Entrepreneurial Strategy
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Entrepreneurial Strategy
Entrepreneurial Strategy:
Strategy is a primary building block of competitive
distinctiveness and advantage.
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Entrepreneurial Strategy
New Entry: it refers to:
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Entrepreneurial Strategy
Entrepreneurial strategy has three key stage.
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Entrepreneurial Strategy
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Generation of New Entry Opportunity
• Resources: the input into the production process.
Resources as a source of competitive advantages
• Resources(Machinery, financial capital and
skilled employees) are the basic building blocks
to a firm’s functioning and performance; the
inputs into the production process.
• They can be combined in different ways. If
skilled workforce combined with Organizational
culture that enhance communication, teamwork
and innovativeness.
• A bundle of resources provides a firm its
capacity to achieve superior performance
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Generation of New Entry Opportunity
Resources must be:
• Valuable: when it enables the firm to pursue
opportunities, neutralize threats, and offer
product and services that are valued by
customers.
• Rare: When it is possessed by few.
• Inimitable(very unusual or of very high quality
and therefore impossible to copy): Replication
is difficult for (potential)competitors.
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Generation of New Entry Opportunity
1. Where does this valuable, rare, and difficult to imitate bundle
of resources come from?
2. How can it best be exploited?
Creating a resources bundle that is valuable, rare and inimitable
• Entrepreneurs need to draw from their unique experiences and
knowledge. Entrepreneurs ability to obtain and then recombine
resources into a bundle that is valuable, rare and inimitable.
• Marketing knowledge- Possession of information, technology,
know-how, and skills that provide insight into a market and
its customers.(market knowledge is deeper than the knowledge
that could be gained through market research).
• Technological knowledge- Possession of information,
technology, know-how, and skills that provide insight into
ways to create new knowledge. e.g., computer and software
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Generation of New Entry Opportunity
Assessing the attractiveness of a new entry opportunity
• Depends on the level of information and the willingness
to make a decision without perfect information. Which
should be attractive and to be worth exploiting and
developing.
Information on a new entry
• Prior knowledge and information used to create new entry.
• More knowledge ensures a more efficient search process
• Search costs include time and money.
• The viability of a new entry can be described in terms of
a window of opportunity(the period of time when the
environment is favorable for entrepreneurs to exploit a
particular new entry)
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Generation of New Entry Opportunity
Comfort with making a decision under uncertainty
• The trade-off between more information and the
likelihood that the window of opportunity will
close, provides a dilemma for entrepreneurs.
This dilemma involves a choice of which error
they prefer to commit.
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The Decision to Exploit or Not to Exploit the New Entry Opportunity
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Entrepreneurial Strategy
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Generation of New Entry Opportunity
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Entry Strategies for New Entry Exploitation
Being a first mover can result in a number of advantages
that can enhance performance. These include:
• Cost advantages: volume of production/ less production cost
• Less competitive rivalry
• The opportunity to secure important supplier and
distributor channels.
• A better position to satisfy customers. –1. select and
secure the most attractive segments of market and -2.
positioned themselves at the center of the market,
providing an increased ability to recognize and adapt to
changes in market and -3. established their products as
the industry standards.
• The opportunity to gain expertise through participation.
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Entry Strategies for New Entry Exploitation
Environmental instability and First-Mover (Dis) Advantages.
The performance of a firm depends on the fit between its
bundle of resources and the external environment.
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Entrepreneurial Strategy
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Risk Reduction Strategies for New Entry Exploitation
Risk is derived from uncertainties over market
demand, technological development, and actions of
competitors.
Two strategies can be used to reduce these
uncertainties:
• Market scope strategies - Focus on which
customer groups to serve and how to serve them.
• Imitation strategies - Involves copying the
practices of others.
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Risk Reduction Strategies for New Entry Exploitation
Market Scope Strategies
Narrow-scope strategy involves offering a small product
range to a small number of customer groups to satisfy a
particular need.
• Focuses on producing customized products, localized
business operations, and high levels of
craftsmanship.
• Leads to specialized expertise and knowledge.
• High-end(range of product) of the market represents
a highly profitable position.
• Reduces some competition-related risks but increases
the risks associated with market uncertainties.
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Risk Reduction Strategies for New Entry Exploitation
Broad-scope strategy: involves offering a range
of products across many different market
segments.
• Strategy emerges through the information
provided by a learning process.
• Opens the firm up to many different “fronts”
of competition.
• Reduces risks associated with market
uncertainties but increases exposure to
competition.
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Risk Reduction Strategies for New Entry Exploitation
Imitation Strategy: Copying the practices of other
firms.
• Why do it(R & D)? Better Research and Copy.
• It is easier to imitate the practices of a
successful firm.
• It can help develop skills necessary to be
successful in the industry.
• It provides organizational legitimacy.
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Risk Reduction Strategies for New Entry Exploitation
• Types of imitation strategies
• Franchising - A business system created by a
contract between a parent company, called
Franchisor, and the acquiring business owner, called
the Franchisee, giving the acquiring owner the right
to sell goods or services, to use certain products,
names, or brand or to manufacturer certain brands.
• A franchisee acquires the use of a “proven formula”
for new entry from a franchisor.
• “Me-too” strategy - Copying products that already
exist and attempting to build an advantage through
minor variations. e.g., “Taste before you buy”
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Risk Reduction Strategies for New Entry Exploitation
An imitation strategy can potentially:
• Reduce the entrepreneur’s costs associated
with R&D.
• Reduce customer uncertainty over the firm.
• Make the new entry look legitimate from day
one.
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Managing Newness- Organization
Managing Newness
Liabilities of newness(Negative implications arising
from an organization’s newness) arise from unique
conditions:
• Incur costs in learning new tasks.
• Conflict arising from overlap or gaps in
responsibilities.
• Unestablished informal structures of communication.
A new firm needs to:
• Educate and train employees.
• Facilitate conflict over roles.
• Promote activities that foster informal
relationships and functional corporate culture.
Risk Reduction Strategies for New Entry Exploitation
Assets of Newness: Positive implications arising
from an organization’s newness.
• Lack of established routines, systems, and
processes provide a learning advantage.
• A heightened (intensified) ability to learn
new knowledge in a continuously changing
environment is an important source of
competitive advantage.
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