Ch 8: Entrepreneurial Strategy

Entrepreneurship

the creation of new value by an existing organization or new venture that involves the assumption of risk

Opportunity Discovery

• Spontaneous and unexpected

• Deliberate search

Opportunity Viability

• Attractive: there is market demand

• Achievable: practically feasible to realize

• Durable: learge nough widow of opportunity

• Value creating: benefits must surpass costs

Challenges of Startups

• Customers often do not know what they like → Can’t articulate their needs properly → Startups must find the customers untacked needs and help them discover their needs

• Liability of newness: higher difficulty accessing resources than established companies

Angel investors

Private individuals who provide equity investments for seed capital during the early stages of a new venture

Venture capitalists

Companies organized to place their investors’ finds in lucrative business opportunities

Crowdfunding

Funding a venture by pooling small investments from a large number of investors, often raised on the internet

Human Capital

The manager could be more important than the idea for investors

Social capital

Entrepreneurs’ networks give exposure and legitimacy to ideas

Government resources

Small Business Administration (SBA) gives loans, training, counseling, and support for your ideas

Vision

Your strongest asset. Your idea to change the world

Dedication and drive

Patience, stamina, willingness to work hard, commitment in the face of poor luck

Commitment to excellence

Commit to knowing customers, paying attention to detail and continuously learning

Pioneering (entry strategy)

A firm’s entry into an industry with a radical new product or highly innovative service that changes the way business is conducted

Advantages:

• Meet customers’ needs in a unique way

• Little direct competition

Disadvantages:

• Risk that product is not accepted by customers

• Competitors with more resources could successfully imitate

Imitative (entry strategy)

A firm’s entry into an industry with products or services that capitalize on proven market successes and that usually has a strong marketing orientation

Advantages:

• Fill a market place where the need had been previously filled inadequately

Disadvantages:

• Risk that imitators do not have resources or skills to better do the job

Adaptive (entry strategy)

A firm’s 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

Advantages:

• A compromise between the previous two entries

Disadvantages:

• Risk that customers do not perceive the product as unique enough

• Competitors’ imitation

Differentiation

Used in pioneering and adaptation entry. However, establishing the brand could be expensive

Focus

Effectively used by many small businesses as they can effectively focus on market niches

Overall cost leadership

Firms cannot use economies of scale but could beat costs of large firms due to faster and simpler decision-making

Combination

Firms can effectively use flexibility of small size to simultaneously pursue cost leadership and differentiation