New Business Creation I ビジネス創造論Ⅰ From idea to

New Business Creation I ビジネス創造論Ⅰ From idea to investment Jay Andrew Smith (jay@eng. kagoshima-u. ac. jp) Associate Professor Inamori Academy, Kagoshima University Spring/Summer 2008 NBC 1 2008, (c) 2008　Jay A. Smith 1

Class 1: Introduction to Venture Business, Industry Analysis & Strategy NBC 1 2008, (c)

Jay Andrew Smith (44) n n n 1963 New Jersey, USA 1985 Rutgers University (Economics経済学, Physics 物理学) 1989 Harvard Business School (MBA 1989) 日本に始め来ました 1990 Management Consultant (NY, NJ, Tokyo) 1992 Venture Business (IT, Internet, email) 1998 Investment Banker　(SF, LA, SV, NY, LV) ¨ n n Raised $400, 000 for clients - IPO, Private Investment, M&A 2004 Kagoshima University, Inamori Academy Professor from 2005 日本に初めて来たのは 1989年 4月2008年？日経平均株価　３９，０００単位円 Dow Jones Indus. ２，７５０点Ｂｕｓｈ ¨ ＿＿＿　総理大臣 and 宇野 and 海部竹下 ¨ ＿＿＿大統領 ¨ ＯＳ＝　　　 DOSV ¨ ¨ NBC 1 2008, (c) 2008　Jay A. Smith １２，９００円１２, ３００点Ｂｕｓｈ 3

Student Introduction n n From Kagoshima？ ___% Other ____% Course of Study ¨ Electrical ¨ Chemical ¨ Bio ¨ Fisheries n n Mechanical Medical Nano Other Lived or studied abroad? Speak English Well? First Business Course? Has “Good” Business Idea? NBC 1 2008, (c) 2008　Jay A. Smith 4

Venture Business English　(1) assets 資産 sales channel 販売ルート liabilities 責任 product プロダクト／製品 sales 販売 market 市場 marketing マーケティング application 適用／応用 market segmentation 市場細分化 capital 資本／資産 finance 財政／財務 idea 考え accounting 会計 control 統制 entrepreneur 起業家 administrator 管理者 stock 株 industry 産業 investor 投資家 competitor 競争相手 business model ビジネスモデル sustainable 支持できる strategy 戦略 competitive advantage 競争優位 financial analysis 財務分析 substitute product 代替製品 pro-forma 形式上 taxes 税 cash flow キャッシュフロー economics 経済学 innovation 革新／変革 anticipation 予想 customer 顧客 adaptation 適応 distributor ディストリビューター momentum 運動量 synthesize 総合する supplier 製造者／提供者 NBC 1 2008, (c) 2008　Jay A. Smith 5

Revised Class Schedule 4/15(火)16: 10 -17: 40 ① Intro to Venture Business & Industry Analysis 4/22(火)16: 10 -17: 40 ② Intel Case Study 5/13(火)16: 10 -17: 40 ③ Sales & Marketing 5/27(火)16: 10 -17: 40 ④ Sales & Marketing Case Study 6/3 (火)16: 10 -17: 40 ⑤ Marketing Project Presentations 6/10(火)16: 10 -17: 40 ⑥ Ideas and Innovation 6/17(火)16: 10 -19: 20 ⑦⑧Product & Service Presentations / Finance & Accounting 6/24(火)16: 10 -17: 40 ⑨ Finance & Accounting (continued) 7/1 (火)16: 10 -17: 40 ⑩ Business Models & Plans 7/8 (火)16: 10 -19: 20 ⑪⑫Elevator Pitches / Investment & Valuation 7/15(火)16: 10 -17: 40 ⑬ Presentation Workshop & Review 7/22(火)16: 10 -19: 20 ⑭⑮Presentations 2 Classes Final Report: Team Business Plan Paper By July 29 (火）　　　　Office Hour: Ｔｕｅｓ： 13: 30 -15: 00 VBL 2 F 電話 285 -3630 NBC 1 2008, (c) 2008　Jay A. Smith nbc 1@bizsmith. com 6

Making a Successful Venture Business Idea Entrepreneur Team Capital Yen/ $ NBC 1 2008, (c) 2008　Jay A. Smith Business Model & Strategy R&D, Production, Operations Sales & Marketing Strategic Partners, Suppliers, Distributors Early Users, Supporters Customer Markets 7

All Parts Work Together Business & Technology Environments Opportunity Social & Government Environments Business Strategy Marketing Strategy Operations Strategy • Organization • Human Resource • Production • R&D Finance Strategy • Leverage • Asset Utilization • Make/buy • Lease/own Do strategies support, fit each other, have flexibility, balance/manage risk? NBC 1 2008, (c) 2008　Jay A. Smith 8

Famous Venture Business Successes Bloomberg NBC 1 2008, (c) 2008　Jay A. Smith 9

Silicon Valley Seminar n n n n 10 Students September 5 -6 days IT,

Japan & Silicon Valley, California NBC 1 2008, (c) 2008　Jay A. Smith 11

Japan & Silicon Valley, California Japan 140, 000日本人 377, 835 sq km 。磐梯山　N 37 38’ California 40, 000外国人 411, 015 sq km 。 SF空港 N 37 37’ SF 太平洋 Silicon Valley SJ LA SF=San Francisco (サンフランシスコ) SJ=San Jose (サン・ホセ) NBC 1 2008, (c) 2008　Jay A. Smith Hawaii ・・ 12

Silicon Valley n 1849 California Gold Rush San Francisco　800人=>24, 000人 n 1970~ Silicon Rush ¨ ¨ n n Oakland Silicon Chip Fairchild Semiconductor, Intel Mix 4 -5 million人 ¨ ¨ n Berkeley 5 Counties (SF, SM, SC, CC, A) 外国人： 1 st/2 nd/3 rd世代 America, Europe, India, China, Mid. East, Russia, Japan Stanford, UC Berkeley, UCSF, Santa Clara , 他大学 Lawrence Livermore Government Research Labs Kagoshima Univ. Silicon Valley Office NBC 1 2008, (c) 2008　Jay A. Smith 13

Birthplace of Silicon Valley 1938 David Bill Packard & Hewlett 367 Addison Ave, Palo Alto in David Packard’s Garage NBC 1 2008, (c) 2008　Jay A. Smith 1938: R&D begins on 1 st product audio oscillator 1939: Formal partnership Jan 1. Decide name with a coin toss. Sales: $5369. Employees: 2 14

Not So Famous Venture Business Successes (M&A) n Tri. Vida ¨ ¨ n “Third life” together for management team Personalization software Sold to Be. Free. com 1999 Be. Free IPO 1999 Spin. Pop - Electric Lollipop ¨ ¨ ¨ John Osher “Serial Entrepreneur” Motorized lollipop Low-cost motor usable in mouth High-priced electric toothbrush already Low-priced spin toothbrush NBC 1 2008, (c) 2008　Jay A. Smith Spin. Brush Company Sold to P&G for $475 million (475億円) 15

Most Venture Ideas Don’t Succeed Bubble IPO Profitable Sales – Costs > 0 Sales

Making a Successful Venture Business Valuable Idea Entrepreneur Team Capital Yen/ $ NBC 1 2008, (c) 2008　Jay A. Smith Business Model & Strategy R&D, Production, Operations Sales & Marketing Strategic Partners, Suppliers, Distributors Early Users, Supporters Customer Markets 17

Successful Venture Business Create Value by Solving Problems Company Sony n Fed. Ex n Google n e. Bay n Microsoft n Intel n Bloomberg n NBC 1 2008, (c) 2008　Jay A. Smith Problem/Opportunity/Desire Big radios not portable This has to get there overnight I can’t find good information I have old stuff you will pay for Not everyone is a programmer These computers are too big I need best, timely info to invest (financial companies can be great early customers) 18

Problems Become Opportunities 人間に必要なのは困ることだ。絶体絶命に追い込まれたときに出る力が本当の力です。本田宗一郎 “What people need is problems. The power that emerges when faced with a problem, where you would lose everything, is your true power. ” Souichiro Honda NBC 1 2008, (c) 2008　Jay A. Smith 19

Today’s Global Issues n n n n n Pollution Hunger Oil Shortage Population Growth Military Spending Population Aging Religious Fundamentalism China Rising (supplier, consumer, politics, military) Other _____ NBC 1 2008, (c) 2008　Jay A. Smith 20

Japan Issues n n n n n Economic Recession Government Bureaucracy Small land area/population Employment dislocations Oil Shortage Population Aging China Rising (supplier, consumer, politics, military) Humidity Other _____ NBC 1 2008, (c) 2008　Jay A. Smith 21

Making a Successful Venture Business Idea Entrepreneur Team Capital Yen/ $ NBC 1 2008, (c) 2008　Jay A. Smith Business Model & Strategy R&D, Production, Operations Sales & Marketing Strategic Partners, Suppliers, Distributors Early Users, Supporters Customer Markets 22

Drucker on Entrepreneurs The entrepreneur always searches for change, responds to it and exploits it as an opportunity. - Peter Drucker 起業家は常に変化を捜し、それを機会として利用し、対処する。 NBC 1 2008, (c) 2008　Jay A. Smith 23

Peter Drucker – Business Guru (1909 -2005) n n n NBC 1 2008, (c) 2008　Jay A. Smith Pioneer of management thinking Over 30 books on management Drucker Institute The Peter F. Drucker Masatoshi Ito Graduate School of Management (Claremont Univ. ) Leader to Leader Institute 24

Apple’s Computers Then & Now First Apple Computer 8 KB RAM in 16 Chips

Microsoft Should Not Exist n IBM dominated PC market ¨ IBM thought hardware was most important ¨ IBM now has no PC hardware at all n Microsoft didn’t create its own first software 仮定とは危険なものである。アガサ・クリスティ NBC 1 2008, (c) 2008　Jay A. Smith Bill Gates (~1985) 26

“The Stone Age didn’t end because they ran out of stones. ” 石器時代はそれらが石を使い果たしたので終わらなかった -------Analog Age-------------------- Digital Age control Bio Gene Age organic material Stone Age Bronze Age network Animal Power • 動物 • 人間 Plastics Age -2000 -4000年 energy Electrical Electronic Quantum Age? Age Mechanical Age energy/info transfer Solar Power • wind/water • plants/ fire 0 Nano Age? 1800 1900 2000年 Coal/Oil Power Nuclear Power Renewable -Sun -Wind/tide -Plants Wired -> Wireless The speed of change is accelerating. NBC 1 2008, (c) 2008　Jay A. Smith 27

Entrepreneurs are Innovators Kazuo Kashio （theme: apply electronics, digital) NBC 1 2008, (c) 2008　Jay

Entrepreneurs Create New Models “You never change things by fighting the existing reality. To change something, build a new model that makes existing models obsolete. ” 既存の現実の問題によって決して事を変えてはいけない。問題を変えるために、既存のモデルを時代遅れにする新モデルを造りなさい。 NBC 1 2008, (c) 2008　Jay A. Smith 29

Company Success Factors Company = (company, industry) Success f NBC 1 2008, (c) 2008　Jay

Industry Analysis n n In which industry does the company participate? How big is the industry? How much is the industry growing? How is the industry changing? ¨ ¨ n n New laws (e. g. , pollution) New technology Industry profitability? Structurally attractive industry? NBC 1 2008, (c) 2008　Jay A. Smith 31

What industries? n Toyota n Suntory Auto, Motor Vehicle, Transportation Equipment Beer, Liquor, Soft Drink, Beverage n Disney Movie, Theme Park, TV, Entertainment n ANA Airline, Hotel, Travel, Leisure n Sony Consumer Electronics, Music, Movie, Entertainment n Yahoo Internet Provider, Ecommerce, News, Media, Advertising NBC 1 2008, (c) 2008　Jay A. Smith Product/Service Areas Application or 32 Broader Category

How Big is The Industry? 一年間　　 47, 993, 000, 000円輸送 (自動車, 船 …) 48兆円日本 (2004): 　　　　　　〔円） Government 82, 110, 900, 000 Defense（陸軍） 4, 876, 400, 000 - Personnel 2, 165, 400, 000 -Equipment 880, 600, 000 National Defense Agency, Ministry of Finance www. stat. go. jp NBC 1 2008, (c) 2008　Jay A. Smith 33

Consumer Electronics (2003) (Japan Production, 2003 METI) NBC 1 2008, (c) 2008　Jay A. Smith

Consumer Electronics (2003) DVD vs Video (Japan Production, 2003 METI) NBC 1 2008, (c)

Japan PC Market 2003 Total = 10 million units NBC 1 2008, (c) 2008　Jay

Industry Life-Cycle SALES Emerging NBC 1 2008, (c) 2008　Jay A. Smith Growing TIME Maturing

Industry Life-Cycle Stages Emerging Growing IP電話　 Example Growth Rate Starting (2 mil ->22 mil) 2002 2007 Product/ Rapid Technology Changes Customers 1 st Timers Maturing Declining Digital Camera Auto Analog Camera Increasing Slowing Decreasing Process Incremental Little Investment Changes Patterns Building Positions New Competition Positions Building NBC 1 2008, (c) 2008　Jay A. Smith E G M D Smart, Decreasing Price Focus Increasing Some exiting 38

Venture Companies Often Start in or Create Emerging Industries n n n n n New products/services Unproven market Little market info First-time buyers Know-how developing Technology changing “Rules” not set Structure unsettled Future uncertain NBC 1 2008, (c) 2008　Jay A. Smith 39

Growth, Market Share & Competition Market share=company’s % of industry sales n Growing industry is often less competitive n ¨ If the industry doesn’t grow companies must take customers from other companies to grow. Sales Co. A 50% Co. B 50% 2004 NBC 1 2008, (c) 2008　Jay A. Smith Co. A 50% Co. A 70% Co. B 50% Co. B 30% 2005 2006 40

Industry Structure 4 Cs Competitors 競争相手 Suppliers 製造者 Venture Businesses Often enter here NBC 1 2008, (c) 2008　Jay A. Smith Substitutes 代替製品 Channel Customers 販売ルート COMPANY 顧客 Collaborators th 協力者/協業者 “ 5 C” 41

Example: 　ヤマト急便 Competitors Suppliers ヤマト急便 Channel Customers Substitutes NBC 1 2008, (c) 2008　Jay A.

Example: 　ヤマト急便 UPS 佐川、UPS, 郵政省 Vehicles, Fuel, IT ヤマト急便 Fax, Car NBC 1 2008,

Company Who are we? Why are we here? n What are our goals? n What are our strengths? n What are our weaknesses? n What are our key competitive advantages? n What is our market position? n What is our strategy? n What is our business model? n NBC 1 2008, (c) 2008　Jay A. Smith 44

Suppliers How many? n How big? n Relative Strength n Importance/Value (e. g. , keitai strap vs. LCD screen) n Derived Demand n Kyocera IC Chip Package NBC 1 2008, (c) 2008　Jay A. Smith Intel Processor, MS Windows, Sharp LCD PC User 45

Channel How your product service gets to customer n Direct – company’s own network n ¨ Sales Force, Mail, Telemarketing, Vending, Some Internet/Catalog, Company Store n Indirect – via one or more other companies ¨ Sales Agents, VAR (value added resellers), Stores (department, convenience, supermarkets, Some Internet/Catalog (e. g. Askul) NBC 1 2008, (c) 2008　Jay A. Smith 46

Collaborators n n n Partners, helpers, advisors, experts Directly or indirectly help the company Examples ¨ Industry experts, user groups, educators, advisors ¨ Industry or trade groups ¨ Government, NPOs, universities ¨ Complementary product/service providers n Software makers for hardware n Computer magazines, manuals, websites NBC 1 2008, (c) 2008　Jay A. Smith 47

Competitors Who are they? n How many? n What are their goals & strategies? n What are their (relative) strengths? n What are their (relative) weaknesses? n More competitors leads to lower prices n ¨ (except maybe in Japan) NBC 1 2008, (c) 2008　Jay A. Smith 48

Substitutes How else can customer achieve goal? n What are the advantages/disadvantages? n ¨ Time, Cost ¨ Quality, Effectiveness What does it cost customer to switch? n Are there new technologies coming? n Foot Horse Train Car Plane NBC 1 2008, (c) 2008　Jay A. Smith 49

In Class Exercise Competitors Suppliers ___ Company Channel Customers Substitutes NBC 1 2008, (c)

5 Industry Forces Affect Profitability Profit = Price – Costs cost Supplier Power New Current Competitor Entry Rivalry price Buyer Power Channel / Customer Company price Substitutes NBC 1 2008, (c) 2008　Jay A. Smith price 51

5 Industry Forces (Michael Porter, HBS) n Buyer Power (Customer /Channel) ¨ How many, how big, how valuable, how sensitive n Supplier Power ¨ How many, how big, how important to us, us to them n Current Competitor Rivalry ¨ n How many, cost structure, capacity, positioning, exit costs New Competitor Entry ¨ Ease of entry, cost of switching, technology change n Substitute Products/Services ¨ Advantages/disadvantages, cost of switching NBC 1 2008, (c) 2008　Jay A. Smith 52

Keiretsu Effect on Structure Group company, suppliers & sometimes channel work together, keeping out competitors, Suppliers Kyocera Example 日本電気、三菱電気、etc. X + Competitors Mitsubishi Group Company Customers Substitutes Intel, Fairchild OK, also 松下 NBC 1 2008, (c) 2008　Jay A. Smith Channel 53

Homework (next class 4月22日） Intel Case Study ¨ Just read it…we will discuss in class … think about the company, industry structure, and the decisions made. ¨ Japanese and/or English versions NBC 1 2008, (c) 2008　Jay A. Smith 54

Suggested Readings n www. venturesmith. us n www ¨ siliconvalley. com ¨ inc. com ¨ bfi. org ¨ youtube. com ¨ answers. com ¨ nikkei. co. jp n startupjournal. com wired. com economist. com skype. com worldlingo. com dreamgate. gr. jp Books ¨ 肩をすくめるアトラス byアイン・ランド ¨ 宇宙船地球号操縦マニュアルちくま学芸文庫 by バックミンスターフラー ¨ 会議が変わる6つの帽子 by エドワード・デボーノ ¨ ヴァージン―僕は世界を変えていく by リチャードブランソン ¨ 日本を創った 12人 by 堺屋太一 NBC 1 2008, (c) 2008　Jay A. Smith 55

Class 2 Industry, Strategy, Business Model (continued) Intel Case Study NBC 1 2008, (c)

Announcements NBC 1 2008, (c) 2008　Jay A. Smith 57

4 C’s & 2 S’s Review Competitors Suppliers ___ Company Substitutes NBC 1 2008,

4 Cs + 2 s – The Players n Company (us) ¨ n Customer (goal) ¨ n Who, Current, Future, Advantages, Position Substitutes (other choices for customer) ¨ n Sales Team, Distributors, Service, Support, Partners Competition (them) ¨ n Who? How many, How strong, How important, Wants & Needs Channel (path) ¨ n Mission, Goals, People, Structure, Strategy, Model What, Advantages, Costs, New Technologies Suppliers (inputs) ¨ Who, How many, How strong, How important to us, NBC 1 2008, (c) 2008　Jay A. Smith 59

5 Forces Affect Industry Profitability Profit = Price – Cost cost Supplier Power New Current Competitor Entry Rivalry price Buyer Power Channel / Customer Company price Substitutes NBC 1 2008, (c) 2008　Jay A. Smith price 60

5 Forces n Buyer Power (Customer /Channel) ¨ How many, how big, how valuable, how sensitive n Supplier Power ¨ How many, how big, how important to us, to them n Current Competitor Rivalry ¨ How many, cost structure, capacity, positioning, exit costs n New Competitor Entry ¨ Ease of entry, cost of switching, n Substitute Products/Services ¨ Advantages/disadvantages, cost of switching NBC 1 2008, (c) 2008　Jay A. Smith 61

Today’s Drucker A business has 2 basic functions: marketing and innovation. Peter Drucker NBC

Intel Case Study n Big idea, new technology/business area: ¨ semiconductors, IC chips n Company is more than its products ¨ “Platform” (product series, same technology base) Technology Innovation n Marketing Innovation n Strategic Choices n Sustainable Competitive Advantage n NBC 1 2008, (c) 2008　Jay A. Smith 63

Intel 1968 -1977 Case n “Trying to do things nobody else could” – Robert Noyce (co-inventor integrated circuit IC) Gordon Moore (creator of “Moore’s Law) n Andy Grove joined, took personal “risk” n First 2 DRAM products not successes n 3 rd product 1103 became world leader, n ¨ 90% of Intel revenues (concentrated) NBC 1 2008, (c) 2008　Jay A. Smith 64

Intel AMD, TI, Cyrix Motorola Competitors 日本のDRAM Direct Equipment (sole/dual) Kyocera, etc Suppliers IBM Channel Intel Customers Licensees -IBM -Others Compaq Dell Packard Bell C H A N N E L E N D U S E R RISC Substitutes NBC 1 2008, (c) 2008　Jay A. Smith Software collaborators Providers • OS • Application 65

Intel DRAM Strategy n Strategy: push product design, be first to market ¨ Design & process technology leader ¨ Investment in plant & equipment ¨ Costs drop over production volume (scale) growth ¨ Prices drop with competitive capacity ¨ DRAM generally not protectable with patents ¨ Japanese started introducing products more rapidly n Invested more heavily in production (44% vs. 22%) ¨ 1986 Intel decided to exit DRAM business n 1/3 of R&D, but only 5% of Revs, was small player in market n Japanese beat Intel on process technology (of commodity) NBC 1 2008, (c) 2008　Jay A. Smith 66

Intel and Microprocessor n 1970 CPU chipset order for Busicom calculator ¨ Technology development “paid by customer” ¨ Bought rights for “non-calculator” use n Hard to see future even for Gordon Moore ¨ ¨ n n “…never gave it another thought” – Moore “We didn’t take it (PCs) seriously” – Grove Non-sequential forecasting Sometimes easier for outsider to see ¨ Exit: By 1984 mid-level managers shifting technology n Hard to leave business that began company n Especially for long time senior managers n Mid-level managers closer to daily business realities NBC 1 2008, (c) 2008　Jay A. Smith 67

Apple/Motorola vs. IBM/Intel n n n First to Market Closed architecture Sole-provider n n Components ¨ Software ¨ Scale economies ¨ ¨ Exclusivity ¨ Proprietary INTERDEPENDENCE OF COMPANIES (p. 30, 22) “Value Chain” 1994 Apple/IBM-Motorola Power. PC chip 2006 Apple/Intel NBC 1 2008, (c) 2008　Jay A. Smith Big, famous name Standardized, open architecture n Intel gets benefit of IBM marketing and strategy (derived demand) 68

Intel Microprocessor Progression Chip (bits) Year Introduced Initial Price Licensees Intel-Chip Market Share 1978 $360 12 30% 1982 $360 4 75% 1985 $299 1 (IBM) 100%-IBM 1989 $950 ? ? Transistors 8086 (8 -bit) 29, 000 80286 (16 -bit) 134, 000 80386 (32 -bit) 275, 000 80486 (64 -bit) 1, 200, 000 NBC 1 2008, (c) 2008　Jay A. Smith 69

386 Changes Everything (1985) n Intel 386 Investments ¨ $200 million for design ¨ $800 million for production facilities ¨ Decides not to license, except IBM n IBM choice allows Compaq entry and Win ¨ IBM delays selling, to create more closed architecture ¨ Compaq enters Desktop market with Intel 386 NBC 1 2008, (c) 2008　Jay A. Smith 70

486 and Wintel Collaboration n Hardware advance precedes software advance ¨ Microsoft Operating System (new DOS) not ready for 386 ¨ Need large installed base of hardware for software upgrade n Emerging collaboration between MS & Intel ¨ WINdows + INTEL = “WINTEL” platform ¨ Software + Brain n Software investments (past and future) ¨ Increasing switching costs NBC 1 2008, (c) 2008　Jay A. Smith 71

“Intel Inside” – Marketing Innovation n Ingredient（材料）/Component（成分） Marketing　 ¨ n Intel is “superior to other chips” ¨ ¨ ¨ n Market maturity, education higher (2 nd, 3 rd PC) Buyer Intel preference moved from 60% to 80% AMD: “it shouldn’t matter which chip” but it DOES IBM, Compaq resisted, but then gave in ¨ ¨ ¨ n Another example? Couldn’t fight Intel Better to have branded “Intel Inside” “premium” chip 6% rebate for use in partner marketing Fight competitors with technology, marketing, lawyers and money power (all pointed to same goal) ¨ ¨ 1997 spent $750 million More valuable than patent NBC 1 2008, (c) 2008　Jay A. Smith 72

Ending Question Is the internet good or bad for Intel? NBC 1 2008, (c)

Some Important Strategic Ideas n n Where is the most “value” in a computer? Success attracts competition, company must protect against ¨ n Technology moved so rapidly that patents became obsolete ¨ n protect by know-how, branding, scale, luck Small stuff that goes inside other stuff ¨ n 2005 Intel has 82% of PC processor market Allows focus, expertise, scale, “piggy-backing” Thrived on derived demand driven growth and rapid change NBC 1 2008, (c) 2008　Jay A. Smith 74

Typical Market Positions & Strategies Position Toyota Goal Strategy Leader Most Sales -Grow Market -Grow Share Challenge -Target Leader -Target Small Nissan Mazda Follower Grow Carefully -Maintain Base -Grow Quietly Daihatsu NBC 1 2008, (c) 2008　Jay A. Smith Challenger Niche Find Safe Space Specialize 75

Fragmented Industries (fragment=破片） n n Market divided over many companies No dominant leader Largest competitor may only have a few percent market share Examples: ¨ ¨ ¨ ¨ ラーメン Restaurants Book stores Repair shops Publishing Pet shops Hair Salons Hotels NBC 1 2008, (c) 2008　Jay A. Smith 76

Fragmented Industry Strategies Construct formula facility n Expand geographically n Increase vertical integration n Become low-cost producer n Specialize by product/service n Specialize by customer type n Build brand n NBC 1 2008, (c) 2008　Jay A. Smith 77

Company Who are we? Why are we here? n What are our goals? n What are our strengths? n What are our weaknesses? n What are our key competitive advantages? n What is our market position? n What is our strategy? n What is our business model? n NBC 1 2008, (c) 2008　Jay A. Smith 78

Homework Assignment n Design your own personal “life” meishi わしのめいし OO枚copies please Email: meishi@bizsmith. com NBC 1 2008, (c) 2008　Jay A. Smith 1. Your Name (as you want it) - Nickname (optional) 2. Title (life position) 3. Purpose statement 4. Ideal living place(s) 5. Identifying email address 6. Anything else important - Logo - Website - Business Name - Cool Phone Number (any languages that fit) 79

Homework Assignment n Design your own personal“life meishi” name “title” SAMPLE logo Jay Andrew Smith International Educator Purpose/goal Promoting Growth And Understanding Around the World Cool place(s) New York + San Francisco + Kagoshima + Brugge jay@soulproprietor. us Meaningful email/HP address NBC 1 2008, (c) 2008　Jay A. Smith 80 www. vistaprint. jp, ppt, Paint, illustrator, etc. by hand all OK

Sample Meishi Kenta Maruyama Someday Astronaut Go to Space and Look the Earth Kagoshima+Fukuoka+Space?

Class 3 Sales & Marketing NBC 1 2008, (c) 2008　Jay A. Smith 82

Today’s Drucker The purpose of a business is to create and keep a customer.

Marketing Universe n n Product/Service (what) Market (where, who) ¨ ¨ ¨ n Location (U. S. , Japan, 鹿児島市) Gender (male, female) Age (<21, 21 -35, >70, 子供…) Activity (ski, golf, travel) Preference (和風、洋風、辛口）ＡｐｐｌｉｃａｔｉｏｎｓＰｒｏｄｕｃｔｓＭａｒｋｅｔｓ Application (how, why) ¨ ¨ New application for a keitai New application for a tree NBC 1 2008, (c) 2008　Jay A. Smith 84

Filling Unmet Needs & Wants n Market Focused - Venture Co. – this thing is happening, what can I do about it? ¨ Identifying problems and opportunities ¨ Reduces market risk (someone needs solution) ¨ Demand side n Product Focused - Existing Co. – I have this thing …how can I make it better for my customers ¨ Supply side NBC 1 2008, (c) 2008　Jay A. Smith 85

Sales & Marketing Product/Service Customers COMPANY n Sales (Revenue): Money ¨ Money received for selling product or service ¨ Source of funds for business operations ¨ Basis for business existence n Marketing: how company gets sales selection, pricing, promotion and distribution of products/services to customers NBC 1 2008, (c) 2008　Jay A. Smith 86

Marketing and 4 C’s & 2 S’s Competitors Suppliers ___ Company Substitutes NBC 1

Customers n n n Who are your customers (or target customers)? How many potential customers are there? What are their characteristics? ¨ ¨ n How do they buy? ¨ ¨ ¨ n Age, sex, wealth, education, hobbies, work, is it one person? What are their goals, desires, needs, wants? What do they think about? Where do they get information? Who influences them? What is important to decide (price, features) When do they buy (seasonal products, bonus season) When do they pay? Market segment = group of similar customers ¨ ¨ Broad market = U. S. Market, Software Market Narrow market segment = left-handed golfers NBC 1 2008, (c) 2008　Jay A. Smith 88

Example Consumer Market Automobiles Segmentation & Positioning Jaguar In Pink Takako Tanaka Wealthy, Single, Women Wealthy, Single, Men Younger Families Older Drivers NBC 1 2008, (c) 2008　Jay A. Smith Mazda Zoom Volv o Safe Ford American Toyot a Car O O Single Women Single Men Jagua r Classy O O O O O O 89

1 Women, buy ALL the stuff Women buy or influence the purchase of nearly all consumer products and an increasingly high percentage of business related products 1 Tom Peters, author of In Search of Excellence NBC 1 2008, (c) 2008　Jay A. Smith 90

Business Market Segmentation How Many 1 Microsoft Fortune 500 Large Businesses 500 ~ 10 -20, 000 Medium Businesses Small Businesses >1 person 9 million 1 -person companies NBC 1 2008, (c) 2008　Jay A. Smith All U. S. Businesses 10 million total 91

Consumer & Business Markets Google? Haagen-Dazs Product Nike Uniqlo Starbucks Microsoft Dell HP GE Sony Hair Salon Intel Amazon Bloomberg Askul ヤマト e. Bay Service Secom Consumer Market NBC 1 2008, (c) 2008　Jay A. Smith Business/Industrial Market 92

3 rd Party Business Model Product/Service Customers COMPANY Money Product/Service User COMPANY Money Other

Sales/Buying Cycle Awareness => Interest => Trial => Purchase => Repurchase Hear About Curious Try Buy Use Again This Exists Educate Test Use it Keep Repeat customers are key to business success Buying NBC 1 2008, (c) 2008　Jay A. Smith 94

Industry/Market Life-Cycle SALES Awareness Interest Trial Purchase Repurchase Emerging NBC 1 2008, (c) 2008　Jay

Technology Adoption Life Cycle Financial Services Academics Tech. Fans Innovators Early Adopters Main Market Early Majority Late Majority Laggards Time Examples- Internet NBC 1 2008, (c) 2008　Jay A. Smith Geoffrey Moore, Crossing the Chasm 96

4 Ps – “Marketing Mix” Product (what do we make) n Place (where do

Product n What is our product and/or service Physical/tangible – alarm, software, newspaper, coffee ¨ Intangible – security, insurance, information, experience ¨ n Why do people buy it What does it do? ¨ How is it used? ¨ n n Does it need something else? One-time or consumable? Packaging (box, label, information, customer experience) Positioning How different is it (perceived) from other products? ¨ What is my brand image/strength ¨ NBC 1 2008, (c) 2008　Jay A. Smith 98

Favorite Products n n n n n Product Company Target Customer Packaging Channel Competitive

Place – Where do I sell? Choosing the Channel, Supporting It n How many potential customers are there? n Can I easily identify customer? n How expensive is my product? n How many products can I sell one customer? n How powerful, or valuable are the resellers? n Are there many resellers that compete? NBC 1 2008, (c) 2008　Jay A. Smith 100

Price Issues n What does it cost to produce? (floor) ¨ Cars, Soda, Computers ¨ Pharmaceuticals, Software n n How much value does it have to customer? (ceiling) How many can I sell at each price? ¨ How many customers are there? ¨ How much competition is there? ¨ Is it easy to compare with other prices? ¨ How much better is my product? n Does price fit with my positioning? NBC 1 2008, (c) 2008　Jay A. Smith 102

Price & Margin Price to customer Price to Channel Cost NBC 1 2008, (c)

Product Positioning Promotion NBC 1 2008, (c) 2008　Jay A. Smith 104

Promotion (communications, “selling”) n Advertising ¨ Push (direct mail, email) n ¨ Is each customer readily identifiable? Pull (TV, radio, poster, newspaper, some banner ad) n Can’t readily identify individual customers Internet can be push or pull ¨ Chirashi? ¨ n n n Public Relations Investor Relations Intel Case Examples Motorola: 13 Wall Street Journal Ads ¨ Intel: 6% rebate = 4% up to 66% of Print, 2% up to 50% of TV/radio ¨ NBC 1 2008, (c) 2008　Jay A. Smith 105

Promotion & Market Segmentation Promotion Media Taro Tanaka Overweight, Athletic, Beer-Drinking Men, Who care about their figure Overweight, Athletic, Beer-Drinking Men Overweight Athletic Men Overweight Men People NBC 1 2008, (c) 2008　Jay A. Smith Direct Mail Fitness Magazine Targeted Poster Football Broadcast Train Poster Night TV TV 106

Advertisement Discussion Product/Service n Target Market n Medium n Value Proposition n “Message” n

Next Class ６月1日 n Dell Online Case Study n Region Goods/Service Marketing Project www.

Dell Case Issues to Think About Company History and Choices n Industry & Competition n Products n Customer/Market Segments n Pricing n Channel/Operations n Competitive Advantage n Case questions & decisions n NBC 1 2008, (c) 2008　Jay A. Smith 109

Region Marketing Project n n n Group project 2 -3 people Pick product/service from Kagoshima or home region Pick a target market Develop company sales/marketing promotion ６月1日 presentation (powerpoint, poster, or other) ¨ Presentation: 5分 ¨ Q&A and advice: 2 -5分 ¨ English Preferred NBC 1 2008, (c) 2008　Jay A. Smith 110

Region Goods/Service Promotion Project n n n n n Product/service: Company/brand: Customer target & size: Promotion message: Place: Channel: Competition: Price: Collaborators: NBC 1 2008, (c) 2008　Jay A. Smith + ADVERTISEMENT Sample 111

Promotion Project n n n n n Product/service: n Company/brand: n Customer target/size: n Business Model: n Promotion message: n Place: n Channel: n Competition: n Price: n Collaborators: n NBC 1 2008, (c) 2008　Jay A. Smith Kagoshima fresh tonkatsu Big Pig Ka-ton Japanese tourist hotels (200? ) Buy, resell tonkatsu to Custom Japan’s juiciest tonkatsu Trade fair, magazine, site visit Direct Kumamoto Ton, Nissin Slight premium Kagoshima pig farmers 会 112

TM So Fresh You Think It Can Fly NBC 1 2008, (c) 2008　Jay A.

Fit – Is this the Right Match? Opportunity n Environment (4 Cs) n Marketing Mix (4 Ps) n Selling/Buying Cycle (Goal) n Promotion Message & Strategy n Business Model n NBC 1 2008, (c) 2008　Jay A. Smith 114

Suggested Readings n Books ¨ ¨ ¨ n Video ¨ ¨ ¨ n 競争の戦略 by マイケル・E. ポーター日本の競争戦略 by マイケル・E. ポーター , 竹内弘高キャズム by ジェフリー・ムーアフォーカス―市場支配の絶対条件アルby リースパーミションマーケティング―ブランドからパーミションへ byセスゴーディンネットビジネス戦略入門 by パトリシアシーボルトペイ・フォワード with ケビン・スペイシービッグ・チャンス with ケビン・スペイシー Glengarry Glen Ross with ケビン・スペイシー WWW ¨ Entrepreneur. com NBC 1 2008, (c) 2008　Jay A. Smith 115

Class 5: Dell Online Case Study NBC 1 2008, (c) 2008　Jay A. Smith 116

Table of Contents – Outlines Story n n [Executive Summary] (should be listed) n Business Opportunity 1. 1 Internet is Huge and Spans the Globe 1. 2 Exponential Growth Will Continue for Foreseeable Future 1. 3 International Commercial Use is Fastest Growing Segment 1. 4 Unmet Needs of Target Market 1. 5 Pacific Internet Nodes are Key Players 1. 6 Technology is Proven n n Financial Outlook 4. 1 Financial Summary 4. 2 Revenue Forecast 4. 3 Income Statement 4. 4 Cost Structure 4. 5 Source and Use of Funds 4. 6 Balance Sheet 4. 7 Capitalization and Dilution Risk Management Business Strategy 2. 1 Goals & Objectives (generic title vs. become dominant provider) 2. 2 Buy Existing Nodes 2. 3 Deliver Value-Added Products & Services 2. 4 Focus on Sales & Marketing 2. 5 Consolidate Operations 2. 6 Position Against Major Competitors n Organizational Plan (all generic titles) 3. 1 Plan of Organization 3. 2 Founders and Management Team 3. 3 Implementation of Organizational Plan 3. 4 Company Values NBC 1 2008, (c) 2008　Jay A. Smith 117

Suggested Reading Books & Magazines n Movies n ¨ Wall Street ¨ Start-up. com n WWW ¨ sec. gov (EDGAR, 10 K filings, S-1) ¨ licensing. org Licensing industry association NBC 1 2008, (c) 2008　Jay A. Smith 118

Course Overview n n Introduction to Venture Business　　 Venture Business Concepts Related to ¨ ¨ ¨ ¨ ¨ n n Industry Analysis, Business Models & Strategy Sales & Marketing Finance, Accounting, Control Strategy, Planning, Management Operations Product Development/R&D HR (Human Resources) PR IR (Public Relations, Investor Relations) Business Communication Case Studies Projects & Presentations ¨ ¨ Marketing promotion presentation (group) New product or service idea (group) New business idea “pitch” (individual) New business plan and presentation (group) NBC 1 2008, (c) 2008　Jay A. Smith 119

Today’s First Drucker: Profit is not the explanation, cause, or rationale of business behavior and business decisions, but rather the test of their validity. -- Peter Drucker 利益は、企業行動とビジネス決定の説明、原因または、理論的根拠ではなく、むしろ、それらの妥当性のテストである。 NBC 1 2008, (c) 2008　Jay A. Smith 120

Entrepreneur’s Approach n n n Anticipation（予想）– look ahead Timing – move quickly, be ready, catch window Adaptation　（適応）– reacts, adjusts quickly to change Synthesis （総合する）– puts the pieces together Momentum （運動量）– keep moving forward Trust – expect high team loyalty n Faith & Confidence – future path is unpredictable 121 n Luck – who knows what can happen today? NBC 1 2008, (c) 2008　Jay A. Smith n

Entrepreneurs vs. Administrators n n What/where is the opportunity? How do I do something about it? What do I need? How can I get needed things? NBC 1 2008, (c) 2008　Jay A. Smith n n What opportunity fits us? How do we fit in the market? What things do I control? How can I reduce risk? 122