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Chapter 2

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York University
Administrative Studies
ADMS 3920

22 September 2012 CHAPTER 2 STARTUP AND THE NEED FOR COMPETITIVE ADVANTAGEStartupcreating a new business from scratchBuyoutpurchasing an existing business THE STARTUP CREATING A NEW BUSINESS There are several reasons for starting a new business rather than buying an existing firm or acquiring a franchise To begin a new type of business on a recently invented or newly developed product or serviceTo take advantage of an ideal location equipment products or servicesTo avoid undesirable precedents policies procedures and legal commitments of existing firmsIDENTIFYING STARTUP IDEAS Facts to consider when deciding whether a new business idea is a good investment opportunityMarket Factors The product or service must meet a clearly defined market need and the timing must be right Competitive Advantage A competitive advantage exists when a firm offers a product or service that customers perceive to be superior to those of its competitors Economics The venture needs to be financially rewarding allowing for profit and growth potential Management capability There must be a good fit between the entrepreneur and the opportunity the entrepreneur must have the appropriate skills and experience to operate the venture Fatal flaws There must be no fatal flawsSTRATEGIES TO FIND NEW IDEAS 1 Look for Favorable Factors driving ChangeTechnologySocialDemographicPoliticalRegulatory2 Look to SectorsIndustries favoring New Firm formationKnowledge ConditionsDemand Intensity ConditionsIndustry Life Cycle ConditionsIndustry Structure 3 Look for Opportunities favoring New Firms over Established FirmsCompetitors Position EntrenchedLacking Flexibility
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