Chapter 5 - Understanding your business model & developing strategy. Marketing is at the heart of an organization because its task is to identify and serve customers’ needs. In essence, marketing spans the boundaries between a company and its customers. It is marketing that delivers a company’s products and services to customers and marketing that takes information about those products and services, as well as about the company itself, to the market.
UNDERSTANDI NG YOUR BUSI NESS MODEL & DEVELOPI NG STRATEGY Chapt e r Bygrave & Zacharakis, Entrepreneurship, New York: Wiley, 2014 © Your first steps are to… q Select a business model q Determine a basic strategy category § Differentiation § Low cost § Niche Bygrave & Zacharakis, Entrepreneurship, New York: Wiley, 2014 Zacharakis, Bygrave & Corbett, Entrepreneurship, New York: Wiley, © 2017© Create your business model Bygrave & Zacharakis, Entrepreneurship, New York: Wiley, 2014 Zacharakis, Bygrave & Corbett, Entrepreneurship, New York: Wiley, © 2017© Amazon’s revenue & cost model requires high volume 12 10 2009 2010 2011 2014 Revenues just exceed costs 2012 2013 Other Revenue Media Electronics & Merchandise Cost of Sales Operating Expenses Operating Income $1,129 $178 $1,406 $862 Bygrave & Zacharakis, Entrepreneurship, New York: Wiley, 2014 Zacharakis, Bygrave & Corbett, Entrepreneurship, New York: Wiley, © 2017© $676 $745 To Succeed as a First Mover, Entrepreneurs Must… ü Be First (or very early) into the Market ü Quickly Capture a Large % of the Market ü Create Switching Costs First movers rarely win and its an expensive strategy to take Bygrave & Zacharakis, Entrepreneurship, New York: Wiley, 2014 Zacharakis, Bygrave & Corbett, Entrepreneurship, New York: Wiley, © 2017© First Mover’s are Often Surpassed Industry First Mover Current Leader Social Networking Friendster Facebook Video Games Atari Microsoft X Box Web Browser Mosaic Google Chrome Internet Search Engine Excite Google Word Processing Software WordStar Microsoft Word Personal Computer Altair Lenovo Email Juno Google Gmail Diet Soda No-Cal Diet Coke Presentation Software Harvard Graphics Microsoft PowerPoint Online Bookseller Book Stacks Unlimited Amazon ATM Machines Docutel Bygrave & Zacharakis, Entrepreneurship, New York: Wiley, 2014 Zacharakis, Bygrave & Corbett, Entrepreneurship, New York: Wiley, © 2017© Diebold To win, your strategy must be to be one, or more, of these… Bygrave & Zacharakis, Entrepreneurship, New York: Wiley, 2014 Zacharakis, Bygrave & Corbett, Entrepreneurship, New York: Wiley, © 2017© Your People are your Advantage Founders need to create a culture and align the employees they select with the values and structure of the company Bygrave & Zacharakis, Entrepreneurship, New York: Wiley, 2014 Zacharakis, Bygrave & Corbett, Entrepreneurship, New York: Wiley, © 2017© Develop your Entry Strategy Benchmar k Devise Initial Market Test Create a Platform Bygrave & Zacharakis, Entrepreneurship, New York: Wiley, 2014 Zacharakis, Bygrave & Corbett, Entrepreneurship, New York: Wiley, © 2017© Benchmark your Competition: The JetBlue Example Bygrave & Zacharakis, Entrepreneurship, New York: Wiley, 2014 Zacharakis, Bygrave & Corbett, Entrepreneurship, New York: Wiley, © 2017© 10 Growth Strategy New ventures should focus on testing the market and refining the business model; however, it is never too early to start thinking about growth Bygrave & Zacharakis, Entrepreneurship, New York: Wiley, 2014 Zacharakis, Bygrave & Corbett, Entrepreneurship, New York: Wiley, â 2017â 11 Franchisinghas3mainbenefits q Replicability Đ q New sources of revenue § q Established and proven methods Royalties and fees from franchisees New capital to fund growth Franchising works best with service businesses that are easy to replicate Be sure to monitor franchisees to maintain brand purity Bygrave & Zacharakis, Entrepreneurship, New York: Wiley, 2014 Zacharakis, Bygrave & Corbett, Entrepreneurship, New York: Wiley, © 2017© 12 Top 10 US Franchisors Perform Well # Chain Franchise Sales (US Stores, Total ) Franchise (US Units) Sales per store (US) McDonald’s $35.4 billion 12,836 $2,500,000 Starbucks $12.7 billion 4,769 $2,660,000 Subway $11.9 billion 27,205 $475,000 Burger King $8.6 billion 7,090 $1,210,000 Wendy’s $8.5 billion 4,895 $1,594,000 Taco Bell $8.2 billion 4,995 $1,441,000 Dunkin Donuts $7.22 billion 8,047 $911,000 Chick-Fil-A $5.8 billion 1,837 $3,064,000 Pizza Hut $5.5 billion 7,337 $843,000 10 Panera Bread $4.5 billion 955 $2,500,000 Source: The 20 most successful Fast Food Chains in America, Business Insider, August 8, 2015 Bygrave & Zacharakis, Entrepreneurship, New York: Wiley, 2014 Zacharakis, Bygrave & Corbett, Entrepreneurship, New York: Wiley, © 2017© 13 Drive Growth with Product Mix q Tangential & Adjacent Products § What new products make sense with your current offerings? Current customers? q Spread Existing Costs over Larger Product Base q Accelerate Revenue Faster than Increase in Costs q Leverage your Firm’s Experience q Distribution q Supplier Channels Relationships q Customer Relationships Bygrave & Zacharakis, Entrepreneurship, New York: Wiley, 2014 Zacharakis, Bygrave & Corbett, Entrepreneurship, New York: Wiley, © 2017© 14 Consider these 3 topics before expanding geographically: q q q 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? Bygrave & Zacharakis, Entrepreneurship, New York: Wiley, 2014 Zacharakis, Bygrave & Corbett, Entrepreneurship, New York: Wiley, © 2017© 15 There are basic ways to expanded internationally Gradual Global Born Global Intermediating: Networks & Alliances Born Again Global Enabling Processes Direct: Technology Technology Transfer Technology Licensing Outsourcing Exporting Foreign Direct Investment Franchising Venture Finance M&A Activities Enacting Processes Bygrave & Zacharakis, Entrepreneurship, New York: Wiley, 2014 Zacharakis, Bygrave & Corbett, Entrepreneurship, New York: Wiley, © 2017© 16 International expansion has risks Means Pros Cons Technology Transfer - Reduces entry costs - Risk of losing the technology Technology Licensing - Creates revenue, conserves resources, controls risk - Doesn’t extend the brand Outsourcing - Cost-saving - Managing partners Exporting - Cheap and easy - Extra sales and transport costs - Moral hazard; adverse selection Foreign Direct Investment - Physical presence - Control of assets - Franchising - Licenses an operational system - Risk of damaging the brand Venture Financing - Enabling and enacting mechanism - Can lead to mergers and acquisitions with foreign companies Mergers & Acquisitions - Established infrastructure - Company can grow quickly - Very expensive Bygrave & Zacharakis, Entrepreneurship, New York: Wiley, 2014 Zacharakis, Bygrave & Corbett, Entrepreneurship, New York: Wiley, © 2017© Expensive 17 Recap q Determine revenue and cost structure q Choose a strategy q Create a culture q Seek and select people who fit culture and goals q Plan entry approach, including benchmarks q Plan growth drivers Bygrave & Zacharakis, Entrepreneurship, New York: Wiley, 2014 Zacharakis, Bygrave & Corbett, Entrepreneurship, New York: Wiley, © 2017© 18 ... billion 4,9 95 $1,441,000 Dunkin Donuts $7.22 billion 8,047 $911,000 Chick-Fil-A $5. 8 billion 1,837 $3,064,000 Pizza Hut $5. 5 billion 7,337 $843,000 10 Panera Bread $4 .5 billion 955 $2 ,50 0,000 Source: The... McDonald’s $ 35. 4 billion 12,836 $2 ,50 0,000 Starbucks $12.7 billion 4,769 $2,660,000 Subway $11.9 billion 27,2 05 $4 75, 000 Burger King $8.6 billion 7,090 $1,210,000 Wendy’s $8 .5 billion 4,8 95 $1 ,59 4,000... Transfer - Reduces entry costs - Risk of losing the technology Technology Licensing - Creates revenue, conserves resources, controls risk - Doesn’t extend the brand Outsourcing - Cost-saving - Managing