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Entrepreneurial Strategy and Competitive Dynamics

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

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Entrepreneurial Strategy and Competitive Dynamics

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  1. Entrepreneurial Strategy and Competitive Dynamics chapter 8

  2. Entrepreneurial Strategy • Entrepreneurshipinvolves value creation andthe assumption of risk • New value can be created in many contexts: • Startup ventures • Major corporations • Family owned businesses • Nonprofit organizations • Established institutions

  3. Entrepreneurial Strategy Exhibit 8.1 Opportunity Analysis Framework Source: 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.

  4. 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

  5. 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

  6. 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

  7. 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

  8. 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

  9. 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

  10. 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

  11. 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

  12. 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

  13. 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?

  14. 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 Types of competitive actions include:

  15. 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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