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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 February 15, 2019

    How to Achieve Goals and Increase Your Chance of Success

    How to Achieve Goals and Increase Your Chance of Success

    Does it ever feel like the things you want to accomplish always end up on the back burner? If the answer to that question is “yes,” you’re not alone. Only about 33% of people consistently work toward their goals. In some cases, their goals may seem too lofty to accomplish, or else they aren’t sure how to make a plan for them.

    If you don’t come up with concrete steps to take toward your goals, they’ll remain dreams. There’s nothing wrong with being a dreamer, but being able to turn your dreams into goals you can realize will help you lead a happier and more fulfilling life.

    Luckily, you can realize almost any dream when you harness the right goal-setting methods.

    In this article, I’ll show you how to achieve goals and get closer you success.

    1. Break your dreams down into specific and measurable steps

    We couldn’t talk about goal-setting without mentioning SMART goals.

    SMART goals are specific, measurable, assignable, realistic, and time-related.

    Specific and measurable steps are so important because if we don’t know what our target it, how can we ever hit it?

    Take all those beautiful dreams you have for yourself and make them into things you can actually do. If you want to be an entrepreneur, for example, a step toward realizing your dream might be researching what you’ll need to start your business.

    Find out more tips about utilizing SMART goals here:

    How to Use SMART Goal to Become Highly Successful in Life

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    2. Have at least one clearly defined goal for every interest and role in your life

    It’s so easy to become complacent or stagnate. We often think that our careers are the only places where we need to set goals, but we aren’t only what we do.

    To make the most of your life, take the approach that you’re always learning and growing in everything you do. Anything worth doing is worth doing well after all.

    Set goals whether you’re sponsoring an activity for your child, taking up guitar lessons or trying to prove your worth at work.

    You’ll notice that this approach forces you to constantly develop new skills. It can also be fulfilling to put more focus and value into all areas of your life— not just the ones related to our careers.

    3. Align your goals with your life’s mission, purpose and passion

    Take the opportunity to do some soul-searching. What is it that you want to do with this precious life of yours?

    Anything that conflicts with your life’s purpose is bound to cause discontent. Staying in a bad relationship, doing a job that goes against your values, or maintaining the status quo just because it’s comfortable are not options for you.

    Thinking about your goals in this way can help you eliminate things in your life that don’t serve you. This frees up mental space that you can use to do the things you care about the most.

    Many of us struggle to find the time to work on our goals, but this strategy enables you to make more time.

    4. Create goals that ignite your spirit and inspire you to take action

    If you can’t be fired up about your goals from the start, they might not be good goals for you.

    The road to success is often tough. You’re going to have times when you might feel tired or discouraged.

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    You need to feel inspired enough that you’ll be able to overcome obstacles as you encounter them.

    If what you’re doing motivates you to be the greatest version of yourself, you’ll be much more resilient.

    5. Write down all your goals in specific, measurable detail

    This is your road map for what success will look like. The more you define what you want the finished product to be, the greater the chance that you’ll reach that vision.

    When you write down your goals, you’re creating a document that you can revisit to make sure you’re on track.

    When you’re in the middle of trying to achieve a big goal, it can be hard to see what’s working for you. The things you write in this step will help you stay on-message as you take your goals out of your mind and into the real world.

    Don’t just write down your goals and stash them away in a folder somewhere. Take the extra step to put them somewhere where you’ll see them.[1]

    If you have too many goals to post on your desk, write a summary or choose one or two steps to work on for the day. Just seeing them will keep them in the front of your mind.

    6. Commit to hitting each of your targets without exception

    You wouldn’t have created the target if you didn’t think it was necessary. Hold yourself accountable for taking the steps to succeed.

    You can always adapt your strategy or break your targets into smaller steps if you find that they aren’t attainable as you originally wrote them.

    Hitting even the smallest target is cause for a celebration. It’s a step in the positive direction. Your success will make you crave more success.

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    We often make excuses when we get tired or overwhelmed. Take away the option to make excuses. You will only be satisfied with the best effort from yourself.

    7. Share your goals with others to motivate each other

    There’s something so powerful about people sharing their goals and dreams with one another. Doing so gives voice to some part of us that could remain hidden (and therefore never be accomplished).

    When other people know about your goals, they can cheer you on and hold you accountable. When people share their vision with you, you can do the same for them.

    This strategy is particularly beneficial when you’re trying to develop healthy habits. Post about your workout on social media, or do a healthy eating challenge with your best friend. You’ll be less likely to slack when temptation arises, and you’ll probably encourage someone else to reach for their goals too.

    8. Set a series of daily, weekly and long-term goals, complete with starting times and deadlines

    Many goals never reach realization simply because the goal-setter doesn’t check their progress. People tend to forget what they set out to do, or their goal gets crowded out by other obligations.

    Forcing yourself to revisit your goals at regular intervals breaks them into smaller steps and it reminds you to think about them.

    Giving yourself regular deadlines for smaller tasks related to your goals also helps you reflect on your strategy. You’ll figure out what works for you, whether your timeline is realistic, and whether or not you need additional help to stay on track.

    In addition, celebrating small wins helps you stay motivated. Here’s how:

    How To Celebrate Small Wins To Achieve Big Goals

    9. Take 10 minutes every day to imagine how great it will feel to achieve your goals

    Visualization is such a powerful tool. Some of the most successful athletes, celebrities and business people take time each day to think about how success looks and feels for them.[2] Imagining that feeling of satisfaction can be a great motivator.

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    When you do meet your goals, take some time to be grateful. Thank yourself for showing up and doing the work. Be grateful when the stars align properly to help you advance to the next step.

    It’s not just getting to the destination of your goals that matters. How you take the journey is important too.

    10. Take an action step toward reaching your goals every day

    Your goals can easily get buried in the hustle and the bustle. Even the smallest step in the right direction is still moving you forward.

    Keep chipping away at the work every day and before long, you’ll start to see those dreams come to life.

    Maybe you didn’t start your business today but you designed the logo that’s going to go on your website and business cards. Doing that task well is going to help you so much in the long run.

    Concrete actions day by day draw your dreams out of obscurity and into the realm of possibility.

    The Bottom Line

    Dreams can inspire and overwhelm us. By turning our dreams into goals that we can work toward, we increase our chances of success. Things that once seemed impossible are suddenly within reach.

    It’s time to start turning your dreams into goals and your goals into realities. Change begins today.

    More Resources About Setting & Achieving Goals

    Featured photo credit: Andrew Neel via unsplash.com

    Reference

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