Your parents started a small business whilst you were still at school. During the start-up years, you and your siblings worked over weekends and holidays in the business. During these times, your parents taught you valuable business skills that would eventually see you finishing a Bachelor of Commerce degree before returning to the business. You are the last of the three siblings to return to the business and thus have the most junior role within the business. The small business that your parents established is called Family DIY. Family DIY is a hardware store that is 17 years old and has a good reputation within the local community with the supply of building materials for major construction projects as well as supporting the local handyman with equipment and services to attempt small DIY projects at home. As the last member of the family to join Family DIY and the only one with a Bachelor of Commerce degree, you are thrown into the deep-end at the annual strategic meeting. The strategic committee decides that the business must establish itself as a franchise and open more stores across the province with a focus on developing and increasing small family-owned business.business report to table at the Strategic Evaluation Committee meeting in three weeks. You must provide feedback on how the following aspects would apply to the business franchise model.

er 25 countries, distributing delicious and putting prin- profits. The ingredients and factory carry cruelty-free food that has as little impact on the natural the world. endorsements from the highest authorities of veganism in Growth was incremental but continuous, and today the business packs 16 tons per day. The focus is on contin- uous improvement and the development of new product lines. Some years ago, the organisation focused on reduc- ing the salt and fat content of its products, reducing fat content from 12 per cent to between 3 and 4 per cent in some of their products and halving sodium content. In addi- ENTREPRENEUR MEDIA SA (PTY) LTD / WWW.ENTREPRENEURMAG tion, Fry's continues researching new ingredients from all over the world, with the proviso that its sources are aligned with the business's own ethics and values. Sources: 'Fry's Family-since 1991', http://www.frysvegetarian.co.za/frys- family-our-story/, accessed 10 June 2016; and Juliet Pitman, 'Fry's Vegetarian: Wally and Debbie Fry', Entrepreneur Magazine: Success stories, http://www .CO.ZA . entrepreneurmag.co.za/advice/success-stories/entrepreneur-profiles/ fry%E2%80%99s-vegetarian-wally-and-debbie-fry/, accessed 10 June 2016. s simenvsb 10 asezsuriand gui 3-3 Using Internal and External Analyses to Assess brods New Business Ideas Two general approaches can help to identify business ideas-outside-in and inside-out LO analyses. In other words, entrepreneurs can look for needs in the marketplace and then determine how to use their own capabilities to pursue those opportunities (outside-in), 3-3 or they can first evaluate their capabilities and then identify new products or services they might be able to offer to the market (inside-out).24 It is important to understand the Describe external and finer points of the two methods because they can reveal business ideas that may other- internal analyses that can shape the selection of wise be overlooked. venture opportunities. barimil sift asnidmos ban atosgnos noidw aged T to jonmoral andT . 3-3A OUTSIDE-IN ANALYSIS general environment The broad environment Entrepreneurs are usually more successful when they study a business context in order encompassing factors that to identify potential start-up opportunities and determine which are most likely to influence most businesses accomplish their goals. This outside-in analysis should consider the general environ- in a society. ment, or big picture, and the industry setting in which the venture might do business. It industry environment should also factor in the competitive environment that is likely to have an impact. The The environment that general environment is made up of very broad factors that influence most businesses includes factors that in a society, while the industry environment is defined more narrowly as the context for directly impact a given factors that directly impact a given business and all of its competitors. The competitive business and all of its environment is even more specific, focusing on the strength, position, and likely moves competitors. and countermoves of competitors in an industry. competitive environment The environment that The General Environment focuses on the strength, The general environment contains a number of important trends, as shown in position, and likely moves Exhibit 3.3. Economic trends include changes in the rate of inflation, interest rates and and counter-moves of even currency exchange rates, all of which promote or discourage business growth. competitors in an industry soorg ord sganame30 Chapter 3 Starting a Small Business Aleman brio ismail goal &.e inversely related to the strength of these factors-that is, strong factors yield weak prof. its, whereas weak factors yield strong profits. Entrepreneurs who understand industry influences can better identify high-poten. tial start-up opportunities-situations where, say, rivalry is weak and neither buyers nor suppliers have enough power to drive 'hard' bargains on price. But these insights can also help entrepreneurs to anticipate threats that they are likely to encounter and to begin thinking about ways to defend their start-ups from any downside risk. Entrepreneurs who recognise and understand Porter's five industry factors can position their ventures in a way that makes the most of what the industry offers. b stom nove so lliw insas The Competitive Environment Within any given industry, it is important to determine the strength, position and likely responses of rival businesses to newcomers. In fact, experts insist that such analyses are a critical input for the assessment of any business idea. William A. Sahlman of Harvard Business School contends that every aspiring entrepreneur should answer several ques- tions about the competitors that he or she is likely to encounter in the marketplace:29 . Who would be the new venture's current competitors. febriledi jard sort sonly . Which unique resources do they control? . What are their strengths and weaknesses? . How will they respond to the new venture's decision to enter the industry? lugn . How can the new venture respond? la . Who else might see and exploit the same opportunity? gnonbordersthrash . Are there ways to co-opt potential or actual competitors by forming alliances? This analysis helps an entrepreneur to evaluate the nature and extent of existing compe- tition and to fine-tune future plans. It can also help to identify high-potential business START UP opportunities based on the competitive situation. Entrepreneurs should take one more step when analysing the competition: They ACTION should identify the thinking that shapes their rivals' moves, which often is based on the assumption that businesses must operate in a certain way because they always have. But this, clearly, is not the case. For example, it wasn't all that long ago that teenagers Save Money with had to do their bargain shopping at the mall, realtors had to use cameras to take pic- Social Media tures of investment properties for out-of-state buyers, and customers had to use cash Want to learn more about or credit cards to pay for purchases. Today, these can all be done by cell phone, and what people are saying forward-thinking businesses can gain an advantage by changing their models to reflect about your industry, but on a shoestring? Join industry these new realities. In other words, innovative entrepreneurs often can overtake estab- groups on sites like Linkedin lished rivals by using these rivals' commitment to time-honoured approaches against and Facebook, and follow them. This is what happened to the American organisation, Blockbuster, when its old influential industry blogs. Such way of doing business left it vulnerable to a start-up (Netflix) that challenged conven- efforts will help you to get a sense of the major players and tional wisdom and adopted an inventive set of 'rules of the game' (offering videos online to identify hot-button issues. or through the mail) to which Blockbuster was not able to adapt. In January 2016, Netf- lix was launched in South Africa. It remains to be seen whether Netflix can replace DStv subscriptions. 3-3B INSIDE-OUT ANALYSIS Identifying opportunities in the external environment is definitely worth the effort, but business concepts make sense only if they fit well with the resources, capabilities and competencies that an entrepreneur can bring to the world of business. The search for a start-up opportunity can actually begin with an inside-out analysis, one that catalogues