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2. Scanning the environment – researching the industry
CHAPTER 4
Scanning the environment – researching the industry
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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.
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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
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5. Applying the cube face external environment
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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
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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
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8. 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
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9. Sources of industry information
Key Note
Mintel
Euromonitor
Company annual reports
Company profiles
Industry associations
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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
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11. 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
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12. Learn from Michael Porter
Interview with Michael Porter, 13 minutes, Harvard Business
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13. Conclusions Five Forces
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14. 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 ?
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Learning outcomes
Drawing conclusions about the industry
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16. Supply chain - positioning
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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.
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Questions?
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