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Entrepreneural Strategy, generating and exploiting new
Entrants
To understand that the essential act of entrepreneurship involves new entry
To be able to think about how an Entrepreneural strategy can first generate, and then exploit our time, a new entry
To understand how resources are involves in the generation of opportunities
To be ale to access the attractiveness of a new entry opportunity
To acknowledge that entrepreneurship involves making decisions under conditions of uncertainty
To be able to assess the extent of first movers advantage and weigh them against first moves disadvantage
To understand that risk associated with newness, but there are strategies that the entrepreneur can use to reduce risk.
New product : Established / new market Established Product : New Market Creating a new organization
Set of Decisions, actions, and reactions that first generate and then exploit over a time new entry
Three Stages Generation of a new entry opportunity Exploitation of a new entry opportunity Feedback
Resources a source of competitive advantage
A bundle of resources includes Valuable ( It enables the firm to pursue
opportunities neutralize threats and offer products and services that are valued by customers)
Rare ( it should be possessed by few/potential competitors)
Inimitable ( it would be difficult or costly for potential competitors)
Entrepreneural resource its liability to obtain then combine the resources into a bundle that is variable, rare and inimitable,
It can be possible through following steps Experience of entrepreneur or manager Collective mind of management and
employees Knowledge of the market Knowledge of the technology Innovative
Its about the entrepreneurs information about market and its skills.
Problems of customers Customers attitudes and behaviors
Possession of information, technology, know-how and skills
If the market is limited then entrepreneur must know how to create new markets.
He must know how to exploit the technological advantage over its competitors.
Information on a new entry Prior knowledge and information search Windows of opportunity Error of omissionOccurs from the decision not to act on the new
entry opportunity. Error of commissionOccurs from the decision to pursue this new
entry opportunity only to find out later that the entrepreneur had over-estimated his ability to create customer demand from imitation by competitors.
First mover develop a cost advantage First mover face less completive
challenge First mover can secure important
challenge First mover are better position to satisfy
customers First mover gain expertise through
participation
External Environment
InternalEnvironment
Company
An entrepreneur should always strive to create the best possible match between the companies resources with the external environment
Key success factors of an industry help in determining that best fit
First movers have a disadvantage that the key success factors are not known. He has to really on his guess.
Emerging industries give the first movers the advantage of choosing the way to success including establishing the rules of the industry.
FIRST MOVER DELAYED ENTRY
Little information potential size of market,
expected growth pattern.
Difficult to measure future demand.
Over-estimating demands leads to additional cost
Under-estimating demands lead to under capacity and shortage of supply
Information is available
Future demand is easy to predict
They can avoid additional costs by correctlty estimating demand.
FIRST MOVER DELAYED ENTRY
Growth pattern and change in customer preferences is difficult to predict.
Customers preferences are immature and bound to change
Growth pattern and change in customer preferences is predictable
Customer preferences are matured with time.
FIRST MOVER DELAYED ENTRY
Uncertainty is more Its not known whether
technology will produce the desire result or not
Risk exists in emergence of substitute technology.
Incase of failure ,losses are incurred
Uncertainty is minimal
Results are known Risks are minimized
by using the most optimal technology which is known to work
Additional losses are not incurred
FIRST MOVER DELAYED ENTRY
Difficult to adapt to new changes
Entrepreneurs attributes of persistence and determination stops him from detecting and implementing the change
Easy to adapt to changes.
New products-new markets, customers are uncertain
Uncertain about use of product that whether it will satisfy or not
Customers are uncertainty averse Customers are uncertain about whether it
will perform better than the existing one Entrepreneur should reduce customer
uncertainty
Offer informational advertising Comparison marketing Tough to offer informational advertising
for complex product Customers are aware of product usage
but still reluctant to buy e.g. software package
Entrepreneur should give demos and presentations
Lead time-the time during which the entrepreneurs prepares for increase competition
Entrepreneur can use marketing efforts to position image
Building customer loyalties Building switch costs Protecting product uniqueness Securing access to important source of
supply and distribution
Involves considerable risks. May be due to competitors technology or
market demand Strategies can be used to reduce risk. Two strategies are used
Market scope imitation
Market scope strategy Scope- is a choice about which consumers
group to serve and how to serve them It ranges from narrow to broadNarrow scope Strategy Offers a small product ranged to a small
number of customer groups in order satisfy a particular need
Reduces the risks for failing Focuses for customized products Reduces competition
By focusing on specific groups of customers the entrepreneur can build up specialized expertise that provide competitive edge
The high end of market typically represent a highly profitable niche.
Broad Scope Strategy Portfolio approach Gain understanding about market and
products Unsuccessful products can be dropped It creates competition Reduces risks.
Copying the practice of other firms Benefits
To minimize the risks To improve performance at the first appearance in
consistent with argument It is necessary to be successful in an industry It quickly acquires skills rather than start from scratch Imitation also provides organizational legitimacy If the entrepreneurs acts like a well established firm
its is likely to be perceived by customers as well established.
Imitation is a means of gaining status and prestige e.g. consultation firm( location , leather chairs, suits)
Franchising Franchisee acquires the use of a proven
formula for new entry for the franchiser. E.g. McDonalds. ( intellectual property)
Me to strategy Copying products that already exists and
attempting to build an advantage through minor variation. For example Ice cream
Negative impact Faces cost time training employees and to
enhance the skills Overlaping and gaps in responsibilty often
cause conflicts Communication gap-Formal and Informal
(new ventures there will be formal communication due to newness)
Positive Impact Pay special attention on employees training and
social needs. Manage good systems and routines, and the
new employee are determined.
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