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Successfully Launching
New Ventures, 2/e
Bruce R. Barringer
R. Duane Ireland
Chapter 4
5-1
Chapter Objectives
(1 of 2)
5-2
Chapter Objectives
(2 of 2)
5-3
Jet Blue: Occupying a unique position in a
difficult Industry – and thriving !
The airline industry may well be the worst possible industry in which
to start a new firm. It is plagued by high fixed costs, low profit
margins, and fierce competition – factors that have created a poor
environment for start-ups
In fact since airline industry was deregulated in 1978 over 100 new
entrants have failed.
Jet Blue instead launched in 1998 posted profits since it was founded
while rivals have lost billions.
David Neelmans leadership first brings a favorable position then tested
a feasibility of what he planned to do & finally crafted a business
model that works.
Neelman believed that the window of opportunity was pen for new
airlines that offered both low fares & a distinctive style.
History of Neelman: In 1998 worked for salt lake city based airline
called Morris Air. Devised the concept of ticketless travel. Later South
west Airline acquired Morris.
Jet Blue: Occupying a unique position in a
difficult Industry – and thriving !
Neelman worked with Southwest for 6 months. Leaving southwest airline
cofounded a company called Open skies that sold an accounting & reservation
system to airline.
Spending time in rethinking process for bringing jet blue is all to make it as a
successful airline.
Open skies became a great test laboratory for jet blue
Jet blue decided to serve handpicked markets rather than compete head to head with
the major carriers nationwide. In this way the company did not have to support a
costly hub-and-spoke system which is necessary to reach all markets. The company
wanted to go where they could make money.
They avoid travel agents push for online ticketing. Brings state of the art aircrafts
along with technological advancements in system. Uses airbus 320 to minimize
maintenance & training experience.
Company is product focus & customer focus while caring for customer care in
introducing specious aircrafts.
The most impressive thing about JetBlue business model is that its self reinforcing.
It plans are full as it offers amenities, low fares, and flies direct routes in attractive
markets.
What is Industry Analysis?
Industry
◦ An industry is a group of firms producing a similar
product or service, such as airlines, fitness drinks,
furniture, or electronic games.
Industry Analysis
◦ Is business research that focuses on the potential of an
industry.
5-6
Why is Industry Analysis Important?
Why is this Topic Important?
◦ Once it is determined that a new venture is feasible in
regard to the industry and market in which it will
compete, a more in-depth analysis is needed to learn
the ins and outs of the industry the firm plans to enter.
◦ This analysis helps a firm determine if the niche
markets it identified during feasibility analysis are
accessible and which ones represent the best point of
entry for a new firm.
5-7
Three Key Questions
When studying an industry, an entrepreneur must answer three
questions before pursuing the idea of starting a firm
5-8
Industry Versus Firm-Specific Factors
Firm-Level Factors
◦ Include a firm’s assets, products, culture, teamwork
among its employees, reputation, and other resources.
Industry-Level Factors
◦ Include threat of new entrants, rivalry among existing
firms, bargaining power of buyers, and related factors.
Conclusion
◦ In various studies, researchers have found that from
8% to 30% of the variation in firm profitability is
directly attributable to the industry in which a firm
competes.
5-9
The Five Competitive Forces That Determine Industry
Profitability
(1 of 3)
5-
10
The Five Competitive Forces That Determine Industry
Profitability
(2 of 3)
5-11
The Five Competitive Forces That Determine Industry
Profitability
(3 of 3)
Five-Forces Model
5-
12
Threat of Substitutes
(1 of 2)
Threat of Substitutes
◦ The price that consumers are willing to pay for a
product depends in part on the availability of
substitute products.
◦ For example, there are few if any substitutes for
prescription medicines, which is one of the reasons
the pharmaceutical industry is so profitable.
◦ In contrast, when close substitutes for a product exist,
industry profitability is suppressed, because
consumers will opt out if the price gets too high.
5-
13
Threat of Substitutes
(2 of 2)
5-
14
Threat of New Entrants
(1 of 6)
5-
15
Threat of New Entrants
(2 of 6)
Barriers to Entry
5-
16
Threat of New Entrants
(3 of 6)
5-
17
Threat of New Entrants
(4 of 6)
5-
18
Threat of New Entrants
(5 of 6)
5-
19
Threat of New Entrants
(6 of 6)
5-
20
Rivalry Among Existing Firms
(1 of 3)
5-
21
Rivalry Among Existing Firms
(2 of 3)
5-
22
Rivalry Among Existing Firms
(3 of 3)
5-
23
Bargaining Power of Suppliers
(1 of 3)
5-
24
Bargaining Power of Suppliers
(2 of 3)
Supplier When there are only a few suppliers that supply a critical
concentration product to a large number of buyers, the supplier has an
advantage.
5-
25
Bargaining Power of Suppliers
(3 of 3)
5-
26
Bargaining Power of Buyers
(1 of 3)
5-
27
Bargaining Power of Buyers
(2 of 3)
5-
28
Bargaining Power of Buyers
(3 of 3)
5-
29
The Value of the Five Forces Model
(1 of 4)
5-
30
The Value of the Five Forces Model
(2 of 4)
5-
31
The Value of the Five Forces Model
(3 of 4)
5-
32
The Value of the Five Forces Model
(4 of 4)
Using the Five Forces Model to Pose Questions to Determine the Potential
Success of a New Venture in a Particular Industry
5-
33
Industry Types and the
Opportunities They Offer
(1 of 3)
Emerging Industries
◦ Industries in which standard operating procedures have yet
to be developed.
Opportunity: First-mover advantage.
Fragmented Industries
◦ Industries that are characterized by a large number of firms
of approximately equal size.
Opportunity: Consolidation.
5-
34
Industry Types and the
Opportunities They Offer
(2 of 3)
Mature Industries
◦ Industries that are experiencing slow or no increase in
demand.
Opportunities: Process innovation and after-sale service innovation.
Declining Industries
◦ Industries that are experiencing a reduction in demand.
Opportunities: Leadership, establishing a niche market, and pursuing
a cost reduction strategy.
5-
35
Industry Types and the
Opportunities They Offer
(3 of 3)
Global Industries
◦ Industries that are experiencing significant international
sales.
Opportunities: Multidomestic and global strategies.
5-
36
Competitor Analysis
5-
37
Identifying Competitors
Types of Competitors New Ventures Face
5-
38
Sources of Competitive Intelligence
(1 of 2)
5-
39
Sources of Competitive Intelligence
(2 of 2)
5-
40
Completing a Competitive Analysis Grid
(1 of 2)
5-
41
Completing a Competitive Analysis Grid
(2 of 2)
5-
42