ENTR 452, Chapter 3 (Entrepreneurial Strategy)

NEW ENTRY New entry refers to: Offering a new product to an established or new market. Offering an established product to a new market. Creating a new organization. Entrepreneurial strategy – The set of decisions, actions, and reactions that first generate, and then exploit over time, a new entry. More simply: strategy is the planning and pursuit of Sustainable Competitive Advantage (SCA).

1. Cost Leadership (Broad Scope) 2. Differentiation (Broad or Narrow Scope) 3. Focus/Niche (Narrow Scope) Think about your customers, what image you want to convey and the type of pricing/profit margin you expect when you are establishing your firm. 3 PRIMARY STRATEGIC OPTIONS

GENERATION OF A NEW ENTRY OPPORTUNITY Resources are a source of competitive advantage (CA) – they are the basic building blocks to a firm’s functioning and performance. To be a source of CA, resources must be: Valuable. Rare. Inimitable. Draw from knowledge, technical and market experience, information from contacts.

You will never have perfect knowledge of all possible outcomes. The trade-off between more information and the likelihood that the window of opportunity will close provides a dilemma for entrepreneurs. GENERATION OF A NEW ENTRY OPPORTUNITY

FIRST MOVER ADVANTAGES Cost advantages. Less competitive rivalry. The opportunity to secure important supplier and distributor channels. A better position to satisfy customers. The opportunity to gain expertise through participation.

The entrepreneur must first determine the key success factors which may change early on Environmental changes are highly likely Demand uncertainty – hard to determine customer base Technological uncertainty Adaptation FIRST MOVER DISADVANTAGES

Choose a niche strategy Choose an imitation strategy. This can:  Reduce the entrepreneur’s costs associated with R&D.  Reduce customer uncertainty over the firm.  Make the new entry look legitimate from day one. RISK REDUCTION STRATEGIES FOR NEW ENTRY

There is a need to properly manage the “liabilities of newness” which arise from:  The costs of learning new tasks.  Conflict arising from overlap or gaps in responsibilities.  Unestablished informal structures of communication. In order to do this, a new firm needs to:  Educate and train employees.  Facilitate conflict over roles.  Promote activities that foster informal relationships and a functional corporate culture. RISK REDUCTION STRATEGIES FOR NEW ENTRY