1 ENTREPRENEURIAL STRATEGY AND COMPETITIVE DYNAMICS STRATEGIC MANAGEMENT BUAD 4980

2 2 ENTREPRENEURIAL 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 4980

3 3 ENTREPRENEURIAL STRATEGY AND COMPETITIVE DYNAMICS  New value can be created in:  Start-up ventures  Major corporations  Family-owned businesses  Non-profit organizations  Established institutions Recognizing Entrepreneurial Opportunities STRATEGIC MANAGEMENT – BUAD 4980

4 4 ENTREPRENEURIAL STRATEGY AND COMPETITIVE DYNAMICS U.S. Small Companies by Industry STRATEGIC MANAGEMENT – BUAD 4980

5 5 ENTREPRENEURIAL STRATEGY AND COMPETITIVE DYNAMICS Entrepreneurial 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. STRATEGIC MANAGEMENT – BUAD 4980

6 6 ENTREPRENEURIAL STRATEGY AND COMPETITIVE DYNAMICS Opportunity Analysis Framework STRATEGIC MANAGEMENT – BUAD 4980

7 7 ENTREPRENEURIAL STRATEGY AND COMPETITIVE DYNAMICS Entrepreneurial Opportunities  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 STRATEGIC MANAGEMENT – BUAD 4980

8 8 ENTREPRENEURIAL STRATEGY AND COMPETITIVE DYNAMICS Entrepreneurial Opportunities  Established Firms  Needs of existing customers  Suggestions by suppliers  Technological developments that lead to new advances  Change STRATEGIC MANAGEMENT – BUAD 4980

9 9 ENTREPRENEURIAL STRATEGY AND COMPETITIVE DYNAMICS Entrepreneurial Opportunities  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 STRATEGIC MANAGEMENT – BUAD 4980

10 ENTREPRENEURIAL STRATEGY AND COMPETITIVE DYNAMICS Opportunity 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 STRATEGIC MANAGEMENT – BUAD 4980

11 ENTREPRENEURIAL STRATEGY AND COMPETITIVE DYNAMICS Characteristics of Good Opportunities  Attractive – market demand present  Achievable – practical and possible  Durable – lasting opportunity  Value Creating – potentially profitable STRATEGIC MANAGEMENT – BUAD 4980

12 ENTREPRENEURIAL STRATEGY AND COMPETITIVE DYNAMICS Financial 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 STRATEGIC MANAGEMENT – BUAD 4980

13 ENTREPRENEURIAL STRATEGY AND COMPETITIVE DYNAMICS Financial Resources STRATEGIC MANAGEMENT – BUAD 4980

14 ENTREPRENEURIAL STRATEGY AND COMPETITIVE DYNAMICS Other 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 STRATEGIC MANAGEMENT – BUAD 4980

15 ENTREPRENEURIAL STRATEGY AND COMPETITIVE DYNAMICS Entrepreneurial Leadership  Launching a new venture requires certain personal characteristics:  Courage  Belief in one’s convictions  Willingness to work hard  Staying power STRATEGIC MANAGEMENT – BUAD 4980

16 ENTREPRENEURIAL STRATEGY AND COMPETITIVE DYNAMICS Entrepreneurial Leadership  Three Required Characteristics  Vision  Dedication and drive  Commitment to excellence STRATEGIC MANAGEMENT – BUAD 4980

17 ENTREPRENEURIAL STRATEGY AND COMPETITIVE DYNAMICS Entrepreneurial Leadership  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 STRATEGIC MANAGEMENT – BUAD 4980

18 ENTREPRENEURIAL STRATEGY AND COMPETITIVE DYNAMICS Entrepreneurial Leadership  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 STRATEGIC MANAGEMENT – BUAD 4980

19 ENTREPRENEURIAL STRATEGY AND COMPETITIVE DYNAMICS Entrepreneurial Leadership  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 STRATEGIC MANAGEMENT – BUAD 4980

20 ENTREPRENEURIAL STRATEGY AND COMPETITIVE DYNAMICS Entrepreneurial 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 STRATEGIC MANAGEMENT – BUAD 4980

21 ENTREPRENEURIAL STRATEGY AND COMPETITIVE DYNAMICS Entrepreneurial 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? STRATEGIC MANAGEMENT – BUAD 4980

22 ENTREPRENEURIAL STRATEGY AND COMPETITIVE DYNAMICS Entry 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 STRATEGIC MANAGEMENT – BUAD 4980

23 ENTREPRENEURIAL STRATEGY AND COMPETITIVE DYNAMICS Entry Strategies  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 STRATEGIC MANAGEMENT – BUAD 4980

24 ENTREPRENEURIAL STRATEGY AND COMPETITIVE DYNAMICS Entry Strategies  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 STRATEGIC MANAGEMENT – BUAD 4980

25 ENTREPRENEURIAL STRATEGY AND COMPETITIVE DYNAMICS “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 STRATEGIC MANAGEMENT – BUAD 4980

26 ENTREPRENEURIAL STRATEGY AND COMPETITIVE DYNAMICS Generic Strategies  Overall cost leadership  Simple organizational structures  More quickly upgrade technology and integrate feedback from the marketplace  Make timely decisions that affect cost STRATEGIC MANAGEMENT – BUAD 4980

27 ENTREPRENEURIAL STRATEGY AND COMPETITIVE DYNAMICS Generic Strategies  Differentiation  Use new technology  Deploy resources in a radical new way  May be difficult and expensive to establish new brand identities STRATEGIC MANAGEMENT – BUAD 4980

28 ENTREPRENEURIAL STRATEGY AND COMPETITIVE DYNAMICS Generic Strategies  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 STRATEGIC MANAGEMENT – BUAD 4980

29 ENTREPRENEURIAL STRATEGY AND COMPETITIVE DYNAMICS Generic Strategies  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 STRATEGIC MANAGEMENT – BUAD 4980

30 ENTREPRENEURIAL STRATEGY AND COMPETITIVE DYNAMICS Competitive Dynamics  Competitive Dynamics  Intense rivalry, involving actions and responses, among similar competitors vying for the same customers in a marketplace STRATEGIC MANAGEMENT – BUAD 4980

31 ENTREPRENEURIAL STRATEGY AND COMPETITIVE DYNAMICS Competitive Dynamics STRATEGIC MANAGEMENT – BUAD 4980

32 ENTREPRENEURIAL STRATEGY AND COMPETITIVE DYNAMICS New 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 STRATEGIC MANAGEMENT – BUAD 4980

33 ENTREPRENEURIAL STRATEGY AND COMPETITIVE DYNAMICS New Competitive Action  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 STRATEGIC MANAGEMENT – BUAD 4980

34 ENTREPRENEURIAL STRATEGY AND COMPETITIVE DYNAMICS New Competitive Action  Hardball Strategies  Devastate rivals’ profit sanctuaries  Plagiarize with pride  Deceive the competition  Unleash massive and overwhelming force  Raise competitors’ costs STRATEGIC MANAGEMENT – BUAD 4980

35 ENTREPRENEURIAL STRATEGY AND COMPETITIVE DYNAMICS Strategic Actions STRATEGIC MANAGEMENT – BUAD 4980

36 ENTREPRENEURIAL STRATEGY AND COMPETITIVE DYNAMICS Tactical Actions STRATEGIC MANAGEMENT – BUAD 4980

37 ENTREPRENEURIAL STRATEGY AND COMPETITIVE DYNAMICS Likelihood 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) STRATEGIC MANAGEMENT – BUAD 4980

38 ENTREPRENEURIAL STRATEGY AND COMPETITIVE DYNAMICS Likelihood 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 STRATEGIC MANAGEMENT – BUAD 4980

39 ENTREPRENEURIAL STRATEGY AND COMPETITIVE DYNAMICS 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. STRATEGIC MANAGEMENT – BUAD 4980

40 ENTREPRENEURIAL STRATEGY AND COMPETITIVE DYNAMICS The Contribution of Small Business to the U.S. Economy  Small firms produce 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 STRATEGIC MANAGEMENT – BUAD 4980

41 ENTREPRENEURIAL STRATEGY AND COMPETITIVE DYNAMICS Types 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 STRATEGIC MANAGEMENT – BUAD 4980

42 ENTREPRENEURIAL STRATEGY AND COMPETITIVE DYNAMICS Types of Entrepreneurial Ventures  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 STRATEGIC MANAGEMENT – BUAD 4980

43 ENTREPRENEURIAL STRATEGY AND COMPETITIVE DYNAMICS Types of Entrepreneurial Ventures  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 STRATEGIC MANAGEMENT – BUAD 4980

44 ENTREPRENEURIAL STRATEGY AND COMPETITIVE DYNAMICS 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 STRATEGIC MANAGEMENT – BUAD 4980