Entrepreneurial Strategy and Competitive Dynamics chapter 8 Copyright

Entrepreneurial Strategy and Competitive Dynamics chapter 8. Copyright © 2014 Mc. Graw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of Mc. Graw-Hill Education

Entrepreneurial Strategy 8 -2 ¥ Entrepreneurship involves value creation and the assumption of risk ¥ New value can be created in many contexts: © Startup ventures © Major corporations © Family owned businesses © Nonprofit organizations © Established institutions

Entrepreneurial Strategy 8 -3 Exhibit 8. 1 Opportunity Analysis Framework Source: Based on Timmons, J. A. , & Spinelli, S. 2004. New Venture Creation (6 th edition). New York: Mc. Graw Hill/Irwin; and Bygrave, W. D. 1997. The Entrepreneurial Process. In W. D. Bygrave (Ed. ), The Portable MBA in Entrepreneurship (2 nd edition). New York: Wiley.

Entrepreneurial Opportunities 8 -4 ¥ Entrepreneurial opportunities require opportunity recognition ¥ Two phases of activity © Discovery Becoming aware of a new business concept © Evaluation Analyzing the opportunity to determine whether it is viable or feasible to develop further

Entrepreneurial Resources 8 -5 ¥ Financial resources depend on stage of venture development & venture scale © Initial, start up financing Personal savings, family, and friends Crowdfunding © Early stage financing © Later stage financing Bank financing, angel investors Commercial financing banks, venture capitalists equity

Entrepreneurial Resources 8 -6 ¥ Human capital © Strong, ¥ Social skilled management capital © Extensive social contacts & strategic alliances Technology, ¥ Federal, manufacturing, or retail alliances state, & local government resources © Government contracting © Loan guarantee programs © Training, counseling, & support services

Entrepreneurial Leadership 8 -7 ¥ Entrepreneurial © Courage leadership is needed © Belief in one’s convictions © Energy to work hard ¥ Leadership © Vision © Dedication characteristics and drive © Commitment to excellence

Entrepreneurial Strategy 8 -8 ¥ New ventures require an entrepreneurial strategy © What are the industry conditions? © What is the competitive environment? © What are the market opportunities? Five-forces Retaliation ¥ Entry analysis - barriers to entry? by established firms? strategies ¥ Generic strategies ¥ Combination strategies

Entry Strategies 8 -9 ¥ New venture entry strategies need to: © Quickly generate cash flow © Build credibility © Attract good employees © Overcome the liability of newness ¥ Pioneering new entry ¥ Imitative new entry ¥ Adaptive new entry

Generic Strategies for New Ventures 8 -10 ¥ Overall cost leadership © Simpler organizational structure © Quicker decision-making to upgrade technology & integrate marketplace feedback ¥ Differentiation © Using new technology © Deploying resources in a radical new way ¥ Focus © Using niche strategies that fit the small business mold

8 -11 Combination Strategies for New Ventures ¥ Pursuing combination strategies © Combine the best features of low-cost, differentiation, and focused strategies © Hold down expenses by having a simple structure © Create high-value products & services by being flexible & innovative

Competitive Dynamics 8 -12 ¥ New entry threatens existing competitors ¥ Competitive dynamics helps explain why strategies evolve and how to respond: © New competitive action © Threat analysis © Motivation and capability to respond © Types of competitive action © Likelihood of competitive reaction

Competitive Dynamics 8 -13 ¥ Threat analysis involves an assessment of © Market commonality © Resource similarity ¥ How serious is the threat? ¥ What is the intent of the competitive response? ¥ What resources are needed to fend off a competitive attack? ¥ Which action should I take?

Competitive Dynamics 8 -14 Types of competitive actions include: ¥ Strategic actions © Entering new markets © New product introductions © Changing production capacity © Mergers/alliances ¥ Tactical actions ▣ Price cutting (or increases) ▣ Product/service enhancements ▣ Increased marketing efforts ▣ New distribution channels

Competitive Dynamics 8 -15 ¥ Likelihood © Market of competitive reaction dependence © Competitor’s resources © The reputation of the firm that initiates the action – the actor’s reputation ¥ Choosing not to respond © Forbearance © Co-opetition Working together behind the scenes to achieve industrywide efficiencies