Describe the purpose of industry/target market feasibility analysis, and identify the two primary issues that should be considered. What is the difference between a firm’s industry and its target market?What is the difference between standard business models and disruptive business models? Include examples of both in your answer.What is a founders’ agreement? Describe the purpose of a buyback clause and why it’s important?Briefly describe the four main components of the Barringer/Ireland Business Model Template. Identify the subcomponents of each the four main components of a business model.
The Correct Answer and Explanation is :
Industry/Target Market Feasibility Analysis
The purpose of industry/target market feasibility analysis is to assess whether a business can succeed in its chosen market or industry by evaluating the external factors that will influence its potential. The analysis helps entrepreneurs understand the viability of their idea in the context of market trends, competition, and customer needs. It enables businesses to determine whether they can profitably operate in a specific market or industry and if there is demand for their product or service.
The two primary issues to consider are:
- Industry Attractiveness: This includes assessing the growth potential, competition, and risks in the industry. Understanding the forces that drive success in the industry helps an entrepreneur make informed decisions.
- Target Market: This refers to evaluating whether there is a sufficient and reachable customer base for the business’s product or service. Entrepreneurs need to analyze the target market’s size, behavior, and preferences to ensure demand exists.
Difference Between Industry and Target Market
An industry refers to the broader sector in which a firm operates, like healthcare, technology, or manufacturing. A target market, on the other hand, is the specific group of consumers a business intends to serve, such as young professionals or health-conscious individuals. The industry is the overall context, while the target market is the specific audience within that industry.
Standard vs. Disruptive Business Models
Standard business models are traditional frameworks that focus on improving existing products and services within established markets. An example is the retail model, where businesses sell products directly to consumers in physical or online stores.
Disruptive business models introduce innovative solutions that change or revolutionize industries. They often offer new, more efficient, or cheaper alternatives. For example, Uber disrupted the taxi industry by offering a more flexible and affordable ride-hailing service through an app.
Founders’ Agreement and Buyback Clause
A founders’ agreement is a legal contract between the founding members of a business that outlines roles, responsibilities, equity ownership, and decision-making processes. It helps prevent conflicts and misunderstandings.
A buyback clause gives one or more founders the right to buy back shares or equity from another founder who may leave or exit the business. It’s important because it ensures stability and prevents outsiders from gaining ownership without the agreement of the other founders.
Barringer/Ireland Business Model Template
The four main components of the Barringer/Ireland Business Model Template are:
- Core Strategy: The company’s approach to competing in its market, which includes its value proposition and competitive advantage.
- Subcomponents: Target market, product/market scope, competitive advantage.
- Resources: The assets needed to execute the strategy, including human, financial, and physical resources.
- Subcomponents: Key resources like technology, intellectual property, and human capital.
- Financials: The economic aspects of the business, such as pricing, revenue model, and costs.
- Subcomponents: Revenue sources, cost structure, and funding requirements.
- Operations: The processes and activities necessary to deliver value to customers, including production and delivery.
- Subcomponents: Supply chain management, distribution channels, customer service.
Each component ensures the business model is comprehensive, covering strategy, resources, financials, and operations for successful execution.