This Document Contains Chapters 1 to 5 Chapter 1 Why Plan? Review Questions 1. What is a business plan? What are the advantages to preparing a business plan for a new venture? Answer: A business plan is a written document that carefully explains every aspect of a new business venture. The advantages to preparing a business plan are that inside the firm, it acts as a “road map” for the execution of strategies and plans. Outside the firm, it introduces the business opportunity to potential investors and other stakeholders. Many investors won’t even consider a firm that does not have a business plan. Finally, the process of writing the plan forces the entrepreneur to examine the merits of the business idea and test its feasibility. 2. What are the two most common reasons that entrepreneurs write business plans? Answer: The most common reasons for writing a business plan are that it forces the founding team to work together to hammer out the details of the business venture, and it communicates the merits o f a new venture to outsiders such as investors or bankers. 3. Who are the primary consumers of business plans? In what ways do the people who read business plans differ in the information they are looking for? Answer: The primary consumers of a business plan are the firm’s employees, investors, and other external stakeholders. A firm’s employees may use the business plan as a guideline to ensure that all their activities are in sync with the vision and plan of the founders. Investors and other external stakeholders are looking for demonstration that the business idea is viable and can offer an attractive financial return when compared with lower risk investment alternatives. 4. It is often argued that the process of writing a business plan is as important as the plan itself. How is this so? Answer: The process of working together on a business plan requires the founders to systematically think through each aspect of their new venture and forces team members to turn abstract ideas into more concrete realities. 5. Why is it important for the founders of a firm to continually measure whether the type of company they are envisioning, as described by their business plan, is consistent with their personal goals and aspirations? Answer: It is important that the founders use the business plan writing process to visualize what the firm will look like in terms of the demands on their time, the pressures of accepting venture capital, and the need to accept investor scrutiny over operational decisions for the firm. If an entrepreneur wants to ensure a significant amount of leisure or family time, this should be taken into consideration before moving forward with an aggressive growth business. 6. What are the hazards involved with using a software package to help write a business plan or hiring consultants to write the business plan for you? Answer: Software packages and outside consultants are useful in providing a conventional format for the business plan, but over-reliance on these sources can produce a business plan that looks “canned” or fails to convey the enthusiasm and excitement of the entrepreneur’s vision. 7. Describe the general rules of thumb for the length and appearance of a business plan. Answer: Most experts agree that the plan should be between 25 and 35 pages in length. It should be clear, concise, and follow a conventional format. It should look sharp, without looking like the entrepreneur spent too much to produce it. The plan’s author should also avoid overuse of clip art and other design elements, but a well-designed logo can add to the professionalism of the plan. 8. Why is it important for a firm to test the feasibility of its business idea prior to writing a business plan? Answer: There are steps that naturally precede the completion of a business plan. The results of a full feasibility analysis will help the entrepreneur to decide whether it is worthwhile to go forward with the business plan. 9. Why is it important for a firm to test the feasibility of its business idea prior to writing a business plan? Answer: Many new businesses fail, not because the founders didn’t work hard or weren’t committed to the venture, but because the idea wasn’t a good one to begin with. Conducting a feasibility analysis helps assess the merits of a business idea prior to dedicating the time and effort to write a business plan. 10. What is an elevator speech? How can developing an elevator speech help a firm write a more effective business plan? Answer: An elevator speech is a 45-second to two-minute statement outlining the merits of a business venture. Creating an elevator speech can help the founders to develop a sharp and concise description of their business. Application Questions 1. Justin Wells is one of three founders of an organic snacks company. The founders have decided to write a business plan to try to obtain funding. In a meeting with his cofounders, Justin said, “I know that we’re all very busy, so I’d like to volunteer to write the business plan. My parents have a cabin on a lake about an hour from here, so if it’s alright with the two of you, I’d like to take my laptop up to the cabin for a couple of days and hammer out the business plan. Any objections?” If you were one of Justin’s cofounders, what would you say? What alternative approach, if any, would you suggest to writing the plan? Answer: As one of Justin’s cofounders, I should consider the fact that the process of writing the plan should be a collaborative effort. Writing the plan together can help the team develop a stronger bond and identify potential problems within the team. We should suggest that, following the feasibility analysis, the three founders have a retreat at Justin’s parents’ cabin and begin work on the business plan writing process together. 2. Melanie Scott is a high school math teacher who is in the process of developing an iPhone app centered on engaging games that require high school students to use math to master the games. Melanie is planning to attend a new business conference in about six weeks that will feature a number of investors. She hopes to make some contacts and schedule follow-up meetings with several investors. Up until now, Melanie has focused primarily on the technical aspects of building the app, and hasn’t written a business plan or talked to any potential customers. She’s willing to do whatever it takes to get prepared for the conference. What would you tell Melanie to focus on over the next six weeks to get ready for the conference? Answer: Since Melanie will be at a conference with other new business founders, she needs to prepare a business plan to use as a selling tool. An investor choosing between two or more business ventures may eliminate one that does not have a professional business plan for them to review. Melanie should also get feedback from potential users and work on an elevator speech to use when speaking with investors at the conference. 3. A year ago, a friend of yours opened in innovative type of fitness center that helps high school athletes improve their fitness and sharpen their skills to the point where they’ll be more likely candidates for college scholarships. He recently wrote a business plan seeking $100,000 in funding to expand from one location to three locations. He sent the business plan out to three industry experts for feedback, and was struck by the advice re received. All three experts loved his concept and encouraged him that instead of asking for $100,000 to expand to three locations, he should ask for $1 million to expand to 30 or more locations. What factors should your friend consider before he pursues this advice? Answer: He should measure the suggested business plan and expert advice against his personal goals and aspirations. Investors will expect a 30-40 percent annual return over the period of their investment. They will also open the firm to increased input and scrutiny since the investors will now own a stake in the business. Further, the type of aggressive growth advised by the industry experts will drastically chance the amount of time and attention required by the founder. He should be sure that he is willing to spend that amount of time away from personal and family concerns. 4. Imagine you just received a text message from a friend. The message reads, “Just wanted to share with you some fantastic news. Last Friday, I talked to an investor about my business idea, and he asked me to send him the executive summary from my business plan along with a PowerPoint overview of the plan. I spent the weekend working on his requires, and am about to send him an 8-page executive summary and a 42-slide PowerPoint overview. Just thought I would check with you to see if you have any last minute words of advice. I really want to get funding.” How would you respond to this request for feedback? Answer: To make the best impression, a business plan should follow a conventional structure. This includes the executive summary and slide deck. The executive summary should only be 1-2 pages long and the PowerPoint overview should be about 12 slides long. The executive summary and slide deck that this founder plans does not recognize the fact that the investor is a busy person who wants a document that provides a very quick snapshot of the key information regarding the business. If the investor is interested, he or she will ask for a 25-35 page plan. 5. Spend some time studying the website of Heart Juice (www.heartjuice.com), a healthy beverage company referred to in the chapter. Search for additional information on the company. Write a two minute elevator speech rather than a 60-second elevator speech. Answer: Student responses will vary, but should cover the four steps of an elevator speech: Step 1: Describe the opportunity or problem that needs to be solved. Answers will vary, but may include information such as documentation of the increased interest in products that support a healthier lifestyle and the high incidence of cardiac events in the target population. Step 2: Describe how your product or service meets the opportunity or solves the problem. Answers will vary but might explain how Heart Juice provides a healthier option than more commonly consumed beverages that have fewer health benefits. They may also explain the health effects of the hawthorne berry, a key ingredient of Heart Juice. Step 3: Describe your qualifications. Answers will vary but might include the personal story of how the founders were inspired following the heart attack of a professor of one founders, a heart attack by the father of another founder, and the high cholesterol diagnosis of a parent of the third founder. Step 4: Describe your market. Student answers will vary but might address the large number of Americans suffer adverse cardiac events, the world’s number one killer. Elevator Speech: Heart Juice • Company Focus: Heart Juice is a healthy beverage company dedicated to promoting cardiovascular wellness. • Product Highlights: Offers beverages made with natural ingredients like pomegranate, hibiscus, and beetroot, known for supporting heart health. • Core Values: Prioritizes transparency and sustainability with non-GMO, organic ingredients and eco-friendly packaging. • Mission: Empowers individuals to improve their heart health through enjoyable, everyday beverage choices. • Market Position: Positioned as a lifestyle choice that helps reduce heart disease risk and enhance overall wellness. • Consumer Appeal: Highly praised for taste and effectiveness, making it popular among health-conscious consumers. • Growth Potential: Well-positioned to become a leading brand in the growing functional beverage market. Additional Activities 1. I Know Someone Who… Purpose: to help students meet other students in your new class, and help students build their network of people who can help connect them to professionals. This is a good exercise for the first day of class. To prepare for this exercise, create a one-page handout listing many different professions such as attorney, accountant, consultant, banker, angel investor, venture capitalist, website developer, etc. These are the kinds of professionals a startup would benefit from. Begin by asking students to first think of professionals in these categories whom they personally know, and would go to with questions. Then each student is given a handout, told to stand up, leave the classroom (if possible) and network with each other. Tell them how much time you can allow for the exercise. They have two objectives to accomplish: • Introduce them self and get to know as many other students as possible. • Write other students’ names on their handout who may know a professional they need. ○ For example, Chris introduces herself to Pat, and asks Pat if he knows anyone who is a professional listed on the handout. If Pat knows a good attorney, then Chris will write Pat’s name next to the word attorney on the handout. 2. Virtual Incubator Tour Purpose: to introduce students to business incubators If you have Internet access in your classroom, take your students on a virtual tour of an incubator. If you do not have classroom access, then you can assign your students to find an incubator’s website to take a virtual tour. If you would like to link directly to an incubator, then visit the University of Central Florida Business Incubator Program in Orlando, Florida, at http://www.incubator.ucf.edu/index.html. You could assign your students to find an incubator on their own by conducting a Google search, starting with http://www.nbia.org/, the National Business Incubator Association (NBIA). 3. Business Plan Competition Purpose: to enhance retention of course concepts and encourage students to apply what they learn Does your college or university participate or sponsor a business plan competition? Encourage your students to enter a competition. This is a great way to generate enthusiasm at the beginning of the term that can carry all the way through to the end of the term. Even if your college or university does not have a business plan competition, there are many events throughout the country that students can explore. Check out the BPC website (http://www.bizplancompetitions.com/) to find a listing of many different business plan competitions. 4. Elevator or Quick Pitch Purpose: to encourage students to practice presenting their new business concepts Although some colleges and universities put on quick pitch or elevator speech competitions, you can easily have a competition in your classroom. Have each student prepare and deliver a one-minute presentation to the class to inform and persuade the class of the viability of a new business concept. Students are not pitching a great idea, team, or product. Instead, they are pitching what their business will do for investors and for customers. Therefore, they should pitch how their business will solve a tangible problem that exists today. Their pitch must have some kind of “hook” that will immediately spark interest in the audience. They must demonstrate that they, personally, are very excited about their own concept. Finally, they should close their pitch with some kind of request for action from the listeners, such as a request for funding or to join the founding team. This YouTube video of an award-winning pitch (http://www.youtube.com/watch?v=BIo-enMAIxE) is only one of many to help students prepare their pitch. You could use the pitch assignment early in the term to form teams. Instead of pitching a business concept, a student could practice preparing and delivering a pitch by attempting to persuade other students to join his or her team. In this case, students will pitch what they can do for the team. Chapter 2 Developing and Screening Business Ideas Review Questions 1. What are the three most common sources of new business ideas? Briefly describe how each of the sources spawns potential business ideas. Answer: The three most common sources of new business ideas are: (1) changing environmental trends—if entrepreneurs are able to distinguish between trends and fads, they can take advantage of various environmental changes. Most start-ups are not sufficiently funded to ramp up quickly enough to capitalize on fads; (2) unsolved problems—many companies have been started by people who have experienced and problem. In the process of solving the problem, they have realized that they were on to a business idea; and (3) gaps in the marketplace—products that consumers need or want that aren’t available in a particular location or aren’t available at all. 2. What four environmental trends provide the richest sources of new business ideas? List each environmental trend and provide an example of the type of business idea that it might create. Answer: (1) economic trends, (2) social trends, (3) technological advances, and (4) political action and regulatory changes. Types of business ideas will vary. 3. Explain how “unsolved problems” can create a business idea. Provide an example that was not mentioned in the chapter of a business that was created by solving an unsolved problem. Answer: Often an entrepreneur will attempt to solve a problem that he, or someone he knows, is having. Once he has successfully solved the problem for himself, he will realize that his idea represents a sustainable business opportunity. 4. Explain how finding a gap in the marketplace can lead to new business ideas. Answer: Gaps in the marketplace can often be targeted by niche companies. Large, mainstream companies can compete on price but often lack the ability to sell products or services to those who don’t fit into the mainstream model due to geographic location, personal style, or comparatively small market size. These “outside of mainstream” targets are often a perfect fit for a start-up. 5. Describe the four categories of new business ideas and the most realistic categories for new firms. Answer: Existing markets, new markets, existing products, and new products are the four categories of new business ideas. The most realistic categories for new firms are new products in existing markets or existing products in new markets. 6. Describe the brainstorming process. How can brainstorming be used to generate new business ideas? Answer: Typically, brainstorming sessions are targeted to a specific topic about which a group of people are instructed to come up with ideas. Each person shares ideas and reacts to the ideas of others with no criticism or analysis until the session is complete. Ideas are recorded as the session progresses so that they can be evaluated later. One way that brainstorming is used it to generate new ideas about potential solutions to common problems. 7. Describe how a focus group is set up and how it can be used to generate new business ideas? Answer: A focus group is a gathering of 5 to 10 people who are selected because they have some relationship to an issue being discussed. Focus groups generally work best as a follow-up to an initial brainstorming session, when the general premise for a business has been established. 8. Explain how library and Internet research can be used to generate new business ideas? Answer: Libraries are often underutilized sources of information for generating business ideas. The best approach is to discuss your general area of interest with a reference librarian, who can point you to useful resources, such as industry specific magazines, trade journals, and industry reports. 9. Why is it necessary to quickly assess the merits of a business idea before conducting a feasibility analysis and writing a business plan? Answer: The time and resources necessary to complete a feasibility and full business plan should be reserved until the idea has passed a First Screen process. It forces founders to refine the business concept and work out potential kinks before progressing too far with a flawed plan. 10. Describe the makeup and the purpose of the First Screen. Answer: The First Screen is a tool that contains 25 items for an entrepreneur to assess about a business idea. The process should take less than an hour and examines the business idea in terms of: strength of business idea, industry-related issues, market and customer-related issues, founder-related issues, and financial issues. Application Questions 1. Study the Web site of InstyMeds (www.instymeds.com), one of the startups mentioned in the chapter. Imagine you were part of InstyMeds’ founding team, and in meetings with investors it was your job to #1 describe the problem that InstyMeds had identified and #2 describe how the InstyMeds service solves the problem. Write out what you would have said to address points #1 and #2 above. Answer: The problem identified is that patients have poorer outcomes if they fail at medication compliance. One way to improve medication compliance is to improve filling of prescriptions. The InstyMeds service solves this problem by offering a convenient 24-hour medication dispenser similar to an ATM. This allows patients to more easily fill their prescriptions and adhere to their prescribed medical protocols. 2. Calab Holms just finished reading this chapter and was struck by the idea of developing products to help older people remember to take their medicine on time. He has an idea for an iPhone app that will not only remind people to take their medicine on time, but will require the user to verify when the medicine has been taken and will send a text alert to a caregiver if the medicine isn’t being taken on time. Calab is ready to run with the idea, but first wants to make sure that it is consistent with changing economic trends, social trends, and technological advances. Make a table that lists these three environmental trends and the changes in these trends that work for and work against this idea. Answer: Student responses will vary but could include data regarding changing economic social and technological trends related to the increasing disposable income of senior citizens as boomers age, aging baby boomers having greater need for health-related services and the proliferation of smart phones/tablets and apps. 3. Think about the problems that you encounter in your everyday life. Select one problem, and describe how solving the problem might represent the basis for a new business idea. Answer: Problem: Difficulty in finding parking in busy urban areas, leading to wasted time and frustration. Solution: Develop a smart parking app that uses real-time data from sensors in parking lots and on streets to show available parking spots nearby. The app could also allow users to reserve spots in advance, navigate to the location, and even pay for parking through the app. This solution would save time, reduce stress, and optimize parking space usage, representing the basis for a new business catering to urban drivers and parking facility operators. 4. Identify three startups, other than those mentioned in the Chapter or included in Table 2-3, that were started to fill a gap in the marketplace. Identify the gap and how the startup is filling the gap in the marketplace. Answer: Here are three startups that were created to fill gaps in the marketplace: 1. Warby Parker • Gap: High cost and limited accessibility of fashionable eyeglasses. • Solution: Warby Parker offers affordable, stylish eyewear through a direct-to-consumer online model, allowing customers to try on frames at home before purchasing, thus disrupting the traditional optical industry. 2. Glossier • Gap: Lack of beauty products tailored to real customer needs and feedback. • Solution: Glossier developed a skincare and beauty brand built on customer input, social media engagement, and a minimalist aesthetic, filling the gap for personalized, user-driven beauty products. 3. Bumble • Gap: Online dating apps with male-dominated interactions and safety concerns. • Solution: Bumble empowers women by allowing them to make the first move, creating a safer and more respectful online dating environment, which filled the gap for a female-focused dating experience. 5. Complete the First Screen for the business idea you selected to answer Question #3. Which areas of the First Screen were the easiest to complete and which areas were the most difficult? Was the result the one you expected? Answer: First Screen for Smart Parking App Easiest Areas: • Identifying the problem and solution. • Defining the target market (urban drivers) and customer pain points. Most Difficult Areas: • Assessing market demand and competition. • Predicting regulatory challenges and adoption pace. Result: The outcome was expected, confirming the idea’s viability, but understanding market demand and regulatory issues proved more challenging. Additional Activities 1. Changing Environmental Trends This exercise can either be conducted in your classroom or be assigned to students to do on their own. If you decide to make this an outside or homework assignment, you should at least discuss in the classroom: • The differences between trends and fads • A brief overview of the four kinds of environmental trends (economic, social, technological, and political/regulatory) Purpose: Your instructional goal is to encourage students to fill the board with amazing (and sometimes silly or ridiculous) products and services. This is a valuable exercise because many students do not consider themselves to be creative. When the exercise is completed, students are often surprised by the many innovative products and services that they generated. The products and services listed might also provide students with ideas for conducting feasibility studies or business plans. When done in the classroom, ask students to first close their textbooks, and then form discussion teams of four or five students. Ask each team to choose one of the trends: economic, social, technological, or political/regulatory. Next, review the rules of brainstorming. When done as an individual activity for homework, emphasize that it is not difficult for an individual to brainstorm, even by herself! Brainstorming rules typically include quantity over quality, no criticism of ideas is allowed, fast and furious is required, and piggybacking of ideas is encouraged. Each discussion team is now asked to use brainstorming to: • First, quickly generate a short list (3 to 5) of current facts related to their trend. For example, a social trend is baby boomers approaching retirement. • Then generate a long list (15 to 20) of new products or services inspired by these current facts. For example, if the team chose social trends, then the issues they identify during brainstorming might include the pending retirement of the baby boom generation, increasing numbers of Hispanics moving to the United States, and so forth. When each team is finished, ask them to write their list of new products or services on the board so everyone in the classroom can see. Ask a spokesperson from each team to discuss their list and identify the current facts that stimulated the products or services. 2. Unsolved Problems and Gaps in the Marketplace This exercise can either be conducted in your classroom or be assigned to students to do on their own. If you decide to make this an outside or homework assignment, you should at least discuss in the classroom the differences between trends and fads. Purpose: Your instructional goal is encourage students to fill the board with amazing (and sometimes silly or ridiculous) products and services. This is a valuable exercise because many students do not consider themselves to be creative. When the exercise is completed, students are often surprised by the many innovative products and services that they generated. The products and services listed might also provide students with ideas for conducting First Screen analyses, feasibility studies, or business plans. When done in the classroom, ask students to first close their textbooks, and then form discussion pairs of two students. Next, review the rules of brainstorming. When done as an individual activity for homework, emphasize that it is not difficult for an individual to brainstorm, even by herself! Brainstorming rules typically include quantity over quality, no criticism of ideas is allowed, fast and furious is required, and piggybacking of ideas is encouraged. Ask each pair of students to use brainstorming to: • Identify a short list (2 to 3) of problems that they personally encountered within the last 24 hours. For example, parking, waking up, or a burned out light bulb. Or ask them to identify gaps in the marketplace they have noticed within the past month. • Quickly generate a list (5 to 10) of new products or services that could solve these problems or fill these gaps. For example, campus valet parking service, an alarm clock that runs away when you try to turn it off, or a light bulb that signals you three hours before it burns out. When each pair is finished, ask them to write their list of new products or services on the board so everyone in the classroom can see. Ask a spokesperson from each pair to discuss their list and identify the problems or marketplace gaps that stimulated the products or services. Consider using both exercise one and two to really fill the board in your classroom! 3. First Screen Purpose: This exercise will reinforce for students the need to conduct research on a concept before advancing too fast to open a new business. Many students do not enjoy research, do not know the benefits of research, and/or do not know where to find information. Assign students to conduct a First Screen analysis of an idea for a new product or service. Students should use the First Screen template found in the Appendix of this chapter. Depending on your needs, you could require students to review specific sources (such as IBISWorld) or a specific number of sources. Appendix 2 of this chapter is particularly helpful in making this decision. 4. Brainstorming and Other Creative Stimulus Techniques Purpose: This exercise is important because students often do not take the rules of brainstorming seriously, or they are unaware of other ways to stimulate creative thinking. Take students on a virtual tour to learn more about techniques that are useful in stimulating innovative business ideas. A quick Google and/or YouTube search on “brainstorming” will provide millions of links. Two good ones include: http://www.jpb.com/creative/brainstorming.php http://www.youtube.com/watch?v=yAidvTKX6xM 5. Focus Groups Purpose: This exercise is valuable to show that focus groups are relatively easy for students to conduct. In the corporate world, focus groups are typically closely controlled and monitored, but students can gain valuable information even from more casually conducted efforts. Take students on a virtual tour to learn more about conducting focus groups. A quick Google or YouTube search on “focus groups” generates millions of links. A good one for students is http://www.managementhelp.org/grp_skll/focusgrp/focusgrp.htm as it provides how-to steps that they could easily use to conduct their own focus group. 6. If You Had only a $1,000 . . . Purpose: This activity will demonstrate that it does not have to cost a lot of money to start a business, to practice brainstorming, and/or to help students get to know one another. Ask students, by a show of hands, “Who can get your hands on a $1,000 or more within the next two weeks?” You can expect that a majority of your students will raise their hands. After describing the purpose of the activity, review the rules of brainstorming: • The goal is to generate a large quantity of new businesses concepts that could be started with very few resources. The goal is quantity, not quality. • No one can criticize anyone else’s ideas. Students should try to come up with what seem to be wild and crazy concepts. You want them to have fun as this stimulates creativity. • Piggybacking is strongly encouraged. This means that one team member should feel free to take another person’s ideas and change it slightly. • Fast and furious is better than slow and methodical. Provide a time limit of 10 to 15 minutes to pressure students to think fast without evaluating their concepts. • Appoint a scribe or note taker to jot down the group’s ideas. Ask students to form small discussion groups. The group’s assignment is to generate as many new business concepts as they can as quickly as they can. The team with the longest list is the winner. They are to assume that they have only $1,000, a computer and printer, a smart phone, and a working vehicle. (Do not tell them that this “working vehicle” might be an airplane, a truck, a boat or ship, or a car.) You and they will be amazed at how many different kinds of businesses they identify! Chapter 3 Feasibility Analysis Review Questions 1. What is a feasibility analysis? How does a feasibility analysis differ from a business plan? Answer: A feasibility analysis is the process of determining if a business idea is viable. The feasibility analysis step, along with the idea screening step, is investigative in nature and is designed to critically asses the merits of a business idea before producing a business plan. 2. What are the four individual components of a full feasibility analysis? Answer: Product/service feasibility, industry/target market feasibility, organizational feasibility, and financial feasibility. 3. What is the difference between primary research and secondary research? Are both types of research necessary to complete a full feasibility analysis? Answer: Primary research is collected by the individual conducting the analysis, whereas secondary research probes data that has already been collected. Both types of research are needed for a complete feasibility analysis. 4. Describe the purpose of product/service feasibility analysis? Briefly describe its two components. Answer: Product/service feasibility analysis is an assessment of the overall appeal of the product or service being proposed. Its two components are product/service desirability and product/service demand. 5. Describe the purpose of a concept test and how it should be executed. Also, describe the purpose of a buying intentions survey and how it should be distributed and assessed. Answer: A concept test involves showing a preliminary description of a product or service idea, called a concept statement, to industry experts and prospective customers to solicit their feedback. A buying intention survey is used to gauge customer interest in a product or service. About 25 to 50 potential customers are given a concept statement with a short survey attached. Typically the number of people who indicate that they definitely would buy is combined with the number of people who indicate that they probably would buy to gauge customer interest. 6. Explain the purpose of industry/target market feasibility analysis. Briefly describe its three components? Answer: Industry/target market feasibility is an assessment of the overall appeal of the industry and market for the product or service being proposed. Its three components are industry attractiveness, target market attractiveness, and market timeliness. 7. What is a target market? Why do most start-ups start in target markets rather than broader markets that have more customers? Answer: A target market represents the limited portion of the industry that a firm goes after or tries to appeal to. Start-ups rarely have the resources to successfully serve the entire industry, so they appeal to a select portion of the total industry that is not being targeted by the larger, more established firms. 8. Describe the purpose of organizational feasibility analysis. Briefly describe its two components. Answer: Organizational feasibility analysis is conducted to determine whether a proposed business has sufficient management expertise, organizational competence, and resources to successfully launch its business. Its two components are management prowess and (non-financial) resource sufficiency. 9. What is an industry “cluster”? Why might a semiconductor start-up, for example, decide to launch in a geographic area where there are other semiconductor firms, rather than another area? Answer: Clusters of firms arise because of the increase of productivity of the firms participating in them. It is easier for the employees of these firms to network with one another and for the firms to gain access to specialized suppliers, scientific knowledge, and technological expertise native to the area. 10. Describe the purpose of a financial feasibility analysis. Briefly describe its three components. Answer: Financial feasibility is conducted to determine if a new venture is feasible from a financial perspective. Its three components are total start-up cash needed, financial performance of similar businesses, and overall financial attractiveness of the proposed venture. Application Questions 1. Kendall Ryan just applied for a bank loan to finance a Greek-style restaurant he plans to open near a large Midwestern university campus. The banker asked Kendall if he conducted any primary research to assess the feasibility of the restaurant. Kendall replied that he spent countless evenings and weekends in the library and on the Internet collecting data on the feasibility of Greek-style restaurants, and he is confident that his restaurant will be successful. He said that he even did careful research to make sure that Greek-style restaurants do well near large Midwestern university campuses. If you were the banker, how would you react to Kendall’s statements? Answer: Kendall should also collect some primary research. Kendall could conduct a concept test to see if the idea is appealing to 5-10 restaurant industry experts and 5-10 potential customers. He could also distribute a buying intentions survey to 25-50 potential customers on the campus to gauge customer interest. 2. Three recent startups, CareZone, Bench Prep, and City Slips were mentioned in Chapter 2. Pick one of these companies and write a concept statement for it. Answer: The should include a preliminary description of the product/service idea, the intended target market, the benefits of the product/service, a description of how the product/service will be positioned relative to competitors, a description of how the product/service will be sold, and a brief description of the company’s management team. 3. InstyMeds, another company introduced in Chapter 2, developed a vending machine for prescription drugs to be located in rural hospitals and urgent care centers. Describe how you would have conducted an industry/target market feasibility analysis for this startup. Answer: The should include some analysis of the trends in fitness, specifically yoga as well as trends in exercise equipment in general. They should consider whether industry is large and growing, is young rather than old, is early rather than late in its life cycle, and is fragmented rather than concentrated. They should also note the degree to which environmental and business trends are moving in favor rather than against the industry. 4. Jane Robinson has developed a software product that helps elementary school teachers better prepare their lesson plans and more accurately assess their students’ progress. Jane is now wondering whether this is a good time to launch the product. What factors should Jane consider in making this determination? Answer: Jane should consider whether the window of opportunity is open or closed. Are economic factors affecting public schools placing this industry on a growth trend? She should also try to determine if there are a number of competing lesson plan and assessment resources in this market. If so, the trends may indicate that this is not a good time to launch a business in this industry. 5. Using one or more of the resources included in the Internet Resources Table in Appendix 2.2 at the end of Chapter 2, investigate the health and growth potential of the spa industry in the United States. Answer: Using resources like the International Spa Association (ISPA) and Statista from the Internet Resources Table, here's what I found about the health and growth potential of the spa industry in the United States: • Industry Health: The U.S. spa industry is robust and continues to grow, driven by increasing consumer demand for wellness services. Spas are expanding their offerings to include more holistic health services like meditation, nutrition counseling, and personalized wellness programs. • Growth Potential: The industry is projected to experience steady growth, fueled by rising health consciousness, stress management needs, and an aging population seeking preventive health care. Revenue growth is strong, with an increasing number of spa visits and higher average spending per visit. The trend towards wellness and self-care suggests a positive outlook for the spa industry's future in the U.S. Additional Activities 1. Concept Statement and Buying Intentions Survey Purpose: students will learn to consolidate their new business concept into a one-page document and will learn how to approach other people to obtain feedback on their concepts. This could be done either as an individual or team assignment. It is not necessary for them to have conducted a feasibility analysis before this assignment. Ask students to identify one new business concept that they believe could be successful, write a one-page concept statement, and then script at least five questions to include in a buying intentions survey. You could either review these documents yourself or have students critique one another’s work. Then assign the students to share their concept statements and conduct their buying intentions survey with some minimum number of people; a minimum of 5 people is recommended. Give them one week to complete this assignment. When the deadline is up, have students verbally report their results to the class. 2. Industry Attractiveness—the Best and the Worst Purpose: to identify industries that are highly attractive or unattractive. Use this activity after you have finished lecturing on Industry Attractiveness. • Ask students to call out loud the best and worst examples of industries. For instance, what are really bad industries to enter or what are examples of really attractive industries to enter. Write the two lists on chalk- or whiteboard. • For each item on each list ask students to share their reasons for placing that industry on their list. • After discussing each industry, have students work in discussion groups to answer the following discussion questions. • Have each discussion group report their answers to the total group and discuss. The Best and the Worst Discussion Questions: • Prioritize the list of the top “Do Enter Industries” based on our discussion of the “Best” list. In other words, this would be the first industry I would want to enter, then the second industry I would want to enter, and so on. Be prepared to defend your choices. • Prioritize the list of the “Do Not Enter” industries based on your discussion of the “Worst” list. Be prepared to defend your choices. 3. Organizational Feasibility Analysis Purpose: to encourage students to expand their awareness of the various factors included in an organizational feasibility test, and to encourage more ideas, adaptations, and innovations. Use this discussion activity after you have completed your lecture on organizational feasibility analysis. Provide your students the “Who, What, Where, When, Why, and How” questions following. Give them a few minutes to read through the questions, and then call their attention to the first set of questions, “Who.” Ask them to answer with examples related to the feasibility of their new business concept or about their industry. Once each student or group has answered each question, ask them to create additional questions that need to be asked and answered. Then continue on to the second point, “What,” and repeat the discussion, eliciting 4 to 5 responses of examples and additional questions. Proceed through the remaining questions, allowing ample time for students’ examples and questions. 1. WHO Who can help or make contributions to make our business successful? Who must I “sell” on this idea in order for it to become a reality? Who can help me get the additional resources needed to open our doors for business? Who will benefit from the success of our business? 2. WHAT What do I need by way of additional resources that I haven’t considered yet? What techniques or methods can I use to get these resources? What is the best way to get these resources for my business? What is the first step that we must take to obtain resources? What will make them (vendors, lenders, customers, other stakeholders) “buy”? 3. WHERE Where should I start to obtain what I need? What resistance is likely to be encountered as we attempt to obtain these organizational resources? Where should I “plant seeds” for the resources I will need in the future? 4. WHEN When should I introduce the plan to each category of stakeholder? When should we implement the various tasks needed to create our organization? When should we revise our current organizational strategy? 5. WHY Why should a stakeholder buy our idea? Why is our way better? Why is the resistance against our new business concept so strong? 6. HOW How can we improve on our concept? How can we “test the waters” without losing our shirts? How can I persuade centers of influence and important stakeholders? When all students have completed this discussion, ask these questions to debrief the activity: 1. How can these questions help you in problem solving and innovation? 2. Which set of questions do you find yourself using most often? 3. Which question is the most thought-provoking? Chapter 4 Introductory Material, Executive Summary, and Description of the Business Review Questions 1. Why is it important for a business plan to have a cover page? What information should the cover page contain? Answer: The cover page makes the first impression for your business plan. The cover page should include the name of the company, its street address, its e-mail address, its phone number (land based and cell), the date, the contact information for the lead entrepreneur, and the company’s Web site address, Facebook page, and Twitter account if it has one. 2. What is it important for a business plan to have a table of contents? What are the attributes of an effective table of contents? Answer: The table of contents makes it easy to find anything in the plan. It should list the main sections, subsections, and appendices to the plan along with their corresponding page numbers. 3. What is an executive summary? Why is it often called the most important part of a business plan? Answer: The executive summary is the first item that appears in a business plan. It is a short overview (no more than two single-spaced pages) of the entire plan, and it provides a busy reader with everything that needs to be known about the new venture’s distinctive nature. The executive summary is arguably the most important part of the plan because many investors will ask to review an executive summary before deciding whether to request a full business plan. 4. At what point in the process of putting together a business plan should the executive summary be written? Answer: The executive summary should be written last. The plan itself will evolve as it’s written, so not everything is known at the outset. 5. Why would an investor ask for a PowerPoint overview of a business plan rather than an executive summary or the full plan? Answer: Some investors ask for a short PowerPoint (10 to 15 slides) overview rather than a traditional executive summary because it is quicker for a busy potential investor to click through a few slides than to read the executive summary. 6. Explain the statement “The primary goal of an executive summary is to capture the reader’s attention”? Answer: The executive summary, along with the company description, must capture the reader’s attention because if the reader’s interest isn’t captured early on, the plan itself is unlikely to get read. Also, if the executive summary was requested as a standalone document, the rest of the plan won’t be seen unless the executive summary succeeds in capturing the reader’s interest. 7. What are the subsections that are included under the company description section of a business plan? Answer: The subsections under the company description category are: company history, mission statement, products and services, current status, and legal status and ownership. It is best to follow this order. 8. What is the purpose of a mission statement? Why is it important to include a mission statement in a business plan? Answer: A mission statement defines why a company exists and what it aspires to become. In the business plan, it shows that your business is focused and that you can articulate its purpose clearly. 9. To what extent should the results of a company’s feasibility analysis be reported in its business plan? Answer: The product/service description section is the ideal place to report any meaningful results from your feasibility analysis. Sharing these results gives the reader some insight into how you shaped your business ideas based on actionable feedback. 10. Why is selecting a company’s name a critical issue? Answer: A company’s name is normally the first thing that people associate with a business, and it can be an integral part of the company’s branding strategy. Application Questions 1. Sarah Austin, who has worked with disabled children all of her professional career, is in the final stretch of developing an iPhone app that will help parents with disabled children better cope with their disabilities. She has put a considerable amount of time and effort into the project, and believes the app can make a meaningful difference in the lives of those people who use it. Sarah has a dilemma. She had planned to spend the next three weeks completing a feasibility analysis and incorporate the results of the feasibility analysis into her business plan, which she thinks will take an additional two weeks. An alternative is to move forward with the business plan and complete the feasibility analysis later. Sarah has heard that several competing apps are in various stages of development, and fears that if she doesn’t get her business plan completed quickly and out for review she may get beat to the punch. What would you tell Sarah if she asked you for your advice? Answer: The “Products and Services” section is the ideal place for founders to start reporting the results of feasibility analysis. Sarah is right to be concerned that she does not have this data collected, but she should not duck the issue. Rather, she should address the issue head on and focus on the advantages to her product idea. Sarah can focus on her personal story of experience working with disabled children to help capture the interest of investors in the absence of a completed feasibility analysis. If she has first screen data, that should be included at this point. The fact that there are other companies pursuing development of competing apps should raise the question of barrier to entry in this industry and must be addressed in the plan as well. If the window of opportunity is closing, revisions to the business idea may be required. 2. Write a mission statement for ZUCA (www.zuca.com), the backpack (and suitcase) on wheels company mentioned in several chapters of this book. How can this statement help define the path that ZUCA takes and act as the company’s financial and moral compass? Answer: ZUCA Mission Statement: "To empower and inspire mobility, creativity, and adventure by delivering innovative, high-quality, and versatile wheeled bags that enhance the lives of our customers with practicality and style." Impact on ZUCA's Path: This mission statement defines ZUCA's commitment to innovation, quality, and customer empowerment, guiding the company towards continuous improvement in product design and customer satisfaction. Financially, it aligns the company with value-driven growth by focusing on products that resonate with customer needs. Morally, it emphasizes integrity in delivering what truly benefits and delights users, ensuring ethical business practices. 3. Suppose you have been asked by your local newspaper to write a 400-word article about the importance of writing a business plan and how to start the process. Please write a 400-word article about the importance of writing a business plan and how to begin the process. Answer: The Importance of Writing a Business Plan and How to Get Started A business plan is crucial for any new venture. It provides a clear roadmap, helping you define your goals, strategies, and financial projections. It also aids in securing funding by demonstrating your preparedness and vision to investors. To start, define your business idea and target market. Conduct market research to understand industry trends and competition. Outline your operational structure and financial projections, including startup costs and revenue expectations. This plan not only guides your business but also convinces investors of your potential for success. 4. Scott and Rebecca Wheeler’s youngest daughter, Emily, has struggled with asthma since she was born. In caring for Emily over the years, Rebecca designed and made a variety of cards, posters, notes, and even decorated lunch bags that encouraged Emily, educated her about her condition, and reminded her to take her medicine on time. Scott and Rebecca are in a support group for parents with asthmatic children, and many of the parents have encouraged Rebecca to start a company to make the items she made for Emily available to other parents. Rebecca has decided to go for it and is writing a business plan for the company. One thing she’s unsure about is how much of her personal story to include in the plan. Should she talk about how she developed the items for her own daughter, Emily, or should she stick to the facts? If Rebecca asked you for your advice, what would you tell her? Answer: If you have an interesting personal story about how your product or business was created, you should share it in the business plan. This helps to put a human face on the plan and make it more interesting and relatable to the reader. 5. Suggest an alternative name for the fictitious fitness club, Prime Adult Fitness, discussed in the chapter. The Internet domain name must be available for the alternative name that you suggest. Explain the rationale for the name you choose. Answer: Name Suggestion: ActiveEdge Fitness Rationale: "ActiveEdge Fitness" conveys a sense of dynamic energy and modernity, appealing to adults seeking to stay fit and ahead in their wellness journey. The name suggests a cutting-edge approach to fitness, which can attract a diverse clientele. The domain name activeedgefitness.com is available, ensuring a unique online presence for the brand. Additional Activities 1. Draft a Mission Statement Purpose: students will practice writing a mission statement. After lecturing on mission statements, show students the actual mission statements of some successful businesses. Ask them what characteristics they notice about the mission statements. Hopefully, they will notice the typical length, key words that convey emotion, and perhaps even that many mission statements are used mainly for public relations purposes. Although students can either do this activity individually or in groups, their creativity is more likely to be stimulated by collaborating with group members. If students work in groups, then ask them to collaborate on all of the statements (not divide the statements up among them) and appoint a scribe to record their work. Have them begin the process of writing a mission statement by filling in the blanks to these statements: The number one reason we (I) decided to start this business is because _____. When people in the community think of this business, I (we) want them to say, “_____.” We (I) hope that our business impacts our customers’ lives by _____. Our (my) three most important personal values include _____. We (I) hope that this business impacts our employees’ lives by _____. The number one reason this business is different from our competitors is because _____. Suppliers and vendors will want to do business with us (me) because _____. The number one reason the products/services that we (I) sell will satisfy our (my) customers because _____. 2. Name This Company Purpose: to practice developing a memorable business name. Items needed—miscellaneous items, such as paper clips, golf balls, spoons, and so on. Have enough items to provide one item either for each student or for each group of students. You can brighten this activity if you collect some unusual items for this activity, as students learn more when they are enjoying themselves! After lecturing on selecting a name for a business that will meet the company’s need for branding, provide students (or teams) with one item. Ask students to use the brainstorming process identified in Chapter 2, and ask teams to appoint a scribe to record their ideas. Give students a limited amount of time, such as 10 to 15 minutes. Their task is to use the concepts in this chapter to develop a business name that will serve as an effective brand. For example, the company names they develop should reflect the four categories: customer-driven, product- or service-driven, industry-driven, and personality- or image-driven. When everyone is finished or time is up, ask the scribes to share the company names, and identify which of the four categories they based their company name on. 3. Tagline, Slogan, Motto Purpose: students will practice writing a slogan. After lecturing on slogans and taglines, show students some actual company slogans or mottos of some successful businesses. Ask them what characteristics they notice about the taglines. Hopefully, they will notice the typical length and key words that convey emotion. While students can either do this activity individually or in groups, their creativity is more likely to be stimulated by collaborating with group members. If students work in groups, ask them to collaborate on this activity and appoint a scribe to record their work. Chapter 5 Industry Analysis Review Questions 1. What is an industry? Why is it important to include an “industry analysis” in a business plan? Answer: An industry is a group of firms producing a similar product or service, such as airplanes, music, electronic games, or fitness club memberships. The industry analysis helps set up and support the remainder of the plan. 2. Why is it important that the industry analysis focus strictly on a firm’s industry rather than its industry and its target market simultaneously? Answer: The reason it’s important to separate the analysis of a firm’s industry and its target market is that it’s premature for a new firm to select, or even talk about, a specific target market until an understanding of the broader industry is obtained. 3. Why is it important for an industry analysis to appear early in a business plan? Answer: The industry analysis should appear early in the plan because it logically precedes the analysis of a firm’s target market and marketing strategy. 4. Why is identifying a company’s industry a tough call in many instances? Answer: Identifying a company’s industry can be difficult because a firm’s industry can be defined narrowly or broadly (e.g., fitness center industry or recreation industry). 5. What should you do if your firm operates in more than one industry? Answer: If your firm operates in two or more industries, you should identify all the industries that it participates in and recognize that it will be necessary to conduct an industry analysis for each of the industries. Some discretion is allowed regarding the weight placed on the individual analyses. In some instances, when a firm operates in more than one industry, it may be appropriate to conduct a full analysis on the primary industry that firm operates in and an abbreviated analysis on the other. 6. What are the four general rules-of-thumb for completing the industry size, growth, and sales projections portion of the industry analysis? Answer: (1) Always display financial information, such as industry sales and growth rate, in a multiyear format, making it easy to spot trends. (2) Display your information graphically, if possible. (3) Provide information about your industry on a regional or local basis if appropriate. (4) Avoid the temptation to report only positive or flattering information about your industry. 7. What topic should be discussed in the industry structure portion of an industry analysis? Why are these topics important? Answer: The topic of industry structure is particularly important. Structure refers to how concentrated or fragmented an industry is and whether the industry’s competitive landscape is generally attractive or unattractive. An industry’s size and its growth rate, regardless of how positive they are, are basically moot points if an industry isn’t structurally attractive for a start-up. 8. Why is it important to know how an industry is segmented? Answer: Understanding which segments of your industry are growing fastest or are most profitable can help you establish credibility in your business plan. Some industries are also clearly bifurcated, where the most successful companies serve the top end of the industry or the bottom end. The worst place to be in a bifurcated industry is right in the middle. 9. Why is knowledge of the key success factors in an industry important? How can an industry’s key success factors be identified? Answer: Key success factors in every industry define what an organization in the industry has to be good at to be successful. Most industries have 6 to 10 key success factors that, if not readily apparent, can be identified by reading IBISWorld and Mintel industry profiles and looking at industry trade journals and magazines. 10. Why is the industry trends portion of the industry analysis arguably the most important section of the analysis? Answer: The industry trends portion of an industry analysis is arguably the most important section because it often lays the foundation for a new business idea in an industry and it typically provides the justification for claims made earlier in the industry analysis. Application Questions 1. You just reviewed a business plan for a company that will make a fitness app that will allow its users track their exercise and monitor their fitness in an innovative way. One thing you noticed is that the plan didn’t include an industry analysis. When you asked Caleb, the author of the plan, why the industry analysis was left out, he said, “Are you kidding? My industry is one of the hottest ones in America. I just read an article that said Health and Fitness apps are one of the top categories in both the Apple and the Android App Store. An industry analysis isn’t necessary.” Do you agree with Caleb? If he said to you, “Okay, persuade me that an industry analysis is necessary,” what would you tell him? Answer: A firm’s industry analysis lays out what is realistically possible and what isn’t realistically possible for it to achieve. Most start-ups are constrained enough by their industries that their performance falls in line with what you would expect after reading their industry analysis. The industry analysis also affects other sections of the business plan because it is a point of reference to work from. It also helps to temper the enthusiasm of business plan writers and provides a useful reference for a plan’s readers. 2. Cybex International (http://www.cybex.com) is a company that makes premium exercise equipment for home and commercial use. What industry is Cybex in? (Provide both an SIC and NAICS code.) Report the industry’s past three years of sales, sales growth, and make a prediction for its sales and sales growth for the next year. Is the industry fragmented or concentrated? What are the environmental and business trends working for and against the industry’s future growth? On a scale of 1–10 (10 is high), how attractive of an industry is the industry Cybex participates in for a startup to enter? Explain your answer. Answer: Cybex operates in the Sporting & Athletic Goods Manufacturing industry (SIC code—3949 & NAICS code—339920). Industry data will change on an annual basis. 3. Jennifer Carroll, a high school classmate of yours, is thinking about starting a company to compete with Crafty.com, the company that makes instructional videos for people who are interested in learning crafts such as knitting, quilting, crocheting, and cake decorating. Jennifer is writing a business plan and is working on the industry analysis. Jennifer is having trouble nailing down the exact industry she will be competing in and is having trouble finding sources of information to help her discern the environmental trends that are impacting her industry. If Jennifer asked for your help, how would you help her determine the industry her instructional video company will participate in, and what suggestions would you give her for finding information on the environmental trends that are impacting her industry? Answer: The best Internet resources to assist in helping identify industries, and in completing all sections of the industry analysis, are IBISWorld, Mintel, and Standard & Poor’s Net Advantage. The most important environmental trends are economic trends, social trends, technological advances, and political and regulatory changes. One place to look to get started thinking about these trends is Standard & Poor’s Net Advantage assessment of the future of the industry. 4. Brooklyn Salsa (www.bksalsa.com) is a company that has launched an exciting new line of salsa dips and related products. Spend a few minutes looking at Brooklyn Salsa’s Web site and studying its business concept. If the founders of Brooklyn Salsa had carefully studied the salsa segment of the broader food industry before coming up with their business idea, what factors about the salsa segment or the food industry might have led them to the idea for Brooklyn Salsa? Answer: The should address issues supportive of the increased interest in healthy and eco-friendly food products. Responses may address the focus on fun, health, organic, sustainable, and local ingredients, and a desire for unique formulations at the high end of the industry. 5. One industry mentioned in the chapter that is fairly “hot” is the mattress industry. Spend enough time studying the mattress industry to determine whether it is structurally attractive for new entrants. Report your conclusions. Answer: The mattress industry presents mixed opportunities for new entrants. Attractive Aspects: 1. Growth Potential: Increasing consumer interest in sleep quality and wellness drives demand. 2. Innovation: Opportunities exist in product innovation and technology integration (e.g., smart mattresses). Challenges: 1. High Competition: The market is saturated with established brands and new direct-to-consumer startups. 2. Low Differentiation: Many products offer similar features, making it hard to stand out. Overall, while there are growth opportunities, new entrants must navigate intense competition and find unique selling propositions to succeed. Additional Activities 1. Who Has the Answer? Purpose: to stimulate students to learn the key terms and concepts in this chapter. This activity should be used as an introduction (or icebreaker) for this chapter. Select three or four possible exam or quiz questions for this chapter, and share them with your students at the very beginning of the class meeting. Instruct the students, at your signal, to stand up, leave their desks, and go visit as many students (who are not in their team) as they can in the next three minutes. Their goal is to share and compare their answers to the three (or four) questions you just shared with them. When the three minutes are up, ask them to share their answers with the entire class, but do not tell them the correct answers yet. Instead, reveal the correct answers to the questions as you move through your lecture. 2. A Life or Death Decision Purpose: to demonstrate the importance of researching industry trends and to raise the possibility of being successful even in a declining industry. After lecturing on industry trends, ask students to identify an industry that is dying. Choose one of their examples, and then instruct them to turn to another student sitting next to them to identify some trends in that industry that would convince you to not enter into that industry. Give them one minute only, and then ask for them to share their list of negative trends associated with that industry. Now, ask students to assume that they have just invented a new product that can be successful in this same dying industry. Ask them to now identify firm-level key success factors they must develop in order to be successful in this dying industry. Ask students to share their results with the rest of the class, and emphasize that it is possible for a business to become successful even in a declining industry. 3. Practicing with Porter Purpose: to encourage students to analyze an industry using Porter’s Five Forces model and to identify if an industry is attractive and profitable or not. After lecturing on Porter’s Five Forces model, ask them to form discussion groups. Their goal is to use the model to analyze an industry that all are likely to be familiar with. (Example: retail shoe stores or beer manufacturers.) Provide this matrix for them to complete: Force Level of Attractiveness/Profitability Low Medium High Threat of Substitute Products/Services Threat of New Entrants into the Industry Rivalry Among Existing Firms Bargaining Power of Suppliers Bargaining Power of Buyers Remind the students to appoint a scribe to record their decisions. Give them 10 to 15 minutes to complete their analysis. At the end of the time period, ask the scribes to share the team’s answers and to identify whether the industry is an attractive one to enter. Listen carefully to ensure that students have correctly interpreted the five forces. Many students confuse threat of substitutes with rivals, and mix up suppliers and buyers. Solution Manual for Preparing Effective Business Plans: An Entrepreneurial Approach Bruce R. Barringer 9780133506976, 9781292039916, 9780132318327
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