Entrepreneurial Strategy

and Competitive Dynamics

Chapter Eight

McGraw-Hill/Irwin

Copyright 2010 by The McGraw-Hill Companies, Inc. All rights reserved.

Recognizing Entrepreneurial
Opportunities
Entrepreneurship
the creation of new value by an existing
organization or new venture that involves the
assumption of risk.

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Recognizing Entrepreneurial
Opportunities
New value can be created in:

Start-up ventures
Major corporations
Family-owned businesses
Non-profit organizations
Established institutions

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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.

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Opportunity Analysis
Framework

8-5

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

8-6

Entrepreneurial
Opportunities

Established firms
Needs of existing customers
Suggestions by suppliers
Technological developments that lead to
new advances
Change

8-7

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

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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

8-9

Characteristics of Good
Opportunities

Attractive
Achievable
Durable
Value creating

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Financial Resources
The types of financial resources that may
be needed depend on two factors: the
stage of venture development and the
scale of the venture.
To obtain funding for rapid growth, firms
often seek venture capital.

8-11

Entrepreneurial Resources
Human capital
Social capital
Government resources
Small Business Administration
Government contracting
State and local governments

8-12

Entrepreneurial Leadership
Launching a new venture requires a
special kind of leadership
Courage
Belief in ones convictions
Energy to work hard

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Entrepreneurial Leadership
Three
characteristics
Vision
Dedication and drive
Commitment to
excellence

8-14

Entrepreneurial Leadership
Vision may be entrepreneurs most
important asset
Ability to envision realities that do not yet
exist
Exercise a kind of transformational
leadership
Able to share with others

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Entrepreneurial Leadership
Dedication and drive are reflected in hard
work

Patience
Stamina
Willingness to work long hours
Internal motivation
Intellectual commitment to the enterprise
Strong enthusiasm for work and life

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Entrepreneurial Leadership
To achieve excellence, venture founders
and small business owners must

Understand the customer

Provide quality products and services
Pay attention to details
Continuously learn
Surround themselves with good people

8-17

Example: 10 Management
Lessons
Its all about
perseverance
Understand the value of
mentorship and
teamwork
Stick to your niche
Stay on top of news that
affects your clients
Communication is key
Capitalization is crucial

Communicate
unwavering honesty and
integrity
Stay on top of the curve
Take ownership in your
clients success
Never stop marketing

Source: Pierce, Sarah. 10 Management Lessons From a Young

Entrepreneur, www.entrepreneur.com. December 17, 2003.

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Entrepreneurial Strategy
Best strategy for the enterprise will be
determined to some extent by
A viable opportunity, resources, and skilled
and dedicated entrepreneurial team
Other conditions in the business environment

8-19

Entry Strategies
Pioneering new entry
a firms entry into an industry
with a radical new product or
highly innovative service that
changes the way business is
conducted.

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Entry Strategies
Imitative new entry
a firms entry into an industry with products or
services that capitalize on proven market
successes and that usually has a strong
marketing orientation.

8-21

Entry Strategies
Adaptive new entry
a firms 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.

8-22

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.

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Generic Strategies
Overall cost leadership
Simple organizational structures
More quickly upgrade technology and
integrate feedback from the marketplace
Make timely decisions
that affect cost

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Generic Strategies
Differentiation
Use new technology
Deploy resources in a radical new way

Focus
Niche strategies fit the small business mold

8-25

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

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Competitive Dynamics
Competitive dynamics
Intense rivalry, involving actions and
responses, among similar competitors vying
for the same customers in a marketplace.

8-27

Model of Competitive
Dynamics

8-28

Why Do Companies Launch

New Competitive Actions?

Improve market position

Capitalize on growing demand
Expand production capacity
Provide an innovative new solution
Obtain first mover advantages

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Threat Analysis
Threat analysis
A firms awareness of its closest competitors
and the kinds of competitive actions they
might be planning.
Market commonality
Resource similarity

8-30

Five Hardball Strategies

Devastate rivals profit sanctuaries

Plagiarize with pride
Deceive the competition
Unleash massive and overwhelming force
Raise competitors costs

8-31

Strategic
and Tactical
Competitive
Actions

8-32

Likelihood of Competitive
Reaction
How a competitor is likely to respond will
depend on three factors
Market dependence
Competitors resources
The reputation of the firm that initiates the
action (actors reputation)

8-33

Choosing Not to React

Forbearance
a firms choice of not
reacting to a rivals
new competitive
action.

Co-opetition
A firms strategy of
both cooperating and
competing with rival
firms.

8-34