Evaluating possible Businesses – 8 basic elements of Your Busine…
Indeed, Business Viability examination is a boring topic. But this is also the most basic part of your business & marketing plans which provides direction on the possible market ecosystem, market need and supply, and to extent, guides your possible market direction decisions. observe that financial modeling is beyond the scope of this article.
I have segregated the Business Viability examination into two major categories, namely Overview Evaluation models and Your Domain Business Evaluation models. The former includes Porter’s 5 Competitive Forces form, P.E.S.T. examination. The latter includes SWOT examination Matrix, Target part examination, Product Life Cycle examination, Competitive Advantage form, Product Growth Directions, BCG Matrix. Both set of models will help you to qualify if the business in question is viable from market need supply in addition as possible market perspectives.
1. Porter’s 5 Competitive Forces form
Porter’s 5 Competitive Forces form is developed by Michael E. Porter, an important strategic examination from a general market ecosystem perspective. It explores the 5 major factors namely Bargaining strength of Supplier, Customer strength/Buyer strength, New Entry Threats, Substitution Threats & Competition Rivalry.
These 5 forces are interdependent, influencing and interplaying with each other at any given point in time. This is a form which needs to be revisited on a consistent basis, usually, over a half yearly time frame for re-evaluation of market trend.
2. P.E.S.T. examination
Doing your “PEST control” ensures good health a strong pulse for your business. PEST examination essentially method macro environmental evaluations such as Political & Legal, Economic, Social & Cultural, in addition as Technological.
Economic ecosystem could make or break your business. In 2008, the US sub-chief issue became a global financial crisis which not only affected the housing market but nearly every facet of the economy by virtue of its spillover effect. The interest rate at time of writing, is 2%, a far cry from 4% a year ago. edges tighten their lending belts and business loan borrowing become more difficult to acquire. But if you manage to get that business loan, you should be incurring a much lower interest repayment.
One Social factor which is growing in importance is the ecosystem. Every large corporation nowadays are involved in one way or another in reducing carbon emission to the ozone and in dealing with climate change.
3. SWOT examination Matrix
SWOT examination, is the acronym for Strengths, Weaknesses, Opportunities & Threats affecting your business. Strengths part analyses internal capabilities throughout all business roles which could become rare propositions when mapping out business strategies. Weaknesses analyses the internal gaps in current state. Likewise, Opportunities & Threats analyse your business’s external ecosystem which could give rise to opportunities or threats to your business. This is a fluid cheat sheet (not totally exhaustive & you should add on to it to cater to your own business kind) which should be revisited yearly as a reality business stop-check.
4. Target part examination
This is a very basic section of the marketing plan which helps you with your market segmentation and defines your target markets. Define & part your clientèle-base into dominant & Secondary Target market groups using demographic and psychographic information. Demographic data includes age, income group, geographic location etc. Psychographic data includes life-stage needs, lifestyle, consumer purchasing behavior etc. Upon completion, you would have a better gauge on the possible size of your target segments. You may adjust the segments to match your products, thereby expanding your segments for greater possible.
5. Competitive Advantage form
The Competitive Advantage form by Michael E. Porter indicates 4 approaches benchmarking against your competitors namely, Cost Leadership, differentiation or focus with 2 variants.
Cost Leadership strategy method leading in a low cost pricing strategy within your industry. This is achieved from economies of extent. You must almost solely rule this competitive space otherwise more than one company in this space will cause a price war.
Differentiation strategy indicates rare value proposition, namely in areas such as the product, service, image, dispensing, marketing etc or a combination of them.
Focus strategy aspires to be the best in a focused part, with 2 variants of cost focus and differentiation focus
6. Product Life Cycle examination
The Product Life Cycle examination helps you to clarify the stage of your product. All products go by four stages, namely the Introduction, Growth, Maturity & Decline stage. Every product has a life cycle. You need to know each of your products’ life cycles thoroughly in order to plan to phase their life-stage across the horizon.
This examination is a fluid document which needs to be revisited yearly for planning purpose. If you believe that your product has other possible uses not maximized currently, you should pro-actively look to rejuvenating the life cycles of such products at their matured and declining stages.
7. Product Growth Directions
Product Growth Directions discarded light on the possible growth approaches you can adopt in driving your product sales. This is a matrix which maps your product growth strategies across new vs existing markets and products. Potentially, the four segments are Market penetration, Market development, Diversification in addition as Product Development. Market penetration essentially denotes leveraging new markets with existing products. Market development method making inroads on existing markets & products. Diversification indicates leveraging on existing markets with new products. And of course, Product development is expansion into new markets with new products.
8. BCG Matrix
Boston Consulting Group developed this BCG Matrix which helps you to determine what priorities should be given in your product portfolio of a product. It has essentially two dimensions – market proportion and market growth rate, with 4 categories fitting into these quadrants.
Stars = Leaders of the Business – Products with high growth rate & high market proportion. Generates high cashflow and requires high cash input. Usually, Net cashflow is flat.
Cash Cows = Foundation of the Business (stars of yester years) – Products with low growth rate & high market proportion. They generates high cashflow with low cash input requirements.
Dogs = Drags of the Business – Products with low growth rate & low market proportion. They must be avoided whenever possible. Liquidate as many as possible.
Question Marks = Ambiguity of the Business – Products with high growth rate & low market proportion. Have high cash need and low returns. If keeping question marks, you must ensure increase in market proportion and deliver cash.
The identification of your products at the various categories will enlighten you to apply the correct growth & funding strategy. for example, cash infusion could be provided to fund Question Marks &/or Stars to excursion them towards the next level – Cash Cow locaiongs.
True application of all the above mentioned viability analyzes is a cumulative interplay of the different models, although they are developed separately by separate strategists. I advocate a general however conjugative approach to the application as therein lies great interdependence of each to the other.