Entrepreneural Strategy, generating and exploiting new Entrants EnTREPRENEURSHIP Entrepreneural Strategy, generating and exploiting new Entrants

Learning Objectives To understand that the essential act of entrepreneurship involves new entry To be able to think about how an Entrepreneural strategy can first generate, and then exploit our time, a new entry To understand how resources are involves in the generation of opportunities To be ale to access the attractiveness of a new entry opportunity

Learning Objectives To acknowledge that entrepreneurship involves making decisions under conditions of uncertainty To be able to assess the extent of first movers advantage and weigh them against first moves disadvantage To understand that risk associated with newness, but there are strategies that the entrepreneur can use to reduce risk.

New Entry New product : Established / new market Established Product : New Market Creating a new organization

Entrepreneural Srtategy Set of Decisions, actions, and reactions that first generate and then exploit over a time new entry Three Stages Generation of a new entry opportunity Exploitation of a new entry opportunity Feedback

Generation of the new entry opportunity Resources a source of competitive advantage A bundle of resources includes Valuable ( It enables the firm to pursue opportunities neutralize threats and offer products and services that are valued by customers) Rare ( it should be possessed by few/potential competitors) Inimitable ( it would be difficult or costly for potential competitors)

Creating a Resource Bundle that is valuable, rare and inimitable Entrepreneural resource its liability to obtain then combine the resources into a bundle that is variable, rare and inimitable, It can be possible through following steps Experience of entrepreneur or manager Collective mind of management and employees Knowledge of the market Knowledge of the technology Innovative

Market knowledge Its about the entrepreneurs information about market and its skills. Problems of customers Customers attitudes and behaviors

Technological Knowledge Possession of information, technology, know-how and skills If the market is limited then entrepreneur must know how to create new markets. He must know how to exploit the technological advantage over its competitors.

Accessing the attractiveness of a new Entry opputunity Information on a new entry Prior knowledge and information search Windows of opportunity Error of omission Occurs from the decision not to act on the new entry opportunity. Error of commission Occurs from the decision to pursue this new entry opportunity only to find out later that the entrepreneur had over-estimated his ability to create customer demand from imitation by competitors.

Entry Strategy for new Entry development First mover develop a cost advantage First mover face less completive challenge First mover can secure important challenge First mover are better position to satisfy customers First mover gain expertise through participation

Environmental Instability For First Mover(disadvantage) External Environment Company Internal Environment

Environmental Instability For First Mover(disadvantage) An entrepreneur should always strive to create the best possible match between the companies resources with the external environment Key success factors of an industry help in determining that best fit First movers have a disadvantage that the key success factors are not known. He has to really on his guess.

Emerging industries give the first movers the advantage of choosing the way to success including establishing the rules of the industry.

Demand uncertainty First mover Delayed entry Little information potential size of market, expected growth pattern. Difficult to measure future demand. Over-estimating demands leads to additional cost Under-estimating demands lead to under capacity and shortage of supply Information is available Future demand is easy to predict They can avoid additional costs by correctlty estimating demand.

First mover Delayed entry Growth pattern and change in customer preferences is difficult to predict. Customers preferences are immature and bound to change Growth pattern and change in customer preferences is predictable Customer preferences are matured with time.

Technological uncertainty First mover Delayed entry Uncertainty is more Its not known whether technology will produce the desire result or not Risk exists in emergence of substitute technology. Incase of failure ,losses are incurred Uncertainty is minimal Results are known Risks are minimized by using the most optimal technology which is known to work Additional losses are not incurred

Adaptation First mover Delayed entry Difficult to adapt to new changes Entrepreneurs attributes of persistence and determination stops him from detecting and implementing the change Easy to adapt to changes.

Custmomer uncertainity first mover (dis)advabtage New products-new markets, customers are uncertain Uncertain about use of product that whether it will satisfy or not Customers are uncertainty averse Customers are uncertain about whether it will perform better than the existing one Entrepreneur should reduce customer uncertainty

Remedy Offer informational advertising Comparison marketing Tough to offer informational advertising for complex product Customers are aware of product usage but still reluctant to buy e.g. software package Entrepreneur should give demos and presentations

Lead time and first (dis)advantage Lead time-the time during which the entrepreneurs prepares for increase competition Entrepreneur can use marketing efforts to position image

Lead time can be increased Building customer loyalties Building switch costs Protecting product uniqueness Securing access to important source of supply and distribution

Risk reduction Strategies for new entry expoitations Involves considerable risks. May be due to competitors technology or market demand Strategies can be used to reduce risk. Two strategies are used Market scope imitation

Market scope strategy Scope- is a choice about which consumers group to serve and how to serve them It ranges from narrow to broad Narrow scope Strategy Offers a small product ranged to a small number of customer groups in order satisfy a particular need Reduces the risks for failing Focuses for customized products Reduces competition

By focusing on specific groups of customers the entrepreneur can build up specialized expertise that provide competitive edge The high end of market typically represent a highly profitable niche. Broad Scope Strategy Portfolio approach Gain understanding about market and products Unsuccessful products can be dropped It creates competition Reduces risks.

Imitation strategy Copying the practice of other firms Benefits To minimize the risks To improve performance at the first appearance in consistent with argument It is necessary to be successful in an industry It quickly acquires skills rather than start from scratch Imitation also provides organizational legitimacy If the entrepreneurs acts like a well established firm its is likely to be perceived by customers as well established. Imitation is a means of gaining status and prestige e.g. consultation firm( location , leather chairs, suits)

Types of imitation strategies Franchising Franchisee acquires the use of a proven formula for new entry for the franchiser. E.g. McDonalds. ( intellectual property) Me to strategy Copying products that already exists and attempting to build an advantage through minor variation. For example Ice cream

Managing Newness Negative impact Faces cost time training employees and to enhance the skills Overlaping and gaps in responsibilty often cause conflicts Communication gap-Formal and Informal (new ventures there will be formal communication due to newness) Positive Impact Pay special attention on employees training and social needs. Manage good systems and routines, and the new employee are determined.