Analysing the economic viability of your online business(part1)
By Andreas Maratheftis on Friday, 4 of January , 2008 at 3:11 pm
First-of all-Happy new year and i hope 2008 is a great year for all, thanks for visiting this blog, reading and asking for advice and hopefully you have learned something.
Each year passes ans some businesses ( focusing on e-commerce-even some on ine web/software development) make it and some just don’t, the reasons are plenty but we will not focus on those in this post. What i want to focus on is something perhaps every business owner/manager should do each year in order to prevent disaster and foresee catastrophe-think of it as your usual heart check-ups and medical check ups after you are fifty; to asses the viability of your business. What do we mean by that? Economic viability refers to the ability of the business to survive in the market strategically and economically in a period of time.
There are two ways to do that-Strategic analysis and financial analysis.
Strategic Analysis
Using strategic analysis the management team can focus on the industry in which the business operates but also in the internals of the business. There are a number of factors in which a business should look into:
- Barriers to entry: How easy is it for new entrants to enter the industry? Do we as a business have or can set any barriers that can obstruct that (e.g high market rate, patents,intellectual property)?
- The power of suppliers: How do suppliers control the demand of the product we sell? Are there any alternative products? Alternative suppliers?Can we bargain prices with a number of suppliers to minimise costs?
- Substitute products: Do these exist? How can they affect us and our revenue and the industry overall?How do these affect our prices?
- Power of customers. How does customer demand affect the prices,where do we stand in consumer preferences as a business? Why do customers prefer our competition?
- Industry value chain:How do we influence the value chain of the industry and how do we react if that changes?
- The nature of competition: What differentiates our competitors?Price?Quality?Products? How do we change that?
- Company value chain: How does our value chain react to the change of the industry? How often does it change and why? How is it to re-align out business processes?
- Competencies: Is our competencies easily duplicate by 3rd parties? Do we as a firm walk in parallel with changes in the industry or do we risk those competencies becoming obsolete?
- Technology: Does the firm really own it’s own technologies or are these outsourced? Is bringing these in-house a better choice? Do we keep up with technology and how does it affect our overall business plan and vision?
There are of course countless other points that manager’s should be aware of- in the next post i will be focusing on the more social and financial issues.
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Category: Business, E-business, E-commerce
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