Chapter 4 Understanding your Business Model and Developing your Strategy

Basic strategy categories are: Differentiation Low cost Niche

Amazon.com’s Revenue Model Total revenues

Amazon. com’s cost model Total costs and expenses

Several key aspects about capturing a first mover’s advantage You have to be first (or very early) into the market You need to capture a large percentage of the market quickly You need to create switching costs so the customer will stick with you Very expensive, hard to win First Movers rarely win 1st mover advantage exercise

Attributes of winning strategies Find HBR article on the first hire

Entry Strategy Benchmark Devise Initial Market Test Create a Platform

The Entrepreneurial Firm International Expansion Process

Means to expand globally Pros Cons Technology Transfer - Reduces entry costs - Risk of losing the technology Technology Licensing - Generates revenue - Conserves resources - A lost opportunity to extend your own brand Outsourcing - Cost-saving Exporting Cheap Easy Additional costs in after-sales support and transportation Moral hazard Foreign Direct Investment (FDI) - Physical presence - Control of assets - Expensive Franchising - Licenses an operational system - Risk of damaging the brand name Venture financing - Both an enabling and an enacting mechanism - Often leads to mergers and acquisitions with foreign companies Mergers and acquisitions (M&A) - Established infrastructure - Allow a company to grow and expand quickly - Very expensive