Entrepreneurial Strategy and Competitive Dynamics
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Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Entrepreneur ial Strategy and Competitive Dynamics chapter 8
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Entrepreneurial Strategy and Competitive Dynamics. chapter 8. Entrepreneurial Strategy. 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 - PowerPoint PPT Presentation
Transcript of Entrepreneurial Strategy and Competitive Dynamics
Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
Entrepreneurial Strategy
and Competitive Dynamics
chapter 8
Entrepreneurial Strategy
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
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Entrepreneurial Strategy8-3
Exhibit 8.1 Opportunity Analysis FrameworkSource: Based on Timmons, J.A., & Spinelli, S. 2004. New Venture Creation (6th edition). New York: McGraw Hill/Irwin; and Bygrave, W.D. 1997. The Entrepreneurial Process. In W.D. Bygrave (Ed.), The Portable MBA in Entrepreneurship (2nd edition). New York: Wiley.
Entrepreneurial Opportunities
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
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Entrepreneurial Resources
Financial resources depend on stage of venture development & venture scale Initial, start up financing
Personal savings, family, and friends Crowdfunding
Early stage financing Bank financing, angel investors
Later stage financing Commercial banks, venture capitalists equity
financing
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Entrepreneurial Resources
Human capital Strong, skilled management
Social capital Extensive social contacts & strategic
alliances Technology, manufacturing, or retail alliances
Federal, state, & local government resources Government contracting Loan guarantee programs Training, counseling, & support services
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Entrepreneurial Leadership
Entrepreneurial leadership is needed Courage Belief in one’s convictions Energy to work hard
Leadership characteristics Vision Dedication and drive Commitment to excellence
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Entrepreneurial Strategy
New ventures require an entrepreneurial strategy What are the industry conditions?
Five-forces analysis - barriers to entry? What is the competitive environment?
Retaliation by established firms? What are the market opportunities?
Entry strategies Generic strategies Combination strategies
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Entry Strategies
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
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Generic Strategies for New Ventures
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
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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
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Competitive Dynamics
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
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Competitive Dynamics
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?
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Competitive Dynamics
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
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Types of competitive actions include:
Competitive Dynamics
Likelihood of competitive reaction Market 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
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