The Environment for Entrepreneurship 105design a strategy that offsets the profit-reducing forces within an industry, the new ven-
ture can achieve a sustainable competitive advantage.
Attractive industries provide opportunities for profitability. The forces that determine
rivalry in attractive industries are not strong forces, and the rivalry is not cutthroat.
Firms compete on the level of product innovations, advertising, brand loyalty, and dis-
tribution channels, a level that enables them to differentiate and position their products.
There is little pressure on prices, and increased costs are passed along to the customer as
increased value. Operating margins are generous and sufficient for reinvestment and
shareholder distributions. An industry characterized by high profitability and good
returns to investors is attractive for entry, all things being equal.DISCUSSION QUESTIONS
1. Perform “thought experiments” on the following businesses using the six dimensions of the
macroenvironment: politics, stakeholders, the macroeconomy, technology, sociodemo-
graphic forces, and ecology factors.
a. Video game designer
b. Pizza restaurant
c. Manufacturer of women’s sweaters- What are the costs and benefits of the process model of environmental analysis? How could
an “ordinary” entrepreneur set up and manage such a model?
KEY TERMS
Assessing
Acyclical
Backward integration
Bargaining power of buyers
Bargaining power of suppliers
Business cycle
Buyer selection strategy
Countercyclical
Cyclical change
Demography
Design patents
Differentiation strategy
Ecology
Entry barrier
Externally stimulated opportunity
Focal industry
Focus strategy
Forecasting
Forward integration
Internally stimulated opportunity
Low-cost strategy
Macroenvironment
Monitoring
Paradox of entrepreneurship
Plant patents
Political risk
Price umbrella
Process innovation
Procyclical
Recognition
Retaliatory barriers to entry
Rivalry
Scanning
Stakeholders
Structural barriers to entry
Structural change
Supplier selection strategy
Sustainable development
Tapered integration
Tariffs
Threat of substitutes
Utility patents
Values