Strategic entrepreneurship Topic 8

STRATEGIC ENTREPRENEURSHIP

TOPIC 8DR ANIS AMIRA AB RAHMAN

TAHIRAH BINTI ABDULLAH

FACULTY OF ENTREPRENEURSHIP AND BUSINESSUNIVERSITI MALAYSIA KELANTAN

[email protected]

Dr Anis Amira Ab Rahman 14

STRATEGIC FOR VENTURE GROWTH


Concept of Business Venture

To organize or to assemble on goinginterdependent actions into sensible sequencesthat generate sensible outcomes (Gartner, 1985).

Important for new ventures to be competent intransforming inputs into outputs that itsstakeholders need and want (Zimmerman, 2002).

The characteristics of the entrepreneur, thestructure of the industry entered and the strategyof the venture involved were play important rolein venture performance (Sandber and Hofer,1987).


Concept of Business Venture

Criteria for a business venture (Gartner, 1985):

1. Its founders must acquire expertise in products, process,market and/or technology;

2. Results are expected beyond the year in which theinvestment is made;

3. It is considered a new market entrant by its competitors;and

4. It is regarded as a new source of supply by its potentialcustomers.


A Framework for Describingthe Creation of A New Venture

Dimensions Descriptions

Individual(s) The person(s) involved in starting a new organization

Organization The kind of firm that is started

Environment The situation surrounding and influencing the new organization

New venture process

The actions undertaken by theindividual(s) to start the venture



Dimensions

Individual(s) Value in describing entrepreneurs; (i) Need for achievement, (ii) Risk taker, (iii) Previous work experience, (iv) Education, (v) Job satisfaction*entrepreneur characteristics are extremely important for venture success (Baum et al., 2001)

OrganizationType of firms such as retail, manufacturing, service and wholesale.



Dimensions

Environment(i) sees the environment as an outside set of conditions to which the organization must adapt(ii) sees the environment as a "reality“ that organizations create via the selectivity of their own perceptions



Dimensions

New venture process(i) The entrepreneur locates a business opportunity(ii) The entrepreneur accumulates resources(iii) The entrepreneur markets products and services(iv) The entrepreneur produces the product(v) The entrepreneur builds an organization


Potential Barriers for The Venture Growth

Institutional barriers

including the legislative framework.

the degree of corruption and bribery a firm encounters.

The external market position of a firm

the sector in which the firm operates.

The degree of competition, whether a firm is facing strategic behavior by competitors.

extent of network alliances to support growth.


Potential Barriers for The Venture Growth

Financial barriers

Including availability

cost of capital and finance

Internal organizational barriers

including managerial capacity and capability

objectives of firm

principal-agent difficulties

skills

Social barriers

to do with the support, or lack of it, from local actors and agencies.


Does every venture need growth?

Not all entrepreneurs seek growth, and growth is nota necessary or even desirable objective for all SMEs.

Firstly, the SME owners may have objectives otherthan profit maximisation.

Secondly, if profit maximising, they may have alreadyreached the minimum efficient scale of businessactivity (small retail shops, repair shops and so on).

Therefore a lack of growth on its own does notnecessarily indicate the presence of significantbarriers to growth (Bartlett and Bukvic, 2001).


STRATEGIES FOR VENTURE GROWTH

Venture growth

Traits

General competencies

Specific competencies

Motivation

Competitive strategies

Environment

Size

Source: Baum et al. 2001Dr Anis Amira Ab Rahman 14


Traits

Tenacity

Proactivity

Passion for work

General Competencies

Organizational Skill

Opportunity Skill



Specific Competencies

Technical skill

Industry skill

Motivation

Vision

Growth Goals

Self-Efficacy



Competitive strategies

Focus

Low-cost

Differentiation-Innovation

Differentiation-Quality/service



Environment

Dynamism

Munificence

Concentration

Size

Size


Threat of new entrants

Threat of substitute product or service

Bargaining power of customer

Bargaining power of suppliers

Intensity of competitive rivalry


Porter’s Five Forces Model Strategy

Barriers to EntryAbsolute cost advantages Proprietary learning curve Access to inputs Government policy Economies of scale Capital requirements Brand identity Switching costs Access to distribution Expected retaliation Proprietary products


Threat of new entrants

Switching costs

Buyer inclination tosubstitute

Price-performancetrade-off of substitutes


Threat of substitute product or service

Bargaining leverage

Buyer volume

Buyer information

Brand identity

Price sensitivity

Threat of backward integration

Product differentiation

Buyer concentration vs. industry

Substitutes available

Buyers' incentives


Bargaining power of customer

Supplier concentration

Importance of volume to supplier

Differentiation of inputs

Impact of inputs on cost or differentiation

Switching costs of firms in the industry

Presence of substitute inputs

Threat of forward integration

Cost relative to total purchases in industry


Bargaining power of suppliers

Exit barriers

Industry concentration

Fixed costs/Value added

Industry growth

Intermittent overcapacity

Product differences

Switching costs

Brand identity

Diversity of rivals

Corporate stakes


Intensity of competitive rivalry

Legitimacy Strategies

Using legitimacy strategies to achieve venturegrowth.

legitimacy as "a generalized perception orassumption that the actions of an entity are desirable,proper, or appropriate within some sociallyconstructed system of norms, values, beliefs, anddefinitions“

(DiMaggio & Powell, 1991)


Legitimacy Strategies

Legitimacy is a relationship between the practices and utterances of the organization and those that are contained within, approved of, and enforced by the social system in which the organization exists.

(Zimmerman and Zeitz, 2002)


REFERENCES Zimmerman, M. A., & Zeitz, G. J. (2002). Beyond survival:

Achieving new venture growth by building legitimacy. Academy ofManagement Review, 27(3), 414-431.

DiMaggio, P. J., & Powell, W. W. 1991. Introduction. In W. W.Powell & P. J. DiMaggio (Eds.), The new institutionalism inorganizational analysis: 1-40. Chicago: University of Chicago Press.

Baum, J. R., Locke, E. A., & Smith, K. G. (2001). A multidimensionalmodel of venture growth. Academy of management journal,44(2), 292-303.

Baum, J. R., & Locke, E. A. (2004). The relationship ofentrepreneurial traits, skill, and motivation to subsequent venturegrowth. Journal of applied psychology, 89(4), 587.

Bartlett, W., & Bukvic, V. (2001). Barriers to SME growth inSlovenia. MOST: Economic Policy in Transitional Economies, 11(2),177-195.


REFERENCES Gartner, W. B. (1985). A conceptual framework for describing the

phenomenon of new venture creation. Academy of ManagementReview, 10(4), 696-706.

SandbergW. R. and Hofer, C. W. (1987). Improving new ventureperformance: The role of strategy, industry structure, and theentrepreneur. Journal of Business Venturing, 2(1), 5-28.


Strategic entrepreneurship Topic 8

Small Business & Entrepreneurship

Transcript of Strategic entrepreneurship Topic 8