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ENTREPRENEURIAL STRATEGY AND COMPETITIVE DYNAMICS

ENTREPRENEURIAL STRATEGY AND COMPETITIVE DYNAMICS

STRATEGIC MANAGEMENT BUAD 4980

STRATEGIC MANAGEMENT BUAD 4980

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ENTREPRENEURIAL STRATEGY AND COMPETITIVE DYNAMICSENTREPRENEURIAL STRATEGY AND COMPETITIVE DYNAMICS

Entrepreneurship

The creation of new value by an existing organization or new venture that involves the assumption of risk.

Recognizing Entrepreneurial Opportunities


STRATEGIC MANAGEMENT – BUAD 4980STRATEGIC MANAGEMENT – BUAD 4980

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New value can be created in:

Start-up ventures

Major corporations

Family-owned businesses

Non-profit organizations

Established institutions




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U.S. Small Companies by IndustryU.S. Small Companies by Industry


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Entrepreneurial OpportunitiesEntrepreneurial Opportunities

Opportunity Recognition

The process of discovering and evaluating changes in the business environment, such as a new technology, socio-cultural trends, or shifts in consumer demand, that can be exploited.


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Opportunity Analysis FrameworkOpportunity Analysis Framework


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New Entrepreneurial Ventures

Current or past work experiences

Hobbies that grow into businesses or lead to inventions

Suggestions by friends or family

Chance events

Change


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Established Firms

Needs of existing customers

Suggestions by suppliers

Technological developments that lead to new advances

Change


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Discovery phase

The process of becoming aware of a new business concept.

May be spontaneous and unexpected

May occur as the result of deliberate search for new venture projects or creative solutions to business problems


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Opportunity Recognition ProcessOpportunity Recognition Process

Opportunity Evaluation Phase

Involves analyzing an opportunity to determine whether it is viable and strong enough to be developed into a full-fledged new venture.

Talk to potential target customers

Discuss it with production or logistics managers

Conduct feasibility analysis


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Characteristics of Good OpportunitiesCharacteristics of Good Opportunities

Attractive – market demand present

Achievable – practical and possible

Durable – lasting opportunity

Value Creating – potentially profitable


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Financial ResourcesFinancial Resources

Types of financial resources that may be needed depend on two factors:

Stage of venture development and the

Scale of the venture

Small start-ups usually funded by personal savings, home equity or contributions from family and friends

To obtain funding for rapid growth, firms often seek venture capital


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Financial ResourcesFinancial Resources


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Other Entrepreneurial ResourcesOther Entrepreneurial Resources

Human capital – management expertise / skill

Social capital – leveraging networks of advisors, potential customers, sources of exposure

Government resources

Small Business Administration (SBA)

Government contracting favoring small businesses

State and local government support programs and business incubators


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Entrepreneurial LeadershipEntrepreneurial Leadership

Launching a new venture requires certain personal characteristics:

Courage

Belief in one’s convictions

Willingness to work hard

Staying power


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Three Required Characteristics

Vision

Dedication and drive

Commitment to excellence


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Vision - the entrepreneur’s most important asset

Ability to envision realities that do not yet exist

Exercise a kind of transformational leadership

Able to share with other potential stakeholders


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Dedication and Drive - reflected in hard work

Patience

Stamina

Willingness to work long hours

Internal motivation

Intellectual commitment to the enterprise

Strong enthusiasm for work and life


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Commitment to Excellence - requires:

Understanding customers and markets

Focus on providing quality products and services

Paying attention to details at all levels of the business

Continuous learning and ability to change

Surrounding yourself with good people who share your values, work ethic and vision


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Entrepreneurial StrategyEntrepreneurial Strategy

The strategy for a new venture will be determined to some extent by:

A viable opportunity

Availability of resources

Skilled and dedicated entrepreneurial team

Other conditions in the business environment


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Entrepreneurial StrategyEntrepreneurial Strategy

The type of entry strategy required will depend on several factors:

Is the product/service high-tech o low-tech?

What resources are available for the initial entry?

What are industry and competitive conditions?

What is the overall market potential?

What level of ongoing control by the owner is desired?


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Entry StrategiesEntry Strategies

Pioneering New Entry

A firm’s entry into an industry with a radical new product or highly innovative service that changes the way business is conducted

Risk of non-acceptance in market

Disrupts status quo of industry – potential rush of competitors to copy the innovative product or service

May require intellectual property protection


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Imitative New Entry

A firm’s entry into an industry with products or services that capitalize on proven market successes and that usually has a strong marketing orientation

Products or services that have been successful in one market niche or geography and can be extended to other niches or locales

Fill a market need for an existing product or service that has been inadequately met by others


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Adaptive New Entry

A firm’s entry into an industry by offering a product or service that is somewhat new and sufficiently different to create value for customers by capitalizing on current market trends.

Taking an existing idea or concept and adapting it to another market or product concept

Must be perceived as unique and valuable by market

Easily imitated by competitors

Challenging to keep the concept fresh


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“Blue Ocean” Strategies“Blue Ocean” Strategies

Create uncontested market space

Make the competition irrelevant

Create and capture new demand

Break the value/cost tradeoff

Pursue differentiation and low cost simultaneously


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Generic StrategiesGeneric Strategies

Overall cost leadership

Simple organizational structures

More quickly upgrade technology and integrate feedback from the marketplace

Make timely decisions that affect cost


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Differentiation

Use new technology

Deploy resources in a radical new way

May be difficult and expensive to establish new brand identities


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Focus

Niche strategies fit the small business mold

May include elements of cost leadership and differentiation

Intent to create small market share and avoid competition by major players in larger market


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Combination Strategies

Entrepreneurial firms are often in a strong position to offer a combination strategy

Combine best features of low-cost, differentiation, and focus strategies

Flexibility and quick decision-making ability of a small firm not laden with layers of bureaucracy

Combination strategies may be more difficult to copy by large competitors

Combination strategies may be more sustainable in the marketplace


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Competitive DynamicsCompetitive Dynamics

Competitive Dynamics

Intense rivalry, involving actions and responses, among similar competitors vying for the same customers in a marketplace


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Competitive DynamicsCompetitive Dynamics


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New Competitive ActionNew Competitive Action

New Competitive Actions

Improve market position

Capitalize on growing demand

Expand production capacity

Provide an innovative new solution

Obtain first mover advantages

CAPTURE PROFIT OPPORTUNITIES


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Threat Analysis

A firm’s awareness of its closest competitors and the kinds of competitive actions they might be planning

Market commonality – vying for same customer base

Resource similarity – drawing on the same resources

The higher the degree of market commonality and/or resource similarity – the greater the competitive threat


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Hardball Strategies

Devastate rivals’ profit sanctuaries

Plagiarize with pride

Deceive the competition

Unleash massive and overwhelming force

Raise competitors’ costs


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Strategic ActionsStrategic Actions


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Tactical ActionsTactical Actions


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Likelihood of Competitive ReactionLikelihood of Competitive Reaction

How a competitor is likely to respond will depend on three factors:

Market dependence

Competitor’s resources

The reputation of the firm that initiates the action (actor’s reputation)


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Likelihood of Competitive ReactionLikelihood of Competitive Reaction

Forbearance

A firm’s choice of not reacting to a rival’s new competitive action

Co-opetition

A firm’s strategy of both cooperating and competing with rival firms

May cooperate in supporting activities that benefit the industry as a whole, while remaining a competitor within the industry


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The Contribution of Small Business to the U.S. Economy


In the U.S. there are approximately 5.6 million companies with less than 100 employees

Another 100,000 companies employ between 100 to 500 employees

Approximately 17 million individuals are non-employer sole proprietors

Small businesses create the majority of new jobs – approximately 75% of them

Small businesses (<500 employees) employ more than half of all private sector workers nd account for more than 50% of nonfarm GDP in the U.S.


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Small firms produce 13-14 more patents per employee than larger businesses and account for 55% of all innovations

97% of US exporters are small businesses and account for 29% of US export value


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Types of Entrepreneurial VenturesTypes of Entrepreneurial Ventures

Family Businesses

A privately held firm in which family members have some degree of control

80% - 90% of all US businesses are family-owned, generating 64% of US GDP


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Franchises

Private businesses that use another company’s name, trademarks, and business systems to provide a product or services under a contractual relationship

Usually the franchisor provides a complete business plan and format for operating the business

There are over 900,000 franchise establishments employing over 11 million people in the US


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Home-Based Businesses

Companies with fewer than 20 employees, including self-employed freelancers, telecommuters and other independent professionals

Approximately 20 million businesses (more than half of all small businesses) are home based


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Strategic Alliances – A Key

Entrepreneurial Resource

Strategic Alliances – A Key

Entrepreneurial Resource Technology Alliances

Sharing technological resources

Manufacturing Alliances

Outsourcing production to other firms with manufacturing capabilities

Retail Alliances

Licensing agreements allowing one company to sell another’s products or services in different market


1 entrepreneurial strategy and competitive dynamics strategic management buad 4980

Documents

entrepreneurial strategy

competitive dynamicsu

competitive dynamics

new venture projects

new technology

creation of new value

new business concept

stage of venture development