Start, run or save a business today !

iv.                Threats

Again in a symmetric fashion, you will now inventory the possible threats to your business or industry, while keeping in mind that you’d better be paranoid and too exhaustive rather than forget something that may bring down your business someday, possibly leaving you with a huge pile of debts in the process. Possible threats may come from the competition, the economic conjuncture, the current or future legislation, management inefficiency, embezzlement, etc … as a matter of fact, it will soon become pretty clear to you that there are many more reasons why your business could go wrong … than reasons why it may go right ! Being a successful entrepreneur will also be about how to be simultaneously paranoid and opportunistic while resisting the temptation to fall for one or the other end of the spectrum. Let us now come back to our previous example.

Example : the automobile industry in 2009

The threats to the automobile industry in 2009 are multifold:

-          economic threat: the current economic depression is taking a toll on car sales as more and more people are struggling to make ends meet. What is more, many people anticipate the fact that gas may become more and more expensive in the future and thus ponder over the possibility to turn to other vehicles or purchase more cost-efficient cars (as exemplified by the shift in demand from large SUVs towards smaller vehicles; the recent takeover offer launched by Fiat on Chrysler, if successful, might help Chrysler shift its production  from big to smaller cars and help restore the competitiveness of the company).

-          financial threat: automobile firms are running out of cash and, even though they would be able to remain economically viable after the end of the crisis, they might not have enough time on their hands in order to weather the storm and avoid bankruptcy.

-          regulatory threat: taxes on polluting vehicles may induce a lower and lower demand for large SUVs in the future.

Exercise: your pizzeria in New York

You are living in a large city from a fully developed country (for instance, New York City in the United States of America). You plan to start up a pizzeria in a middle-income neighborhood in the suburbs of this city (for instance in the Queens district). Try to:

1)      Build a consistent Porter’s framework of the situation, and try to go into reasonable details in your analysis (of course, you are not asked for a complete quantitative analysis of your arguments, but your qualitative reasoning shall be detailed enough; whenever you need statistics, feel free to formulate your own assumptions if you do not want to consult external sources, and indicate what are your conclusions for each assumption you make).

2)      Conduct a SWOT analysis.

3)      What conclusions can be drawn concerning your business idea ?