entrepreneurial strategy chp 13

Entrepreneurial Strategy: Generating and Exploiting New Entries

Chapter: 13

04/09/2023 Prepared by Madam Amina Sadaf

Opening Profile Justin parker Australian entrepreneur He was thrown out of Uni for gross failing --His first entrepreneurial venture

failed – he started his mobile pizza business when he was 18 years old – local council terminated permits for these type of mobile food business

He said, “ I am not sure that straight after the failure I was that motivated to get back into it. I knew I enjoyed business and was frustrated that I couldn’t make it work, but I felt more like a failure than a ‘ success waiting to happen’. My confidence was hurt and I was looking for a lot more security. I had few option but no clear vision. When opportunity came along to go back to university, I grabbed it with both hands. University gave me an options”.

Justin’s second attempt at university became him an exceptional student with a passion to learn and passion to apply that knowledge

He majored in accounting and had his first job out of Uni with Ernst and Young Page 423


New Entry Offering a new product to an established or new

market, offering an established product to a new market, or creating a new organisation

Entrepreneurial strategy represents the set of decisions, actions, and reactions that first generate, and then exploit over time

Entrepreneurial strategy has three elements: The generation of new entry opportunity The exploitation of new entry generation Exploitation back to stage 1

Figure 13.1


Generation of a new entry opportunity Resources as a Source of Competitive Advantage

When a firm engages in a new entry, it is hoped that this new entry will provide the firm with a sustainable competitive advantage

What are resources? The inputs into the production process, such as machinery, financial

capital, and skilled employees What is a bundle of resources?

These are the basis of the firm’s superior performance over competitors for an extended period of time

The resources must be valuable, rare and inimitable The bundle of resources is:

Valuable: when it enables the firm to pursue opportunities, neutralize threats and offer products and services that are valued by the customers

Rare: when it is possessed by few, if any competitors Inimitable: when replication of this combination of resources would be difficult

and costly for potential competitors Example: Breeze Technology – ventilation of athletic shoes

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Generation of a new entry opportunity Creating a Resource Bundle that is Valuable, Rare and

Inimitable The ability to obtain, and then recombine, resources

into bundle that is valuable, rare and inimitable represents an important entrepreneurial resource

Knowledge is built up over time through experience and it resides in the mind of the entrepreneur and in the collective mind of management and employees

Knowledge is important for generating a bundle of resource that will lead to the creation of a new venture with a long and prosperous life --- customers plays an important source of providing innovation

Example – mountain bike enthusiast Page 426-427


Creating a Resource bundle that is valuable, Rare and Inimitable Market Knowledge

It is a basis for generating new entry opportunities Refers to the entrepreneur’s possession of

information, technology, know-how, and skills that provide insight into a market and its customers

Technological Knowledge It is also a basis for generating new entry

opportunities Refers to the entrepreneur’s possession of

information, technology, know-how, and skills that provide insight into ways to create new knowledge.

The technological knowledge might lead to a technology that is basis for a new entry Page 427-428


Assessing the attractiveness of a new entry organization After creating a new resource combination,

the entrepreneur needs to determine whether it is valuable, rare and inimitable by assessing whether new product are sufficiently attractive to be worth exploiting and developing. Information on a New Entry Comfort with making a decision under

uncertainty Decision to exploit or not to exploit the new

entry Page 429


Assessing the attractiveness of a new entry organization Information on a new entry

Prior knowledge and information search The prior market and technological knowledge used to

create the potential new entry can also be of benefit in assessing the attractiveness of a particular opportunity

Window of opportunity The dynamic nature of viability of a new entry can be

described in terms of a ‘window of opportunity’. When the window is open, the environment is favorable

for entrepreneurs to exploit a product When window is closed, leaving the environment for

exploitation unfavorable Page 429-430


Assessing the attractiveness of a new entry organization Comfort with making a decision under uncertainty

The less information and the likelihood of closing of ‘window of opportunity’ provides a dilemma for entrepreneurs

HOW? This dilemma involves a choice of which error they prefer to

commit: Error of commission

It occurs from the decision to pursue the new entry opportunity only to find out later that the entrepreneur had overestimated his or her ability to create customer demand or to protect the technology from imitation by competitors

Error of omission It occurs from the decision not to act on the new entry

opportunity, only to find out later that the entrepreneur had underestimated his or her ability to create customer demand and to protect the technology from imitation by competitors

Page 430


Assessing the attractiveness of a new entry organization

Decision to exploit not to exploit the new entry The decision on whether to exploit or not to

exploit the new entry opportunity depends on: whether the entrepreneur has what he or she

believes to be sufficient information to make a decision

whether the window is still open for this new entry opportunity

figure 13.2 Page 430


Entry strategy for new entry exploitation The common catch phrase used by entrepreneur when

asked about their source of competitive advantage is “ Our competitive advantage comes from being first”. First movers develop a cost advantage

Costs are reduced because the firm can spread its fixed cost over a greater number of units (economies of scale)

First movers face less competitive rivalry More market share to first movers

First movers can secure important channels Good and strong relationships with the suppliers and

distribution channels Page - 431


Entry strategy for new entry exploitation

First movers are better positioned to satisfy customers They have a chance to select and secure the most

attractive segment of the market, position themselves at the centre of the market, establish their products as the industry standard

First movers gain expertise through participation They have the opportunity to learn from the first

generation products and improve Monitor changes Built up their networks, which can provide early

information about attractive opportunities Page 431


Risk reduction strategies for new entry organization

A new entry involves considerable risk for the entrepreneur and his or her firm

Risk here is – probability, magnitude, of downside loss which could result bankruptcy

To reduce uncertainties, there are two strategies: Market Scope Strategy Imitation strategy

Page 439


Risk reduction strategies for new entry organization Market Scope Strategies

Scope is a choice about which customer groups to serve and how to serve them

There are two types of strategies: Narrow scope strategy

A narrow scope strategy focuses the firm on producing customised products, localised business operations

By focusing on a specific group of customers, the entrepreneur can build up specialized expertise and knowledge

The high end of the market represents a highly profitable niche that is well suited to those firms that can produce customized products

Broad scope strategy A broad scope strategy can be thought of as taking a portfolio

approach to dealing with different market segments By offering a range of products across many different market

segments, the entrepreneur can gain an understanding of the whole market by determining which products are the most profitable Page 440


Risk reduction strategies for new entry organization Imitation Strategies

Copying the practices of other firm Entrepreneur may simply find it easier to imitate the

practices of a successful firm than to go through the process of a systematic and expensive

An imitation strategy cannot be rare or inimitable Types of imitation strategies:

Franchising MacDonald’s

Me-too Strategy Copying products that already exists in the market. The

successful firms occupies a prime position in the minds of customers, and now the imitator is there too and hopes to be considered by customers

Ice cream shops Page 441


entrepreneurial strategy chp 13

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