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Administrivia PowerPoint slides due Wednesday. Executive summaries handed back…
Today for those presenting on Thu 3/6Wed for those presenting on Tue 3/11
It’s ok if your ppt changes from what you hand in this Wednesday.
Office hours at Muddy Charles tonight after class
Ken virtual OH: Tue 11:30 am – 1 [email protected] or 617-354-6565
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class 8 prefix...
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Comment on Ethics We’ve discussed some creative techniques for
building excitement around an up-until-now unexciting idea.
It’s critical to know how distinguish a good magician from a con artist.
Those who can “make a silk purse out of a sow’s ear” are admired. Those who falsify the label on a sow’s ear and sell it for the price of a silk purse are incarcerated.
Calls upon on deep character issues, which you have to know how to sense.
Think Muhammad Ali: fancy footwork, a loud-mouth, but... was an amazing athlete, never hit below the belt
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The Next Big Thing
“Americans love being part of the next big thing”
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From Adrian’s PowerPoint
Nice graphic: “The Pyramid”
Cisconext wave
our market
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Jargon check:
“Limiteds”, i.e. “we asked our VCs to ask their limiteds for sales leads”
The limiteds are the people from whom the VCs get their money.
VCs are partnerships, and “limited partner” is the legal jargon for the people who supply the money to the VCs
Often are big corporations and pension funds
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Example of Numbers AnalysisVariable Value (Assumptions)
Marketable population
(developed countries in Americas, Europe, Asia) 3,500,000,000
Adult population 2,100,000,000 adult/whole = 60%
Drinking population 420,000,000 drinking/adult = 20%
Blushing population 42,000,000 blushing/drinking = 10%
Problematic population (i.e. consumer size) 10,500,000 problematic/blushing = 25%
DO (Drinking Occasions) per week 1
DO per year 50
Number of pills required per DO 2
Number of pills per NoBlush bottle 25
Consumption rate (# of bottles/yr/consumer) 4
Price ($/bottle) $12
Cost ($/bottle) $8 profit margin = 33%
Profit ($/bottle) $4
Profit ($/yr/consumer) $16
Consumer size in 3rd year of operations 315,000 penetration rate in yr3 = 3%
Profits in 3rd year of operations $5,040,000
Market Value $50,400,000 multiple = 10
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15.390 class 8The Competition Section
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Aspects of Marketing and Sales
Market Analysis and Segmentation (26-Feb) How big is the market, what are the trends, what have
similar companies done before, what are analysts saying about the future? (identifying a group of buyers)
Competitive Analysis (3-Mar) who are the other players in this market, where are they
strong and weak, what options do your buyers have? Marketing and Sales Strategy (12-Mar)
How are you going to identify individual buyers, how are you going to make the product appealing to and get it in front of these buyers? Are you going to sell direct or through a distributor?
Salesmanship (5-Mar) and Sales Tactics (10-Mar) How are you going to send salespeople to call upon and
close (or use distributors for) each of these buyers?
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What you’ll be submitting:
By Mon the 17th, you’re to submit the “Competition” Section of your business plan.
Sales and Marketing submitted separately (April 2). The Competition section should include much of the
overall market segmentation section, and save the tactical marketing and sales strategy for April 2.
Competition section: Who are your competitors (and if they’re not companies,
what are your customers’ substitute options, i.e. where do they spend their money now)?
How do you plan to beat them?
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What to accomplish in the Competition Section
Define who the competition is Handicap which companies you are
going to compete against – and those you are not
Discuss the strengths and weaknesses of the major competitors – honestly
Discuss how you are going to compete with them.
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Competition
“If you think you have have a ‘Killer Idea’ - and if five other companies aren’t already working on the same idea - it’s probably a lousy idea”
- Guy Kawasaki (garage.com)
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Your Competitors are not idiots
They have ... Customers Customer service Hardworking employees Products that work R&D you probably don’t know about The ability to sustain a loss for longer
than you can Residual good will
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But they are not invulnerable…
They may be low cost…. but can’t be high touch
They may be technically obsolete They may have disaffected employees They may have profit pressures They may be suffering from their own success They may be unable to admit that a disruptive
technology is about to hit them Or other agendas...
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Sun TsuPick Your Battlefield Define who you want to compete against,
and who you do not Use PR to force them to show metrics in
areas where you will win Amass your strengths against your
competition’s weaknesses. Distribution? Delivery? Service? Features?
Quality? Price? “The goal of strategy is to upset the business
equilibrium and to re-establish it on a more favorable basis”
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Pick your competition
Don’t fight all wars, be selective Example: DEC wanted to compete in
office automation against IBM. But figured it was easier to compete against Wang first, build a beachhead then go onto IBM
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Go Where They’re Not
If they are feature poor, then you are feature rich
If they go direct (Dell), then you can use channels… or vice versa…
If they own the operating system, then perhaps you do not fight them directly, but adopt their operating system.
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Going where they’re not
Markets sometimes take time to mature. Consider why, up until now, the
competition has not seen this market as attractive.
What is it that now makes it ripe?
Egenera Confidential - Do Not Copy
egenera
“processing at the edge”,build-out shifts from bandwidth, through content,to transactions
ASPs and network-service models emerge as data centers become increasingly hard to manage, expensive to staff
Intel processors andother commoditycomponents matureto enterprise-levelquality and capacity
The Linux revolutionISV mass adoptionIT staff craving Linux
Why Now?
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Writing the plan...
In the “market segmentation” discussion, you address: What is the segment of the market you are
attacking.What is the size of the market of the top 10
competitors?Who in the market has what sector, how
are they growing?
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Now address their strengths and weaknesses
Example: Competitor A+’s. Has direct sales force
Strongest in software
-'s. Not strong in communications Bias towards Microsoft
Viewed as arrogant, won’t take client callsHigh Priced
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Put The Competitors on a Grid
Price vs. Quality Customer Oriented vs. Customer
Agnostic Global vs. National Credible vs. Non credible. Entrenched vs. non entrenched.
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Who are their customers?
Name the ten largest customer of your major one competitor (if industrial)
Or the major demographic groups of the buyers (if consumer/retail)
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WHY are they customers?
What do they like about their supplier? Dislike? Who is the buying influence? What other vendors do they buy from? Who is the buying influence? What are the criteria that the buyer will use to make a decision.
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Example: Buying Decision
A. Local Service 25%
B. Open Architecture 20%
C. Performance 30%
D. Price 25%
How will you stack up?
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How is your competitor organized?
Number of salespeople? Location? Service people?
What has been the economic performance? Where is the R&D going at your Number one
competitor? Which products in the line are growing
fastest? Slowest? Where is a major upgrade expected? What would that do to your product plan?
What does his balance sheet look like?
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How do you match up with competitor #1?
Pricing and Cost of Goods Sold Do you have a manufacturing advantage?
(probably not) Do you have a speed advantage?
(maybe)
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Competition has several forms
Geographical Price Distribution Quality Features Service
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Distribution
Has C#1 just gone from distributors to direct….. And can you replace him with those distributors?
Has C#1 changed the terms of margin of his distributors from 40 - 30% - and are they miffed?
Has C#1 lost … or is about to lose…his OEM agreement with a distributor?
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Product
What improvements has C#1 made in his product? How often does he make these improvements? How long to respond to improvements in others? When is his new improvements due?
Are the improvements substantial or cosmetic?
What parts of the market is C#1 ignoring?
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Financing
What does his balance sheet look like? Income statement? Is he public or private? How is his stock doing? Are his people restive? Have they signed non competes? Do his people have stock options? At what price? Who’s under water? What is the pressure point?
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1:1 Marketing
Will always beat mass marketing. Are their ways that you could use 1:1 marketing
“When he concentrates, prepare against him; where he is strong, avoid him”
“Appear at places to which he must hasten; move swiftly where he does not expect you”
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Hard customization vs. soft
Soft customization can be done easier….New England packageLanguage or segment
Hard customization changes the basic product...ex: Cat Food for the Indoor Overweight
Cat, ages 8 years or older
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have a better story than just being low-cost Yes, you can underprice your competitor. But
for how long and for how much. Most leaders understand that they are the
Price Umbrella. At a 10% discount, you will most likely not disturb the beast.
At 40% your Competitor A may decide he has had enough. And underprice you by 20%…. And hope to drive you out
Competing on Price
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Alliances
“The enemy of my enemy is my friend”-think through alliances that might work because of a commonality of interest.Ex: if they have a tight relationship with
Sears, you might propose a relationship with Walmart
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Bottom Line:
Pick three competitors that you want to compete with
Line up your strengths against their weaknesses
Gain a foothold; build on that foothold Try and not use price as the lever; you
may be outmatched
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How would you compete with you?
If you started a company to compete with your company, where would you begin? Where are you vulnerable?
What new service could a hypothetical company offer that you would be “unable or unwilling to compete with”.
Companies have different vulnerabilities at different times.
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The End
