Strategic Entrepreneurship

© 2007 Thomson/South-Western.© 2007 Thomson/South-Western.All rights reserved.All rights reserved.

PowerPoint Presentation by Charlie CookPowerPoint Presentation by Charlie CookThe University of West AlabamaThe University of West Alabama

Strategic Strategic ManagementManagementCompetitiveness and Globalization: Competitiveness and Globalization: Concepts and CasesConcepts and Cases Michael A. Hitt • R. Duane Ireland • Robert E. Hoskisson

Seventh edition

STRATEGIC

ACTIONS:

STRATEGY

IMPLEMENTATION

STRATEGIC

ACTIONS:

STRATEGY

IMPLEMENTATION

CHAPTER 13CHAPTER 13

Strategic Strategic EntrepreneurshipEntrepreneurship

© 2007 Thomson/South-Western. All rights reserved. 13–2

KKNOWLEDGENOWLEDGE O OBJECTIVESBJECTIVES

1.1. Define strategic entrepreneurship and corporate Define strategic entrepreneurship and corporate entrepreneurship.entrepreneurship.

2.2. Define entrepreneurship and entrepreneurial Define entrepreneurship and entrepreneurial opportunities and explain their importance.opportunities and explain their importance.

3.3. Define invention, innovation, and imitation and describe Define invention, innovation, and imitation and describe the relationship among them.the relationship among them.

4.4. Describe entrepreneurs and the entrepreneurial mind-Describe entrepreneurs and the entrepreneurial mind-set.set.

5.5. Explain international entrepreneurship and its Explain international entrepreneurship and its importance.importance.

Studying this chapter should provide you with the strategic management knowledge needed to:


The World of the EntrepreneurThe World of the Entrepreneur• In the U.S., entrepreneurs start between 3 million In the U.S., entrepreneurs start between 3 million

and 4.5 million businesses a year!and 4.5 million businesses a year!• Study of influential Americans – Study of influential Americans – the the defining defining

issue of the 21issue of the 21stst Century: Entrepreneurship. Century: Entrepreneurship.• Approximately 10.5% of Americans are actively Approximately 10.5% of Americans are actively

involved in trying to start a new business. involved in trying to start a new business.


Entrepreneurial Activity Across the GlobePersons per 100 Adults, 18-64 Years Old Engaged in Entrepreneurial Activity

0.02.04.06.08.0

10.012.014.016.018.020.0

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TEA Index

Global TEAAverage


What is an Entrepreneur?What is an Entrepreneur?

One who creates a new business in the face of One who creates a new business in the face of risk and uncertainty for the purpose of achieving risk and uncertainty for the purpose of achieving profit and growth by identifying opportunities and profit and growth by identifying opportunities and assembling the necessary resources to assembling the necessary resources to capitalize on them. capitalize on them.


Characteristics of EntrepreneursCharacteristics of Entrepreneurs

• Desire for responsibilityDesire for responsibility• Preference for moderate riskPreference for moderate risk• Confidence in their ability to succeedConfidence in their ability to succeed• Desire for immediate feedbackDesire for immediate feedback• High level of energyHigh level of energy• Future orientationFuture orientation• Skilled at organizingSkilled at organizing• Value achievement over moneyValue achievement over money


EntrepreneurshipEntrepreneurship• One characteristic of entrepreneurs stands out:One characteristic of entrepreneurs stands out:

Diversity!Diversity!• AnyoneAnyone – regardless of age, race, gender, color, – regardless of age, race, gender, color,

national origin, or any other characteristic – can national origin, or any other characteristic – can become an entrepreneur (although not everyone become an entrepreneur (although not everyone should). should).


Strategic EntrepreneurshipStrategic Entrepreneurship

• Strategic EntrepreneurshipStrategic Entrepreneurship Taking entrepreneurial actions using a strategic Taking entrepreneurial actions using a strategic

perspective.perspective. Engaging in simultaneous opportunity seeking and Engaging in simultaneous opportunity seeking and

competitive advantage seeking behaviors.competitive advantage seeking behaviors. Designing and implementing entrepreneurial Designing and implementing entrepreneurial

strategies to create wealth.strategies to create wealth.

• Strategic entrepreneurship actions can be taken Strategic entrepreneurship actions can be taken by:by: IndividualsIndividuals CorporationsCorporations


Strategic Entrepreneurship and Strategic Entrepreneurship and InnovationInnovation• Entrepreneurship is concerned with:Entrepreneurship is concerned with:

The discovery of profitable opportunitiesThe discovery of profitable opportunities

The exploitation of profitable opportunitiesThe exploitation of profitable opportunities

• Firms that encourage entrepreneurship are:Firms that encourage entrepreneurship are: Risk takers.Risk takers.

Committed to innovation.Committed to innovation.

Proactive in creating opportunities rather than waiting Proactive in creating opportunities rather than waiting to respond to opportunities created by others.to respond to opportunities created by others.


Entrepreneurial OpportunitiesEntrepreneurial Opportunities

• Entrepreneurial OpportunitiesEntrepreneurial Opportunities

Conditions in which new products or services can Conditions in which new products or services can satisfy a need in the market.satisfy a need in the market.

• Entrepreneurs or entrepreneurial managers must Entrepreneurs or entrepreneurial managers must be able to:be able to:

Identify opportunities not perceived by others.Identify opportunities not perceived by others.

Take actions to exploit the opportunities.Take actions to exploit the opportunities.

Establish a competitive advantage.Establish a competitive advantage.


Benefits of Small Business OwnershipBenefits of Small Business Ownership

The opportunity to:The opportunity to:• Create your own destinyCreate your own destiny• Make a differenceMake a difference• Reach your full potentialReach your full potential• Reap impressive profitsReap impressive profits• Contribute to society and to be recognized for your Contribute to society and to be recognized for your

effortsefforts• Do what you enjoy and to have fun at it Do what you enjoy and to have fun at it


9.8%

16.8% 16.7%15.9%

15.2%

9.3%8.5%

3.9%

2.2% 1.7%

0.0%

2.0%

4.0%6.0%

8.0%

10.0%

12.0%14.0%

16.0%

18.0%

Under25

25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65+

Age

Owner Age at Business Formation


Feeding the Feeding the Entrepreneurial FireEntrepreneurial Fire

• Entrepreneurs as heroesEntrepreneurs as heroes• Entrepreneurial educationEntrepreneurial education• Demographic and economic factorsDemographic and economic factors• Shift to a service economyShift to a service economy• Technological advancementsTechnological advancements• Independent lifestylesIndependent lifestyles• E-Commerce and the World Wide WebE-Commerce and the World Wide Web


Feeding the Feeding the Entrepreneurial FireEntrepreneurial Fire

• Entrepreneurs as heroesEntrepreneurs as heroes• Entrepreneurial educationEntrepreneurial education• Demographic and economic factorsDemographic and economic factors• Shift to a service economyShift to a service economy• Technological advancementsTechnological advancements• Independent lifestylesIndependent lifestyles• E-Commerce and the World Wide WebE-Commerce and the World Wide Web

International opportunitiesInternational opportunities


The Cultural Diversity of The Cultural Diversity of EntrepreneurshipEntrepreneurship

• Young entrepreneursYoung entrepreneurs• Women entrepreneursWomen entrepreneurs• Minority-owned enterprisesMinority-owned enterprises• Immigrant entrepreneursImmigrant entrepreneurs• Part-time entrepreneursPart-time entrepreneurs


The Cultural Diversity of The Cultural Diversity of EntrepreneurshipEntrepreneurship

• Home-based businessesHome-based businesses• Family businessesFamily businesses• CopreneursCopreneurs• Corporate castoffsCorporate castoffs• Corporate dropoutsCorporate dropouts


A Profile of Small Business by Industry

Service40%

Retail20%

Construction12%

Wholesale8% Manufacturing

6%Finance

8%

Other6%


Small Businesses...Small Businesses...

• Make up 99% of all the businesses in the Make up 99% of all the businesses in the U.S.U.S.

• Employ 51% of the nation's private sector Employ 51% of the nation's private sector workforce.workforce.

• Create more jobs than big businesses.Create more jobs than big businesses.• Are leaders in offering training and Are leaders in offering training and

advancement opportunities to workers.advancement opportunities to workers.


Innovation ProcessInnovation Process

• The act of creating or developing a The act of creating or developing a new product or processnew product or process

• Brings something new into being.Brings something new into being.• Technical criteria are used to Technical criteria are used to

determine the success of an determine the success of an invention.invention.

InventionInvention


Innovation Process (cont’d)Innovation Process (cont’d)

• The process of creating a The process of creating a commercial product from an commercial product from an invention.invention.

• Brings something new into use.Brings something new into use.• Commercial criteria are used to Commercial criteria are used to

determine the success of an determine the success of an innovation.innovation.

InventionInvention

InnovationInnovation


Innovation Process (cont’d)Innovation Process (cont’d)

• The adoption of an innovation by The adoption of an innovation by similar firmssimilar firms

• Usually leads to product or Usually leads to product or process standardization.process standardization.

• Products based on imitation often Products based on imitation often are offered at lower prices but with are offered at lower prices but with fewer features.fewer features.

InventionInvention

InnovationInnovation

ImitationImitation


The Importance of InnovationThe Importance of Innovation

• InnovationInnovation Is a key outcome firms seek through Is a key outcome firms seek through

entrepreneurship.entrepreneurship. Is often the source of competitive success.Is often the source of competitive success.

• Corporate EntrepreneurshipCorporate Entrepreneurship Innovations produced in large established firms.Innovations produced in large established firms.


International EntrepreneurshipInternational Entrepreneurship

• Entrepreneurship can:Entrepreneurship can: Fuel economic growthFuel economic growth Create employmentCreate employment Generate prosperity for Generate prosperity for

citizens citizens

• There is a strong positive There is a strong positive relationship between the rate relationship between the rate of entrepreneurial activity and of entrepreneurial activity and economic development in a economic development in a nation.nation.


International Entrepreneurship (cont’d)International Entrepreneurship (cont’d)

• There must be a balance There must be a balance (in the culture) between (in the culture) between Individual initiative andIndividual initiative and The spirit of cooperation andThe spirit of cooperation and

group ownership of innovation.group ownership of innovation.

• Successful entrepreneurial firms: Successful entrepreneurial firms: Provide appropriate autonomy.Provide appropriate autonomy. Offer incentives for individual initiative.Offer incentives for individual initiative. Promote cooperation and group ownership of Promote cooperation and group ownership of

an innovation.an innovation.


Incremental and Radical InnovationIncremental and Radical Innovation• Incremental InnovationIncremental Innovation

Is the usual case for Is the usual case for innovation in innovation in organizations.organizations.

Provides small Provides small increments in current increments in current product lines.product lines.

Improves existing Improves existing knowledge and knowledge and processes.processes.

Can create value.Can create value.

• Radical InnovationRadical Innovation Is rare because of Is rare because of

difficulty and risk.difficulty and risk. Provides significant Provides significant

technological technological breakthroughs.breakthroughs.

Creates new Creates new knowledge and knowledge and processes.processes.

Can create value.Can create value.


Venturing: Strategic BehaviorsVenturing: Strategic Behaviors

• Autonomous Strategic BehaviorAutonomous Strategic Behavior Based on a firm’s knowledge and resources that are Based on a firm’s knowledge and resources that are

the sources of the firm’s innovation.the sources of the firm’s innovation.

A firm’s technological capabilities and competencies A firm’s technological capabilities and competencies are its basis for new products and processes.are its basis for new products and processes.

• Induced Strategic BehaviorInduced Strategic Behavior A top-down process whereby the firm’s current A top-down process whereby the firm’s current

strategy and structure foster product innovations.strategy and structure foster product innovations.

The strategy in place is filtered through a matching The strategy in place is filtered through a matching structural hierarchy.structural hierarchy.


Implementing New Product Implementing New Product Development and Internal VenturesDevelopment and Internal Ventures• To be innovative and develop internal ventures To be innovative and develop internal ventures

requires:requires: An entrepreneurial mindsetAn entrepreneurial mindset Risk propensityRisk propensity An emphasis on executionAn emphasis on execution

• Individuals with an entrepreneurial mindsetIndividuals with an entrepreneurial mindset Engage the energies of everyone in their domain both Engage the energies of everyone in their domain both

inside and outside the organization.inside and outside the organization.


Acquisitions to Buy InnovationAcquisitions to Buy Innovation

• AcquisitionsAcquisitions Can rapidly extend the product line.Can rapidly extend the product line.

Can quickly increase the firm’s revenues.Can quickly increase the firm’s revenues.

• Key risks of acquisitionsKey risks of acquisitions The firm may substitute the ability to buy innovations The firm may substitute the ability to buy innovations

for an ability to produce innovations internally.for an ability to produce innovations internally.

The firm may lose intensity in R&D efforts.The firm may lose intensity in R&D efforts.

The firm may lose its ability to produce patents.The firm may lose its ability to produce patents.


Capital for Entrepreneurial VenturesCapital for Entrepreneurial Ventures

• Venture Capital FirmsVenture Capital Firms

Seek high returns on their investment.Seek high returns on their investment.

Value the competence of the entrepreneur or the Value the competence of the entrepreneur or the human capital in the firm.human capital in the firm.

Place weight on the expected scope of competitive Place weight on the expected scope of competitive rivalry the firm is likely to experience.rivalry the firm is likely to experience.

Evaluate the degree of instability in the market Evaluate the degree of instability in the market addressed.addressed.


Creating Value through Strategic Creating Value through Strategic EntrepreneurshipEntrepreneurship

• Be effective in identifying opportunities.Be effective in identifying opportunities.

• Be flexible and willing to take risks.Be flexible and willing to take risks.

• Have sufficient resources and capabilities to exploit Have sufficient resources and capabilities to exploit identified opportunities.identified opportunities.

• Sustain a competitive advantage while identifying and Sustain a competitive advantage while identifying and exploiting opportunities.exploiting opportunities.

• Develop an entrepreneurial mind-set among managers Develop an entrepreneurial mind-set among managers and employees.and employees.

• Seek to enter and compete in international markets.Seek to enter and compete in international markets.


• Produce 51% of the nation's private GDP.Produce 51% of the nation's private GDP.• Account for 47% of business sales.Account for 47% of business sales.• Create 4X more innovations per R & D Create 4X more innovations per R & D

dollar spent than medium-sized firms and dollar spent than medium-sized firms and 24X as many as large companies.24X as many as large companies.

Small Businesses...Small Businesses...(continued)(continued)


100%

81%

65%

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40%36%

32% 29% 27% 25%

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# of Years in Business

Small Business Survival Rate


Ten Deadly Mistakes of Ten Deadly Mistakes of EntrepreneurshipEntrepreneurship1.1. Management mistakesManagement mistakes

2.2. Lack of experienceLack of experience

3.3. Poor financial controlPoor financial control

4.4. Weak marketing effortsWeak marketing efforts

5.5. Failure to develop a strategic planFailure to develop a strategic plan


Ten Deadly Mistakes of Ten Deadly Mistakes of EntrepreneurshipEntrepreneurship(continued)(continued)

6.6. Uncontrolled growthUncontrolled growth

7.7. Poor locationPoor location

8.8. Improper inventory controlImproper inventory control

9.9. Incorrect pricingIncorrect pricing

10.10. Inability to make the “entrepreneurial Inability to make the “entrepreneurial transition”transition”


Putting Failure Into PerspectivePutting Failure Into Perspective

• Entrepreneurs are Entrepreneurs are notnot paralyzed by the prospect paralyzed by the prospect of failure.of failure.

• Failure – a natural part of the creative process. Failure – a natural part of the creative process. • Successful entrepreneurs learn to fail Successful entrepreneurs learn to fail

intelligentlyintelligently..


Avoiding the Pitfalls of Avoiding the Pitfalls of Small Business FailureSmall Business Failure

• Know your business in depthKnow your business in depth• Develop a solid business planDevelop a solid business plan• Manage financial resourcesManage financial resources• Understand financial statementsUnderstand financial statements• Learn to manage people effectivelyLearn to manage people effectively• Keep in tune with yourselfKeep in tune with yourself

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