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How Not to Start from Zero for New Startups

How Not to Start from Zero for New Startups

Looking to start a business but are unfamiliar with the potential profitability in the industry, and don’t really want to start everything from zero?

This simple tool is the perfect one for you to start with — Porter’s Five Forces Model. It is an effective tool to evaluate the existing market.

And if sometimes you are asked to analyze a market and identify its major competitors but you are struggling on where to begin; or, if you are looking to raise your company’s competitiveness in the industry, the Porter’s Five Forces Models could then be your remedy.

What exactly are the Porter’s Five Forces?

The Porter’s Five Forces Model is named after Michael E. Porter, an economist. He proposed the model in his 1979 book Competitive Strategy. While there are different names for the five forces to different experts, they are essentially the same. Generally, the five forces are as follows:

    1. Threat of Substitution

    It concerns the availability of substitutes products or services from the competitors. Porter’s definition of substitute good in the model refers to a good in another industry. The goods or services are substitutes if they can be used in place of one another. This force is affected by various factors including the cost for customers to switch to a substitute, buyer’s propensity to substitute and price-performance of substitutes.

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    2. Threat of Established Rivals

    It considers the strength of the rivalry present in the current industry.There are a number of possible factors including number of competitors, pace of market growth and diversity of competition.

    3. Threat of New Entrants

    It refers to the potential threat posed by newcomers in the industry. It is also known as the barriers to entry as it measures the vitality of new entrants in an industry. Capital costs, branding of existing competitors and requirement of proprietary technology or patents are the major factors influencing the force.

    4. Bargaining Power of Suppliers

    It concerns the ease for suppliers or factor of production to raise prices. For example, the number of possible suppliers and whether they produce homogenous or differentiated products can influence the price to a great extent.

    5. Bargaining Power of Customers

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    It considers the ease for customers to push for a lower price. To illustrate, it is more likely for customers to demand a lower price if they purchase a large amount of goods or services. Number of customers and brand name strength also affect the bargaining power of customers.

    The first three forces are from horizontal competition while the remaining are from vertical competition.

    What’s good about the Porter’s Five Forces?

    Every owner and stakeholder of a business has a question in common: how to maximise the profitability?

    By evaluating the industry using the model, we can grasp a clearer picture of the overall environment of the industry. In fact, the model can also be applied to have a better understanding of the current major competitors. Identifying their strengths and weaknesses allows us to devise a better strategy to further boost our competitiveness.

    We can also evaluate the potential of our business by comparing us with other competitors to see if the market has been saturated or not.

    On the other hand, the model tells us on what aspect we are better. Thus, we can put more effort to expand our competitive advantage in order to always stay ahead of the counterparts.

    Besides, after analysing the current and potential future states of the five competitive forces, we can seek to manipulate the forces in our favour. Adjusting the strategy can change the impact of competitive forces on the organization. A proper shift in direction can lead the company to a bright future.

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    Anything challenging about the Porter’s Five Forces?

    Despite that Porter’s model may be applied to a lot of good use, it is a little too ideal to look at the industry. The model provides directions to evaluate an industry but such analysis is based on a perfect market assumption. In reality, the market is seldom if not never in such ideal conditions so it is impossible to perfectly evaluate an industry with this model. Instead, the model is only applicable to simple market structures.

    Morever, the model overlooks a sixth force – Complementors. Complementors refer to those who sell products and services that are best used in conjunction with a product or service from a competitor. Intel and Apple are a good example which they are in fierce competition yet there is obvious reliance of each other in the industry. Taking the sixth force in account makes the model more well-rounded.

    Lastly, the model also overlooks the technology component in today’s business world. As the model was proposed back in 1979, influencing power of technology was almost negligible compared to nowadays. Disregarding the technological aspect may render the whole analysis inaccurate. Hence, the factors in digitalisation or globalisation is usually added into the model now.

    When’s the best time to apply the model?

    When is a good time to make the best use of the Porter’s Five Forces Model? For business startups, it is unwise for entrepreneurs to start a company before exploring the profitability of a new entrants in the industry. In that case, the model can come in handy to analyse the market before putting in effort and investment.

    Also, the model can be a good tool for an operating businessto fine-tune its strategies for better growth. It is especially useful when the business is experiencing stagnant progress and has no clues where goes wrong. The model may provide the answer for the dissatisfaction.

    Here we demonstrate how the Porter’s Five Forces Model can be used to evaluate a business. Two world-renowned business, Facebook and Nike, are chosen.

    Example 1: Facebook

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    The social networking market is significantly competitive and is constantly under rapid changes. Due to frequent introduction of new technologies, Facebook has to cope with the situation by continuous innovation and adaption to the ever-changing environment. Besides, the social networking market is unlike other market for its ease to enter the industry.

    Consequently, increased number of competitors intensifies the competition further, making the Threat of New Entrants and Established Rivals greater. Lastly, as the mobile market is emerging while the switching cost for users from computer to mobile is low, the Threat of Substitution is also great.

    Example 2: Nike

    The Threat of Established Rivalry is the major worry for Nike, as there is established as well as upcoming counterparts in the market. The low barrier to entry also poses a big threat to Nike as the large number of competitors will significantly impact the profitability. If Nike is unable to adapt to the customers’ trends, the growth can be severely impacted or even recorded in negative digits.

    Besides, the Bargaining Power of Customers is also worth consideration as the wholesaler can request for greater discounts for their tremendous demands.

    Featured photo credit: Flaticon via flaticon.com

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    Jeffrey Lau

    Editor. Sport Lover. Animal Lover.

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    Last Updated on January 13, 2020

    Is It Time for a Career Change? (And How to Make the Change)

    Is It Time for a Career Change? (And How to Make the Change)

    Are you challenged at work? Do you regret career decisions? Are you happy? If the answer to the questions leads to a negative feeling, it is time to determine next steps.

    Many people settle for a career that no longer brings satisfaction. Most will respond by stating, “I am surviving” if a colleague asks them “How’s work?”

    Settling for a job to pay bills and maintain a lifestyle is stagnation. You can re-direct the journey of a career with confidence by taking control of future decisions. After all, you deserve to be live a happy life that will offer a work-life balance.

    Let’s look at the reasons why you need a career change and how to choose a career for a more fulfilling life.

    How to Know if You Need a Career Change?

    The challenges of dissatisfaction in a career can have a negative impact on our mental health. As a result, our mental health can lead to the obvious appearance of stress, aging, weight gain and internal health issues.

    You deserve a career that will fulfill the inner desire of true happiness. Here are common factors that it is time for you to change your career.

    Physical Signs

    Are you aging since you started your job? Do you have anxiety? What about work-related injuries?

    It feels amazing to receive a pay cheque, but you deserve to work in an environment that brings out the best of you. If the work environment is hazardous, speak to your boss about alternative options.

    In the case that colleagues or your boss take advantage of your kindness, feeling the anxiety of fear of losing your job because of a high-stress environment may not be right for you.

    Mental Signs

    One out of five Americans has mental health issues, according to Mental Health America.[1] In most cases, it is related to stress.

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    I remember working at a job in a work environment where harassment was acceptable. I had to walk on eggshells to avoid crossing the line with colleagues. My friends started to notice the difference in that I seemed out of character. It was then that I knew that changing a career to freelancing was the right decision.

    Here is a list of mental signs of workplace unhappiness:

    • The tension in your neck
    • Difficulties with sleeping
    • Unable to concentrate
    • High anxiety
    • Depression

    If you start to feel your self-esteem is diminishing, it is time to consider if working in a high-stress industry is for you. The truth is, this negative energy will be transferred to people in your life like friends and family.

    Are You Sure You’re Not Changing for the Wrong Reason?

    Most people that feel they need a career are frustrated with their situation at work. Do you really understand your current situation at work?

    The reason it is important to think about the work situation is some people decide to change career for factors that are insignificant. Factors that can potentially change if the person works in a different department or new organization.

    Here is a list of unimportant factors to think about before you decide to make the transition:

    Desire for an Increase of Salary

    The desire for a higher income can persuade some to believe they are in the wrong career. The issue with this is more money requires more time in the office or taking on several positions at a time.

    At times, pursuing a high-income role can be the complete opposite of what one is expected. It is what happens when a colleague leaves a company to a new one and returns several years later.

    Overnight Decision

    Let’s face it. We make overnight decisions when stressed out or disappointed with situations at work. The problem with a quick decision is the negative and positive points is overlooked.

    Rejected for a Promotion

    I have heard stories of managers that applied ten times for a position throughout a 5-year period. Yes, it sounds to be a lengthy process, but at times, a promotion requires time. Avoid changing a career if you do not see the results of a promotion currently.

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    Bored at Work

    Think deeply about this point. If you work a job that is repetitive, it is normal to feel bored. You can spice it up by changing the appearance of your desk, socializing with new employees in a different department, joining a leadership committee at work or coming to work with enthusiasm. Sometimes, all it takes is you to change jobs into a fun situation.

    A career change can take time, networking, education and the job search process can be a journey. Here is a list of things to consider before making a final decision:

    • How long have you worked in your career?
    • What is the problem at work? Do you work well with the team?
    • Do you receive recognition?
    • Can you consider working in a new department?

    If after reviewing your work situation and none of the above recommendations can help, then it’s time to make a career change.

    How a Career Change Will Change Your Life

    I have a friend that works in the medical industry. She was once a nurse working directly with patients in one of the top hospitals in her area. After five years, she started to internalize the issues with her patients to the point where she felt depressed after work hours. It impacted her relationship with her family and she almost lost herself.

    One day, she decided to wake up and take control of her destiny. She started applying for new medical jobs in the office. It meant working on medical documentation of patients which is not an ideal career based on what society expects a medical professional to perform. But she started to feel happier.

    It is a classic example of a person that was negatively impacted by issues at work, stayed in the same industry but changed careers.

    A career change can fulfill a lifelong dream, increase one’s self-esteem or revive the excitement for one’s work.

    You know a career change can be the right decision to make if you experience one or all of these:

    • Working in a negative workplace: Don’t be discouraged. A negative workplace can be changed by working at a new organization.
    • Working with a difficult boss: The challenges of working with a difficult boss can be stressful. All it takes is communication. You can address the issue directly with a manager professionally and respectfully.
    • Feeling lost about what you do: Most people stay at their jobs and settle for mediocrity because of the fear of failure or the unknown. The rise to success often comes with working a tedious role or stepping outside of one’s comfort zone. If you fear the idea of being involved in activities that are new, remember that life is short. Mediocrity will only continue to make you feel as if life is passing you by.

    How to Make a Career Change Successfully

    The ultimate key to success is to go through a career transition step by step to avoid making the wrong decision.

    1. Write a Career Plan

    A career plan has a dead line for action steps that includes taking new courses, learning a new language, networking or improving issues at work.[2] A career plan should be kept in your wallet because it will motivate you to keep pursuing the role.

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    You can learn how to set your career plan here.

    2. Weigh Your Options

    If you have a degree in Accounting, write down five positions in this industry of interest. The good news is diplomas and degrees can be used to a variety of roles to choose.

    You don’t have to stick to what society holds a top job. In the end, choosing the right role that will make you happy is priceless.

    3. Be Real About the Pros and Cons

    It is time to be honest about strengths, weaknesses, opportunities and threats in the job market that are impacting the current situation.

    A SWOT Analysis of a career can include:[3]

    • Economic factors
    • Direct competition: Is this role in high demand?
    • Location: Do you need to move? If the goal is to work in tech and living in Cincinnati is not realistic, consider moving to San Francisco.
    • Achievements: To stand out from the competition achievements like awards, committee involvement, freelance work or volunteering is a recipe for success.
    • Education: Do you need to go back to school? Education can be expensive. However, online courses, webinars or self-study is an option.

      A career blueprint is the first step to creating realistic goals. A person without goals will be disappointed without a clear direction of what to do next.

      4. Find a Mentor or Career Coach

      A mentor or a career coach that works in the desired position can share the pros and cons of working in the role. Here is a list of questions to ask a mentor:

      • What is required to be successful in the role?
      • What certification or educational development is needed?
      • What are the challenges of the role?
      • Is there potential for career advancement?

      A chat at a coffee shop with a mentor can change your mind about the desire for a career change.

      Find out how to pick a good mentor for yourself in this article: How to Find a Mentor That Will Help You Succeed

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      5. Research Salary

      Some people decide to change careers for a role that pays less or perks like benefits to make up for the difference in previous to potential salary.

      It can reveal the cities throughout the country that offer a higher salary for those that have an interest in relocating for work.

      6. Be Realistic

      If your goal is to move up into an executive position, it is time to be honest about where you are in your career.

      For example, if boardroom meetings, high-level discussions about financials or attending weekly networking events are boring, an executive role may not be right for you. If you are an introvert and working with people every day is nerve wrecking, you need to reconsider a job in sales.

      Ask yourself if you can work in this role for the next five years of your life. If other benefits that come with the role are enticing, other roles are fit that will make you happy.

      7. Volunteer First

      A person that wants to become a manager should take on volunteer opportunities to experience the reality of the position.

      Becoming a committee member to pursue a presidential opportunity can provide a perspective on leadership, maintaining a budget and public speaking.

      Volunteer in a role until you are certain that it is the right opportunity.

      8. Prepare Your Career Tools

      I recommend asking a boss, colleague or mentor for career tools. If you prefer professional assistance, you can seek out resume writing assistance. Here is a list of things to consider when preparing career tools:

      • Online search: Search your name online to see what shows up. I recommend searching images that are on Facebook, Twitter, Snapchat or other sites on a personal account. The last thing you want to realize is the job search is unsuccessful because there is unprofessional content you posted online.
      • Be LinkedIn ready: Recruiters conduct a LinkedIn search to see if the work experience is the same on a resume. Remember to change the wording on LinkedIn from the resume, or it will appear there was no effort put into creating the profile.
      • Portfolio: A portfolio of work is recommended for people that work in the arts, writing, graphic design and other fields. I recommend a portfolio online and one that is available in hand when attending job interviews or networking meetups.
      • Cover letter: A good cover writer will always impress your potential employers. Here’s how to write a killer cover letter that stands out from others.

      Bottom Line

      It takes time to move towards a new career. Pay attention to the physical and mental signs to maintain your health. You deserve to work in happiness and come home stress-free. If you avoid the common mistakes people make, you will find a job and discover the role in a career field that is the best fit with your skillsets.

      Master these action steps and changing career paths will be on your terms to make the best decision for your future.

      More About Career Change

      Featured photo credit: Pexels via pexels.com

      Reference

      [1] Mental Health America: The State of Mental Health in America
      [2] MIT Global Education & Career Development: Make a Career Plan
      [3] Creately: Personal SWOT Analysis to Assess and Improve Yourself

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