Chapter 3Chapter 3Entrepreneurial StrategyEntrepreneurial Strategy

Generating and Exploiting Generating and Exploiting New StrategiesNew Strategies

Vishnu Parmar, IBAVishnu Parmar, IBAUniversity of Sindh, JamshoroUniversity of Sindh, Jamshoro

New EntryNew Entry Offering a new product to an established or Offering a new product to an established or

new market. Offering an established product to new market. Offering an established product to a new market or creating a new organization.a new market or creating a new organization.

Knowledge

Other Resources

Resource Bundle

Assessment ofNew Entry

Opportunity

Organization

Risk ReductionStrategy

Entry Strategy

Firm Performance

An entrepreneurial strategy has three Key An entrepreneurial strategy has three Key StagesStages1.1. Generation of a New Entry StrategyGeneration of a New Entry Strategy2.2. Exploitation of New Entry StrategyExploitation of New Entry Strategy3.3. A feedback loop from the New strategyA feedback loop from the New strategy

New EntryNew Entry Entrepreneurial Strategy is the set of decisions Entrepreneurial Strategy is the set of decisions

actins, and reactions that first generate, and actins, and reactions that first generate, and then exploit over time a new entrythen exploit over time a new entry

Generation of a new Entry Generation of a new Entry OpportunityOpportunity

Resources as a source of CompetitiveResources as a source of CompetitiveAdvantageAdvantage

Understanding where a sustainable Understanding where a sustainable competitive advantage comes from will competitive advantage comes from will provide some insight into how entrepreneurs provide some insight into how entrepreneurs can generate new entries that are likely to can generate new entries that are likely to provide the basis for high firm from provide the basis for high firm from performance over an extended period of timeperformance over an extended period of time

Generation of a new Entry Generation of a new Entry OpportunityOpportunity

Entrepreneurial Resources:Entrepreneurial Resources: The ability to obtain, and The ability to obtain, and then recombine, resources into a bundle that is then recombine, resources into a bundle that is valuable, rare, and inimitablevaluable, rare, and inimitable

Entrepreneurs combines the resources into such a Entrepreneurs combines the resources into such a different ways as this bundle of resources provides a different ways as this bundle of resources provides a firm its capacity to achieve superior performancefirm its capacity to achieve superior performance

For Example: A high skilled workforce will be For Example: A high skilled workforce will be useless if the organization’s culture, teamwork, useless if the organization’s culture, teamwork, communication does not support themcommunication does not support them

Generation of a new Entry Generation of a new Entry OpportunityOpportunity

Resources must be:Resources must be:1.1. ValuableValuable: enables a firm to pursue opportunities, : enables a firm to pursue opportunities,

neutralize threats, and offer valuable product and neutralize threats, and offer valuable product and services to the customersservices to the customers

2.2. Rare:Rare: Possessed by few, (potential) competitors Possessed by few, (potential) competitors3.3. Inimitable:Inimitable: Replication of this bundle of resources Replication of this bundle of resources

would difficult or costly for the potential would difficult or costly for the potential competitorscompetitors

Generation of a new Entry Generation of a new Entry OpportunityOpportunity

Market Knowledge:Market Knowledge: Possession of Information, Possession of Information, technology, know-how, and skills that provide technology, know-how, and skills that provide insight into a market and its customersinsight into a market and its customers

Technological Knowledge: Possession of Technological Knowledge: Possession of information, technology, know-how and skills information, technology, know-how and skills that provide insight into ways to create new that provide insight into ways to create new knowledgeknowledge

Generation of a new Entry Generation of a new Entry OpportunityOpportunity

Assessing the Attractiveness of a New Entry Assessing the Attractiveness of a New Entry OpportunityOpportunity

The entrepreneur needs to determine whether The entrepreneur needs to determine whether it is in fact valuable, rare, and inimitable by it is in fact valuable, rare, and inimitable by assessing whether the new product or the new assessing whether the new product or the new market are sufficiently attractive to be worth market are sufficiently attractive to be worth exploiting and developingexploiting and developing

Generation of a new Entry Generation of a new Entry OpportunityOpportunity

Assessing the Attractiveness of a New EntryAssessing the Attractiveness of a New EntryOpportunity Opportunity Information on a New EntryInformation on a New Entry: The prior : The prior

market and technological knowledge used to market and technological knowledge used to create the potential new entry can also be of create the potential new entry can also be of benefit in assessing the attractiveness of a benefit in assessing the attractiveness of a particular opportunityparticular opportunity

Generation of a new Entry Generation of a new Entry OpportunityOpportunity

Window of OpportunityWindow of Opportunity: The period of time : The period of time when the environment is favorable for when the environment is favorable for entrepreneurs to exploit a particular new entryentrepreneurs to exploit a particular new entry

Generation of a new Entry Generation of a new Entry OpportunityOpportunity

Comfort with making a decision underComfort with making a decision underCertaintyCertaintyThe trade-off between more information and the The trade-off between more information and the

likelihood that the window of opportunity will likelihood that the window of opportunity will close provides a dilemma for entrepreneursclose provides a dilemma for entrepreneurs

Here entrepreneurs usually commits two types of Here entrepreneurs usually commits two types of errorserrors

Generation of a new Entry Generation of a new Entry OpportunityOpportunity

1.1. Error of CommissionError of Commission occurs from the decision occurs from the decision to pursue this new entry opportunity, only to to pursue this new entry opportunity, only to find out later that the entrepreneur had over find out later that the entrepreneur had over estimated his/her ability to create customer estimated his/her ability to create customer demand and/or to protect the technology from demand and/or to protect the technology from imitation by competitors. The cost of the imitation by competitors. The cost of the entrepreneur were derived from acting on the entrepreneur were derived from acting on the perceived opportunityperceived opportunity

Generation of a new Entry Generation of a new Entry OpportunityOpportunity

2. 2. Error of OmissionError of Omission occurs from the decision occurs from the decision not to act on the new entry opportunity only to not to act on the new entry opportunity only to find out later that the entrepreneur had find out later that the entrepreneur had underestimated his/her ability to create underestimated his/her ability to create customer and/or protect the technology from customer and/or protect the technology from imitation by competitors. In this case, the imitation by competitors. In this case, the entrepreneur must live with the knowledge that entrepreneur must live with the knowledge that he let an attractive opportunity slip through his he let an attractive opportunity slip through his fingersfingers

Generation of a new Entry Generation of a new Entry OpportunityOpportunity

Decision to Exploit or Not Exploit the New Decision to Exploit or Not Exploit the New Entry Entry Figure 3.2Figure 3.2

Assessment of the new entry’s attractiveness Assessment of the new entry’s attractiveness determining whether the entrepreneur believes determining whether the entrepreneur believes she or he can make the proposed new entry she or he can make the proposed new entry workwork

ENTRY STRATEGY FOR NEW ENTRY STRATEGY FOR NEW ENTRY EXPLOITATIONENTRY EXPLOITATION

Competitive Advantages of ‘being first’Competitive Advantages of ‘being first’ 1.1. First mover develop a cost advantageFirst mover develop a cost advantage2.2. First mover face less competitive rivalryFirst mover face less competitive rivalry3.3. First movers can secure important channelsFirst movers can secure important channels4.4. First movers are better positioned to satisfy First movers are better positioned to satisfy

customerscustomers5.5. First mover gain expertise through First mover gain expertise through

participationparticipation

ENTRY STRATEGY FOR NEW ENTRY STRATEGY FOR NEW ENTRY EXPLOITATIONENTRY EXPLOITATION

Disadvantages of ‘Being First’Disadvantages of ‘Being First’1.1. Demand Uncertainty:Demand Uncertainty: Considerable difficulty in Considerable difficulty in

accurately estimating the potential size of the accurately estimating the potential size of the market, how fast it will grow, and the key market, how fast it will grow, and the key dimensions along which it will growdimensions along which it will grow

2.2. Technological UncertaintyTechnological Uncertainty: Considerable difficulty : Considerable difficulty in accurately assessing whether the technology will in accurately assessing whether the technology will perform and alternate technologies will emerge and perform and alternate technologies will emerge and leapfrog (game) over current technologiesleapfrog (game) over current technologies

ENTRY STRATEGY FOR NEW ENTRY STRATEGY FOR NEW ENTRY EXPLOITATIONENTRY EXPLOITATION

3. 3. Uncertainty of Customers:Uncertainty of Customers: Customers may Customers may have considerable difficulty in accurately have considerable difficulty in accurately assessing whether the new product or service assessing whether the new product or service provides value for themprovides value for them