MODULE 4: LIVING THE ENTREPRENEURIAL MIND

Outline:

1. SWOT Tool
2. Strategic Approach (Porter’s Five Forces)

At the end of the modules, the students are expected to:

- Analyze the strengths, weaknesses, opportunities and threats of the business plan
- Determine the strategies to make the business plan viable

INTRODUCTION:

Business opportunities are everywhere as long as there are people with money, and they are
willing to satisfy their needs. However, there are more business opportunities for individuals who are
creative, resourceful, and risk-takers because they create opportunities instead of waiting for
opportunities to come. These are the real entrepreneurs.

There are factors to take into account in searching for business opportunities. These are resources,
skills, interests, and economic needs. The resources, skills, interests of the entrepreneur should match the
social and economic needs of the community. For instance, are you really interested in such kind of
business? Are you willing and able to sell a certain product or service? Is there a demand for such product
or service? Do you have the resources and skills to undertake such business?

Likewise, the resources, skills, and technologies available in the community are to be evaluated.
If these are not fully or efficiently utilized, then these are good sources for business opportunities.

Entrepreneurial Activities

Business activities are concentrated in cities and other urban communities. The primary reasons
are that more buyers, more incomes and more facilities are located in the said heavily populated areas.
Apparently, there are more business competitors in the cities. This means it would be very difficult for a
newcomer to penetrate the markets. But for entrepreneurs, such difficult situation provides a challenge.
Hence, they are encouraged to explore market opportunities. (Fajardo, 1994)

It is natural for buyers to look for goods and services which offer better quality, lower price, and
more conveniences. Precisely, these are the basic features of consumer satisfaction which entrepreneurs
can develop. In our country, there are several marketing innovations of goods and services, like the
cashless mode of payment, 24-hour service of some grocery stores and home delivery services of food
items.

SWOT TOOL

Looking for a way to separate your organization from the competition? A SWOT analysis is a
technique used to identify strengths, weaknesses, opportunities, and threats in order to develop a strategic
plan for your business. While it may sound difficult, it’s actually quite simple.

Whether you’re looking for external opportunities or internal strengths, we’ll walk you through
how to perform your own SWOT analysis with helpful examples along the way. To be able to translate
business opportunities into profits, the SWOT analysis is applied. It studies the financial resources,
physical facilities, management capabilities, the market, production process, information system, sources
of supply, social environment.

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What is a SWOT Analysis?

SWOT stands for Strengths, Weaknesses, Opportunities, and Threats, and so a SWOT analysis
is a technique for assessing these four aspects of your business. SWOT Analysis is a tool that can help
you to analyze what your company does best right now, and to devise a successful strategy for the future.
SWOT can also uncover areas of the business that are holding you back, or that your competitors could
exploit if you don't protect yourself.

A SWOT analysis examines both internal and external factors – that is, what's going on inside
and outside your organization. So some of these factors will be within your control and some will not. In
either case, the wisest action you can take in response will become clearer once you've discovered,
recorded and analyzed as many factors as you can. SWOT seems simple, but, if used carefully and
collaboratively, it can be very revealing. For example, you may be well aware of some of your
organization's strengths, but until you record them alongside weaknesses and threats you might not realize
how unreliable those strengths actually are. Equally, you likely have reasonable concerns about some of
your business weaknesses but, by going through the analysis systematically, you could find an
opportunity, previously overlooked, that could more than compensate. (https://www.mindtools.com/)

What does SWOT stand for?

Simply put, SWOT stands for strengths, weaknesses, opportunities, and threats. Each of these
factors is important to examine in order to properly plan for organizational growth. That’s where the
analysis comes in. When analyzed together, the SWOT framework can paint a larger picture of where
you are and how to get to the next step.

When should you perform a SWOT Analysis?

You can employ a SWOT analysis before you commit to any sort of company action, whether
you are exploring new initiatives, revamping internal policies, considering opportunities to pivot or
altering a plan midway through its execution. Sometimes it's wise to perform a general SWOT analysis
just to check on the current landscape of your business so you can improve business operations as needed.
The analysis can show you the key areas where your organization is performing optimally, as well as
which operations need adjustment.

While the business owner should certainly be involved in creating a SWOT analysis, it is often
helpful to include other team members in the process. Ask for input from a variety of team members and
openly discuss any contributions made. The collective knowledge of the team will allow you to
adequately analyze your business from all sides. (https://www.businessnewsdaily.com/)

Characteristics of a SWOT Analysis

A SWOT analysis focuses on the four elements of the acronym, allowing companies to identify
the forces influencing a strategy, action or initiative. Knowing these positive and negative elements can
help companies more effectively communicate what parts of a plan need to be recognized.

When drafting a SWOT analysis, individuals typically create a table split into four columns to
list each impacting element side by side for comparison. Strengths and weaknesses won't typically match
listed opportunities and threats verbatim, although they should correlate, since they are ultimately tied
together. (https://www.businessnewsdaily.com/)

Billy Bauer, managing director of Royce Leather, noted that pairing external threats with internal
weaknesses can highlight the most serious issues a company faces.

"Once you've identified your risks, you can then decide whether it is most appropriate to eliminate
the internal weakness by assigning company resources to fix the problems, or to reduce the external threat
by abandoning the threatened area of business and meeting it after strengthening your business," said
Bauer.
How to Write a SWOT Analysis and Example

SWOT analysis involves making lists – but so much more, too! When you begin to write one list
(say, Strengths), the thought process and research that you'll go through will prompt ideas for the other
lists (Weaknesses, Opportunities or Threats). And if you compare these lists side by side, you will likely
notice connections and contradictions, which you'll want to highlight and explore.

A SWOT matrix is a 2x2 grid, with one square for each of the four aspects of SWOT.

Bryan Weaver, a partner at Scholefield Construction Law, was heavily involved in creating a
SWOT analysis for his firm. He provided Business News Daily with a sample SWOT analysis template
and example that was used in the firm's decision to expand its practice to include dispute mediation
services. His SWOT matrix included the following:

Resulting Strategy: Take mediation courses to eliminate weaknesses and launch Scholefield
Mediation, which uses name recognition with the law firm, and highlights that the firm's construction and
construction law experience makes it different.

"Our SWOT analysis forced us to methodically and objectively look at what we had to work with
and what the marketplace was offering," Weaver said. "We then crafted our business plan to emphasize
the advantages of our strongest features while exploiting opportunities based on marketplace
weaknesses."
 Here are additional examples for SWOT Analysis from https://asana.com/

Figure 1: SWOT Analysis Example

When used correctly and effectively, your matrix can be a great toolkit for evaluating your
organization’s strengths and weaknesses. Once you’ve created your matrix, you can focus on how to
actually implement the opportunities you found.

Figure 2: A SWOT Analysis Matrix.

 Steps on how to do a SWOT Analysis:
https://www.mindtools.com/pages/article/newTMC_05.htm#:~:text=SWOT%20stands%20for%20Strengths%2C%20Weaknesses,successful%20strategy%20for%20the%20future.

In order to get a better sense of what a complete SWOT analysis might look like, we’ve taken the
example of a hypothetical massage therapist who is starting a service business.

1. Strengths (internal, positive factors)

Strengths are the big things that a particular company is doing well, which gives them a
competitive advantage in their industry and benefits their customers. For your own business, identifying
your strengths can help you leverage these by making them stronger. For competitors, consider their
strengths a goal to aim for. Ask yourself, how can I do what they do, but better? Or, how can I create my
own twist on this idea that outsmarts theirs?

Here are a few questions to consider as you begin your SWOT analysis:

• What are this company’s competitive advantages in the industry?

• What features do they offer that are unique and valuable?
• What processes are they excelling in?
• What draws customers in?
• Is the organization expanding and hiring new employees?
• What strong assets does the company have, i.e., intellectual property,
stakeholders, buildings, etc.?

Your strengths are an integral part of your organization, so think about what makes it "tick."
What do you do better than anyone else? What values drive your business? What unique or lowest-cost
resources can you draw upon that others can't? Identify and analyze your organization's Unique Selling
Proposition (USP), and add this to the Strengths section.

Remember, any aspect of your organization is only a strength if it brings you a clear advantage.
For example, if all of your competitors provide high-quality products, then a high-quality production
process is not a strength in your market: it's a necessity.

2. Weaknesses (internal, negative factors)

Weaknesses, like strengths, are inherent features of your organization, so focus on your people,
resources, systems, and procedures. Think about what you could improve, and the sorts of practices you
should avoid. Once again, imagine (or find out) how other people in your market see you. Do they notice
weaknesses that you tend to be blind to? Take time to examine how and why your competitors are doing
better than you. What are you lacking? Be honest! A SWOT analysis will only be valuable if you gather
all the information you need. So, it's best to be realistic now, and face any unpleasant truths as soon as
possible. (https://www.mindtools.com/)
 3. Opportunities (internal, negative factors)

Owning a business is all about seizing the moment. Opportunities are probably the same for
yourself and your competition, if not very similar. Recognizing them is the first step, and taking advantage
of them before your competition does is the second. Likewise, you should do so at the determined time
that makes the most sense for your business, depending on what stage of development you’re in.
Opportunities are external factors in your business environment that are likely to contribute to your
success.

Think about good opportunities that you can exploit immediately. These don't need to be game-
changers: even small advantages can increase your organization's competitiveness. What interesting
market trends are you aware of, large or small, which could have an impact? You should also watch out
for changes in government policy related to your field. And changes in social patterns, population profiles,
and lifestyles can all throw up interesting opportunities.

Opportunities are external attractive factors that represent reasons your business is likely to
prosper. https://articles.bplans.com/

4. Threats (external, negative factors)

Threats include external factors beyond your control that could place your strategy, or the
business itself, at risk. You have no control over these, but you may benefit by having contingency plans
to address them if they should occur.

Threats include anything that can negatively affect your business from the outside, such as
supply-chain problems, shifts in market requirements, or a shortage of recruits. It's vital to anticipate
threats and to take action against them before you become a victim of them and your growth stalls. Think
about the obstacles you face in getting your product to market and selling. You may notice that quality
standards or specifications for your products are changing, and that you'll need to change those products
if you're to stay in the lead. Evolving technology is an ever-present threat, as well as an opportunity!

Always consider what your competitors are doing, and whether you should be changing your
organization's emphasis to meet the challenge. But remember that what they're doing might not be the
right thing for you to do. So, avoid copying them without knowing how it will improve your position.
 Be sure to explore whether your organization is especially exposed to external challenges. Do
you have bad debt or cash-flow problems, for example, that could make you vulnerable to even small
changes in your market? This is the kind of threat that can seriously damage your business, so be alert.

Here are examples of potential threats:

• Is a customer expressly unhappy with a particular product or service?

• Is the market fluctuating, i.e., are prices rising, are consumers purchasing alternatives,
etc.?
• Are there new government regulations to watch out for?
• What is it that they are doing better? Do some market research to find out.
• Will new technology become available in the near future that could make this business’s
products or services obsolete?
• Are consumers no longer expressing interest in these services?

Use a SWOT Analysis to assess your organization's current position before you decide on any
new strategy. Find out what's working well, and what's not so good. Ask yourself where you want to go,
how you might get there – and what might get in your way.
Strategic Approach (Porter’s Five Forces)

Porter's Five Forces is a simple but powerful tool that you can use to identify the main sources
of competition in your industry or sector. When you understand the forces affecting your industry, you'll
be able to adjust your strategy, boost your profitability, and stay ahead of the competition. For example,
you could take fair advantage of a strong position or improve a weak one, and avoid taking wrong steps
in the future

What Are Porter's Five Forces?

Porter's Five Forces is a model that identifies and analyzes five competitive forces that shape
every industry and helps determine an industry's weaknesses and strengths. Five Forces analysis is
frequently used to identify an industry's structure to determine corporate strategy. Porter's model can be
applied to any segment of the economy to understand the level of competition within the industry and
enhance a company's long-term profitability. The Five Forces model is named after Harvard Business
School professor, Michael E. Porter. https://www.investopedia.com/terms/p/porter.asp

Porter recognized that organizations like to keep a close watch on their rivals, but, in his Harvard
Business Review article, 'How Competitive Forces Shape Strategy,' he encouraged them to look beyond
the actions of their competitors and examine the forces at work in their wider business environment.

Porter's Five Forces is considered a macro tool in business analytics – it looks at the industry's
economy as a whole, while a SWOT analysis is a microanalytical tool, focusing on a specific company's
data and analysis. https://www.businessnewsdaily.com/5446-porters-five-forces.html

Understanding Porter's Five Forces

Porter's Five Forces is a business analysis model that helps to explain why various industries are
able to sustain different levels of profitability. The model was published in Michael E. Porter's book,
"Competitive Strategy: Techniques for Analyzing Industries and Competitors" in 1980. Michael E.
Porter. "Competitive Strategy: Techniques for Analyzing Industries and Competitors (Abstract)

According to Porter, there are five forces that represent the key sources of competitive pressure
within an industry. They are:

1. Competition in the industry

2. Potential of new entrants into the industry

3. Power of suppliers

4. Power of customers

5. Threat of substitute products

And he described them in his later article, 'The Five Competitive Forces That Shape Strategy.”

He stressed that it's important not to confuse these five forces with more fleeting factors, such as
industry growth rates, government interventions, and technological innovations. According to Porter, the
latter are examples of temporary factors, while the Five Forces are permanent parts of an industry's
structure.
 Let’s elaborate each: https://www.businessnewsdaily.com/5446-porters-five-forces.html

1. Competitive Rivalry

This force examines how intense the competition is in the marketplace. It considers the number
of existing competitors and what each one can do. Rivalry competition is high when there are just a few
businesses selling a product or service, when the industry is growing and when consumers can easily
switch to a competitor's offering for little cost. When rivalry competition is high, advertising and price
wars ensue, which can hurt a business's bottom line.

2. The Bargaining Power of Suppliers

This force analyzes how much power a business's supplier has and how much control it has over
the potential to raise its prices, which, in turn, lowers a business's profitability. It also assesses the number
of suppliers of raw materials and other resources that are available. The fewer supplier there are, the more
power they have. Businesses are in a better position when there are multiple suppliers. Learn more about
finding suppliers and B2B partners.

3. The Bargaining Power of Customers

This force examines the power of the consumer, and their effect on pricing and quality.
Consumers have power when they are fewer in number but there are plentiful sellers and it's easy for
consumers to switch. Conversely, buying power is low when consumers purchase products in small
amounts and the seller's product is very different from that of its competitors.

4. The Threat of New Entrants

This force considers how easy or difficult it is for competitors to join the marketplace. The easier
it is for a new competitor to gain entry, the greater the risk is of an established business's market share
being depleted. Barriers to entry include absolute cost advantages, access to inputs, economies of scale,
and strong brand identity.

5. The Threat of Substitute Products or Services

This force studies how easy it is for consumers to switch from a business's product or service to
that of a competitor. It examines the number of competitors, how their prices and quality compare to the
business being examined, and how much of a profit those competitors are earning, which would determine
if they can lower their costs even more. The threat of substitutes is informed by switching costs, both
immediate and long-term, as well as consumers' inclination to change. Learn how to perform a
competitive analysis to stay ahead of other players in the market. To take full advantage of this strategy
make sure you're able to properly calculate cost of goods sold (COGS).

Example of Porter's Five Forces

There are several examples of how Porter's Five Forces can be applied to various industries. The
ultimate goal is to identify the opportunities and threats that could impact a business. As an example,
stock analysis firm Trefis looked at how Under Armour fits into the athletic footwear and apparel industry.

• Competitive rivalry: Under Armour faces intense competition from Nike, Adidas, and newer
players. Nike and Adidas, which have considerably larger resources at their disposal, are
making a play within the performance apparel market to gain market share in this up-and-
coming product category. Under Armour does not hold any fabric or process patents, hence its
product portfolio could be copied in the future.
 • Bargaining power of suppliers: A diverse supplier base limits supplier bargaining power.
Under Armour's products are produced by dozens of manufacturers based in multiple countries.
This provides an advantage to Under Armour by diminishing suppliers' leverage.

• Bargaining power of customers: Under Armour's customers include wholesale customers and
end-user customers. Wholesale customers, like Dick's Sporting Goods, hold a certain degree of
bargaining leverage, as they could substitute Under Armour's products with those of Under
Armour's competitors to gain higher margins. The bargaining power of end-user customers is
lower as Under Armour enjoys strong brand recognition.

• Threat of new entrants: Large capital costs are required for branding, advertising, and
creating product demand, which limits the entry of newer players in the sports apparel market.
However, existing companies in the sports apparel industry could enter the performance apparel
market in the future.

• Threat of substitute products: The demand for performance apparel, sports footwear and
accessories is expected to continue to grow. Therefore, this force does not threaten Under
Armour in the foreseeable future.

How to Use Porter's Five Forces Model

Porter's Five Forces Model can help you to analyze the attractiveness of a particularly industry,
assess investment options, and measure competition intensity.

To use the model, start by looking at each of the five forces in turn, and how they apply in your
industry. Ask yourself the following questions:

• Is rivalry between competitors intense or do you tend to retain customers relatively easily?
• Do you have lots of suppliers to choose from or do you rely heavily on a small group of
suppliers?
• Is buyer power high or low?
• Would buyers find it easy to substitute your product or service?
• Do new competitors find it easy to enter the market or is it difficult?

Key Takeaways

Michael Porter's Five Forces model is an important tool for understanding the main competitive
forces at work in an industry. This can help you to assess the attractiveness of an industry, and pinpoint
areas where you can adjust your strategy to improve profitability.

✓ Porter's Five Forces is a framework for analyzing a company's competitive environment.

✓ The number and power of a company's competitive rivals, potential new market entrants,
suppliers, customers, and substitute products influence a company's profitability.
✓ Five Forces analysis can be used to guide business strategy to increase competitive
advantage.
 Additional Learning Activities:

➢ Watch this video https://youtu.be/_IaBZmB09RE entitled: Porter’s Five Forces

Suggested Assignments:

➢ SWOT Template/s and other Examples

➢ Porter's Five Forces Template and Example
➢ Include these 2 approaches in the learner’s final business proposal.

References:

Link are provided as references for this module.