. The purchaser may make back-up copies for his or her own use only and not for distribution or resale. The author and the publisher assume no responsibility for errors, omissions, or damages caused by the use of these programs or from the use of the information contained herein.