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ENTR 452, Chapter 3 (Entrepreneurial Strategy)
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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).
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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
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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.
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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
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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.
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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
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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
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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
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