CHAPTER 13 Strategic Issues in Entrepreneurial Ventures and Small Businesses STRATEGIC MANAGEMENT & BUSINESS POLICY 10TH EDITION THOMAS L. WHEELEN J. DAVID HUNGER Prentice Hall, Inc. © 2006 Prentice Hall 2006

99% of all businesses – 23 million small businesses Entrepreneurial Ventures & Small Businesses 99% of all businesses – 23 million small businesses 60% -80% new jobs annually Prentice Hall, Inc. © 2006 Prentice Hall 2006

Entrepreneurial Ventures & Small Businesses Employs fewer than 500 people and sales of less than $20 million annually – Prentice Hall, Inc. © 2006 Prentice Hall 2006

Small business firm – Independently owned & operated Entrepreneurial Ventures & Small Businesses Small business firm – Independently owned & operated Not dominant in field Not engaged in innovative practices Prentice Hall, Inc. © 2006 Prentice Hall 2006

Entrepreneurial venture – Entrepreneurial Ventures & Small Businesses Entrepreneurial venture – Primary goals profitability and growth Characterized by innovative strategic practices Prentice Hall, Inc. © 2006 Prentice Hall 2006

Differences – Not in types of goods and services Entrepreneurial Ventures & Small Businesses Differences – Not in types of goods and services Fundamental views on growth and innovation Prentice Hall, Inc. © 2006 Prentice Hall 2006

Entrepreneur – Ultimate strategist All 3 levels Corporate Business Entrepreneurial Ventures & Small Businesses Entrepreneur – Ultimate strategist All 3 levels Corporate Business functional Prentice Hall, Inc. © 2006 Prentice Hall 2006

Lack of strategic planning in small business – Entrepreneurial Ventures & Small Businesses Lack of strategic planning in small business – Not enough time Unfamiliar with strategic planning Lack of skills Lack of trust and openness Prentice Hall, Inc. © 2006 Prentice Hall 2006

Entrepreneurial Ventures & Small Businesses Degree of formality – Process far more informal in small companies than in large corporations Prentice Hall, Inc. © 2006 Prentice Hall 2006

Informal questions to begin strategic management process Prentice Hall, Inc. © 2006 Prentice Hall 2006

Strategic decision-making process for entrepreneurial ventures – Entrepreneurial Ventures & Small Businesses Strategic decision-making process for entrepreneurial ventures – Develop basis business idea Product/service with target market/customers Scan external environment Locate factors of opportunity/threat Prentice Hall, Inc. © 2006 Prentice Hall 2006

Strategic decision-making process for entrepreneurial ventures – Entrepreneurial Ventures & Small Businesses Strategic decision-making process for entrepreneurial ventures – Scan internal factors Relevant to the new business Analyze strategic factors Current situation using SWOT Prentice Hall, Inc. © 2006 Prentice Hall 2006

Strategic decision-making process for entrepreneurial ventures – Entrepreneurial Ventures & Small Businesses Strategic decision-making process for entrepreneurial ventures – Decide go or no go Opportunity to go Generate business plan Transform idea into reality Prentice Hall, Inc. © 2006 Prentice Hall 2006

Entrepreneurial Ventures & Small Businesses Prentice Hall, Inc. © 2006 Prentice Hall 2006

Entrepreneurial Ventures & Small Businesses Prentice Hall, Inc. © 2006 Prentice Hall 2006

Entrepreneurial Ventures & Small Businesses Prentice Hall, Inc. © 2006 Prentice Hall 2006

Advisory Boards – External business people – voluntary Entrepreneurial Ventures & Small Businesses Advisory Boards – External business people – voluntary Discuss strategic and other issues Prentice Hall, Inc. © 2006 Prentice Hall 2006

Sarbanes-Oxley Compliance costs Entrepreneurial Ventures & Small Businesses Sarbanes-Oxley Compliance costs Prentice Hall, Inc. © 2006 Prentice Hall 2006

Sources of Innovation – Entrepreneurial Ventures & Small Businesses Sources of Innovation – The unexpected The incongruity Innovation based on process need Changes in industry or market structure Prentice Hall, Inc. © 2006 Prentice Hall 2006

Sources of Innovation – Entrepreneurial Ventures & Small Businesses Sources of Innovation – Demographics Changes in perception, mood, meaning New knowledge Prentice Hall, Inc. © 2006 Prentice Hall 2006

Factors affecting new venture success – Entrepreneurial Ventures & Small Businesses Factors affecting new venture success – Structure of industry Business strategy of new venture Behavioral characteristics of entrepreneur Prentice Hall, Inc. © 2006 Prentice Hall 2006

Entrepreneurial Characteristics – Entrepreneurial Ventures & Small Businesses Entrepreneurial Characteristics – Identify opportunities better Sense of urgency—action oriented Detailed knowledge-physical stamina Access to outside help Prentice Hall, Inc. © 2006 Prentice Hall 2006

Sub-stages of small business development Entrepreneurial Ventures & Small Businesses Sub-stages of small business development Existence Survival Success Take-off Resource maturity Prentice Hall, Inc. © 2006 Prentice Hall 2006

Evaluation and Control – Entrepreneurial Ventures & Small Businesses Evaluation and Control – Line between debt and equity blurred Lifestyle part of financial statements Standard financial formulas don’t apply Personal preference Banks combine personal and business wealth Prentice Hall, Inc. © 2006 Prentice Hall 2006