entrepreneurship & intrapreneurship entrepreneurship the process of uncovering and developing...
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Entrepreneurship & Entrepreneurship & IntrapreneurshipIntrapreneurship
EntrepreneurshipEntrepreneurship
The process of uncovering and The process of uncovering and developing an opportunity to create developing an opportunity to create value through innovation and seizing value through innovation and seizing that opportunity without regard to that opportunity without regard to either resources (human and capital) either resources (human and capital) or the location of the entrepreneur—or the location of the entrepreneur—in a new or existing company in a new or existing company (Churchill, 1992: 586).(Churchill, 1992: 586).
Entrepreneurship Entrepreneurship CharacteristicsCharacteristics
Commercial leaningsCommercial leanings Lack of structure/self-controlLack of structure/self-control Visionary tendenciesVisionary tendencies Risk-taking/appetite for uncertaintyRisk-taking/appetite for uncertainty PersistencePersistence Doer/high initiativeDoer/high initiative Charisma and extroversionCharisma and extroversion
Entrepreneurship Entrepreneurship CharacteristicsCharacteristics
High-energy levelHigh-energy level Strong self-imageStrong self-image Team building skills/uses contacts Team building skills/uses contacts
and connections and connections Views failure as learningViews failure as learning Commitment and funCommitment and fun
Entrepreneurs vs ManagersEntrepreneurs vs Managers
EntrepreneursEntrepreneurs ManagersManagers
RewardsRewards Doing what they like. Doing what they like. IndependentIndependent
Corporate rewards. Promotion, Corporate rewards. Promotion, staff, office, moneystaff, office, money
ActivityActivity Direct involvementDirect involvement DelegationDelegation
RiskRisk Moderate risk takerModerate risk taker Avoids riskAvoids risk
StatusStatus Not concerned about status Not concerned about status symbolssymbols
Represents power and positionRepresents power and position
RelationshiRelationshipsps
Deal-making and Deal-making and reciprocityreciprocity
Relies upon the hierarchyRelies upon the hierarchy
Time Time orientation orientation
Time orientation - 5 - 10 Time orientation - 5 - 10 years.years.
Short termShort term
Decisions Decisions Follows dreams with Follows dreams with decisionsdecisions
Follows directivesFollows directives
Intrapreneurship Intrapreneurship CharacteristicsCharacteristics
Understands the environmentUnderstands the environment Visionary and flexibleVisionary and flexible Creates management optionsCreates management options Encourages teamworkEncourages teamwork Encourages open discussionEncourages open discussion Builds a coalition of supportersBuilds a coalition of supporters PersistsPersists
Intrapreneurship EnvironmentIntrapreneurship Environment
New ideas encouragedNew ideas encouraged Trial and error encouraged. Failure Trial and error encouraged. Failure
ok!ok! Resources available and accessibleResources available and accessible Long time horizonLong time horizon Appropriate reward systemAppropriate reward system Sponsors and champions availableSponsors and champions available Support of top managementSupport of top management
““It is the customer who, in the end, It is the customer who, in the end,
determines how many people are determines how many people are employed and what sort of wages employed and what sort of wages
companies can afford.” Lord companies can afford.” Lord RobensRobens
Strategy in High Strategy in High Technology IndustriesTechnology Industries
High Technology IndustriesHigh Technology Industries
Rapidly changing scientific Rapidly changing scientific knowledge underlying attribute for knowledge underlying attribute for competitioncompetition
R&D/SalesR&D/Sales Battle over technical standard, Battle over technical standard,
format, and dominant designformat, and dominant design• Set by decree, cooperation, public Set by decree, cooperation, public
domain, but mostly through consumer domain, but mostly through consumer choiceschoices
Benefits for StandardsBenefits for Standards
CompatibilityCompatibility Reduce consumer uncertaintyReduce consumer uncertainty Reduce production costsReduce production costs Increase in complementary products Increase in complementary products
– Network effects – which greatly – Network effects – which greatly enhances sustainabilityenhances sustainability• Lock outs and switching costsLock outs and switching costs
Wining Format WarsWining Format Wars
Ensure complementary productsEnsure complementary products Killer applicationsKiller applications Razor and blade strategyRazor and blade strategy
• Cell phones, printers, satellite TV/radio, Cell phones, printers, satellite TV/radio, video gamesvideo games
Cooperative competitionCooperative competition LicensingLicensing
Technological ChangeTechnological Change
If the automobile had developed at If the automobile had developed at the same rate as the microchip, a the same rate as the microchip, a Roll Royce would:Roll Royce would:
Cost $2.75Cost $2.75 Go 3 Million miles on a gallon of gasGo 3 Million miles on a gallon of gas
Competitive DynamicsCompetitive Dynamics
Competitive action within an Competitive action within an industry. industry.
Strategic and tactical action does not Strategic and tactical action does not occur within a vacuumoccur within a vacuum
What industries have high What industries have high competitive dynamics?competitive dynamics?
What sort of actions/tactics are What sort of actions/tactics are taken?taken?
Drivers of Competitive DynamicsDrivers of Competitive Dynamics
numerous/equally balanced competitorsnumerous/equally balanced competitors slow growthslow growth high fixed/storage costshigh fixed/storage costs lack of differentiation/switching costslack of differentiation/switching costs high exit barriershigh exit barriers Etc…Etc…
RivalryCompetitive
Dynamics
Types of Competitive Types of Competitive ResponsesResponses
First Movers - initial competitive First Movers - initial competitive actionaction advantages and disadvantagesadvantages and disadvantages
Fast Followers or Capable Fast Followers or Capable Competitors- respond quickly to first Competitors- respond quickly to first moversmovers
Late Entrants - day late and a dollar Late Entrants - day late and a dollar shortshort
Chapters 9 - 10Chapters 9 - 10
Corporate Level StrategyCorporate Level Strategy
Foods
Quaker North America
Quaker OatsCap’n Crunch cerealLife cerealQuisp cerealKing Vitaman cerealMother’s cereal
Quaker rice cakes and granola barsRice-A-Roni side dishesNear East couscous/pilafsAunt Jemima mixes & syrupsQuaker grits
Business Level Strategies
How are we going to compete and gain a competitive advantage in each of our businesses?
Snack Foods Beverages
Foods
Corporate Level Strategy1) What businesses do we want to compete in?2) How do manage effectively across businesses
Goals of Corporate StrategyGoals of Corporate Strategy
Moves to enter new businessesMoves to enter new businesses
Boosting combined performance of the Boosting combined performance of the businessesbusinesses
Capturing Capturing synergiessynergies and turning them and turning them into competitive advantagesinto competitive advantages
Establishing investment priorities and Establishing investment priorities and steering resources into business steering resources into business unitsunits
4 Corporate Level Strategies 4 Corporate Level Strategies
• 1) Vertical Integration1) Vertical Integration• 2) Strategic Outsourcing2) Strategic Outsourcing• 3) Horizontal Integration3) Horizontal Integration• 4) Diversification – two or more 4) Diversification – two or more
different businesses with distinct different businesses with distinct operationsoperations
1) Vertical Integration1) Vertical Integration Forward or backwardsForward or backwards
• Full integrationFull integration• Taper integrationTaper integration
BenefitsBenefits• Build barriers to entryBuild barriers to entry• Facilitates investment in specialized assetsFacilitates investment in specialized assets• Protecting product qualityProtecting product quality• Improved schedulingImproved scheduling
RisksRisks• CostsCosts• Rapid technological changesRapid technological changes• Demand predictabilityDemand predictability
Alternatives to Vertical IntegrationAlternatives to Vertical Integration
Competitive biddingCompetitive bidding Long term contracts or strategic Long term contracts or strategic
alliancesalliances
VerticalIntegration
Markets &Competitive Bidding
Hybrid &Contracts/Alliances
Form of Relationship
2) Outsourcing2) Outsourcing
Cost reduction and differentiationCost reduction and differentiation Hold-ups, scheduling and hallowing Hold-ups, scheduling and hallowing
outout
3) Horizontal Integration3) Horizontal Integration
Acquiring or merging with industry Acquiring or merging with industry competitorscompetitors• Reduce cost and economies of scaleReduce cost and economies of scale• Increasing value through wider product Increasing value through wider product
line or product bundlingline or product bundling• Manage industry rivalryManage industry rivalry• Decrease buyer and supplier powerDecrease buyer and supplier power
4) How to Diversify?4) How to Diversify?
1) Internal Development - corporate 1) Internal Development - corporate entrepreneurship or internal entrepreneurship or internal venturingventuring• able to appropriate a larger portion of able to appropriate a larger portion of
wealthwealth• avoids complexities of multiple partnersavoids complexities of multiple partners• time consuming and requires diversity time consuming and requires diversity
of organizational capabilitiesof organizational capabilities
4) How to Diversify?4) How to Diversify?2) Strategic Alliances and Joint Ventures2) Strategic Alliances and Joint Ventures
• entering a new market via the combination entering a new market via the combination of complementary resources - do more of complementary resources - do more togethertogether
• cost reduction & sharingcost reduction & sharing• development/diffusion of technologydevelopment/diffusion of technology
ProblemsProblems• appropriate partners - skills and compatibilityappropriate partners - skills and compatibility• trust and commitmenttrust and commitment• communicationcommunication
4) How to Diversify?4) How to Diversify?
3) Mergers & Acquisition3) Mergers & Acquisition
Acquisitions
Reasons of Acquisitions
Increase Market Power
Overcome Entry Barriers
Increased Speed
Lower Risk
Avoid Competition
Problems with Acquisitions
Integration of two firms
Overpayment/Debt
Overestimation of Synergy
Overdiversification
Managerial energy absorption
Become too large
Substitute for innovation
Results
Poor Performance
Who Wins?
Acquired FirmShareholders
Failures of AcquisitionsFailures of Acquisitions
30 - 40% average acquisition premium30 - 40% average acquisition premium
Acquiring firm’s value drops 4% in the 3 Acquiring firm’s value drops 4% in the 3 months following acquisitionsmonths following acquisitions
30 - 50% of acquisitions are later divested30 - 50% of acquisitions are later divested
Acquirers underperform S&P by 14%, peers by Acquirers underperform S&P by 14%, peers by 4%4%
3 month performance before and after3 month performance before and after• 30% substantial losses, 20% some losses, 30% substantial losses, 20% some losses,
33% marginal returns, 17% substantial 33% marginal returns, 17% substantial returnsreturns
Why, then, do executives acquire?Why, then, do executives acquire?
Often, for personal reasonsOften, for personal reasons
Firm size and executive compensation Firm size and executive compensation are relatedare related
When do executives loss their jobs?When do executives loss their jobs?• 1) Acquired - larger firms harder to 1) Acquired - larger firms harder to
acquireacquire• 2) Performing poorly - employment risk 2) Performing poorly - employment risk
is reduced as returns are less volatileis reduced as returns are less volatile
Levels of Diversification
Related Diversification - entering product markets that share some resource or capability requirements with the current business – horizontal relationships across businesses - synergies
Advantages of related diversification include: Leveraging Core Competencies Sharing Activities Market Power
Levels of Diversification (cont.)
Unrelated Diversification - few similarities in the resources and capabilities required among the firm’s businesses
Conglomerate Diversification - no relatedness between businesses
When/Why to Diversify?When/Why to Diversify?
To create shareholder valueTo create shareholder value
Porter’s Three Point TestPorter’s Three Point Test
1) Attractiveness Test1) Attractiveness Test
2) Cost of Entry Test2) Cost of Entry Test
3) Better off Test3) Better off Test
Should pass all 3Should pass all 3
Portfolio analysisPortfolio analysis
BCG Growth-Share MatrixBCG Growth-Share Matrix• question marks, dogs, cash cows, starsquestion marks, dogs, cash cows, stars
GE- Nine Cell MatrixGE- Nine Cell Matrix
Gro
wth
Rat
eRelative Market Share
StarsQuestion
Marks
CashCows
Dogs
Boston Consulting Group Matrix
Gro
wth
Rat
e
Relative Market Share
1.0High Low
Soft Drinks
FritoLay
KFC
PizzaHut
TacoBell
Low
High
10%
BCG Matrix for PepsiCo - Early 1990s
Gro
wth
Rat
e
Relative Market Share
.75High Low
Soft Drinks
FritoLay
KFC
PizzaHutTaco
Bell
Low
High
5%
BCG Matrix for PepsiCo - Early 1990s
Competitive StrengthsA
ttra
ctiv
enes
s
Invest Grow
Low
High
LowHigh
HarvestDivest
Hold
GE 9 Cell Matrix
Competitive StrengthsA
ttra
ctiv
enes
s
Low
High
LowHigh
GE 9 Cell Matrix for Pepsico
Soft Drinks
Snack Foods