Entrepreneurial Strategy and Competitive Dynamics Chapter Eight McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.
Learning Objectives After reading this chapter, you should have a good understanding of: LO8.1 The role of new ventures and small businesses in the U.S. economy. LO8.2 The role of opportunities, resources, and entrepreneurs in successfully pursuing new ventures. LO8.3 Three types of entry strategies—pioneering, initiative, and adaptive—commonly used to launch a new venture. 8-2
Learning Objectives (cont.) LO8.4 How the generic strategies of overall cost leadership, differentiation, and focus are used by new ventures and small businesses. LO8.5 How competitive actions, such as the entry of new competitors into a marketplace, may launch a cycle of actions and reactions among close competitors. LO8.6 The components of competitive dynamics analysis— new competitive action, threat analysis, motivation and capability to respond, types of competitive actions, and likelihood of competitive reaction. 8-3
Recognizing Entrepreneurial Opportunities Entrepreneurship the creation of new value by an existing organization or new venture that involves the assumption of risk. 8-4
Entrepreneurial Opportunities Start-ups Current or past work experiences Hobbies that grow into businesses or lead to inventions Suggestions by friends or family Chance events Change 8-5
Entrepreneurial Opportunities Established firms Needs of existing customers Suggestions by suppliers Technological developments that lead to new advances Change 8-6
U.S. Small Companies by Industry 8-7 Exhibit 8.1
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. 8-8
Characteristics of Good Opportunities AttractiveAchievable Durable Value creating 8-9
Sources of Capital for Start-Up Firms 8-10 Exhibit 8.5
Entrepreneurial Resources Human capital Social capital Government resources Small Business Administration Government contracting State and local governments 8-11
Elements of a Blue Ocean Strategy Create uncontested market space Make the competition irrelevant Create and capture new demand Break the value/cost tradeoff Pursue differentiation and low cost simultaneously. 8-12
Model of Competitive Dynamics 8-13 Exhibit 8.7
Threat Analysis Threat analysis A firm’s awareness of its closest competitors and the kinds of competitive actions they might be planning. Market commonality Resource similarity 8-14
Five “Hardball” Strategies Devastate rivals’ profit sanctuariesPlagiarize with prideDeceive the competitionUnleash massive and overwhelming forceRaise competitors’ costs 8-15