strategic entrepreneurship topic 5
TRANSCRIPT
STRATEGIC ENTREPRENEURSHIP
TOPIC 5DR ANIS AMIRA AB RAHMAN
RAJA ROSNAH BINTI RAJA DAUDFACULTY OF ENTREPRENEURSHIP AND BUSINESS
UNIVERSITI MALAYSIA [email protected]
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NEW VENTURE CREATION STRATEGIC APPROACH
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Strategic Entrepreneurship and Strategic Management
Source : Wheelen, T. L. and Hunger, J. D. (2000 cited in Kuratko, D. F. & Hodgetts,
R. M., 2004: 521).Dr Anis Amira Ab Rahman 14
What is a business strategy?
The actions an organization takes to pursue itsbusiness objectives.
Strategy drives performance and an effective strategyresults in a good performance.
A basic distinction exists among the content of abusiness’s strategy, the strategy process that thebusiness adopts to maintain that strategy and theenvironmental context within which the strategymust be made to work.
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Strategy content
The strategy content relates to three (3) things: thefinal product range, the customers it serves and theadvantage it seeks in the marketplace.
The product range:-
Covers the types and range of products that the firmssupplies to its market.
E.g. what type of products should the business offer?What should their features be?
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Strategy content
Market scope:-
Defines the customer groups and market segments thatwill be addressed by the firm.
Key decision includes:
How is the total market to be defined?
What features are important for characterizing the marketand defining its sectors?
On what groups of customers should the businessconcentrate?
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Strategy content
Competitive approach:-
Refers to the way in which the firm competes within itsproduct-market domain to sustain and develop itsbusiness in the face of competitive pressures.
Reflects the way in which the firm tries to influence thecustomers to favor their offerings.
E.g. how should the product be priced relative tocompetitors? What distribution route will be used to getthe product to the customer?
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Decisions about strategy content must be made in the lightof understanding of ‘external’ conditions and ‘internal’concerns.
External – characteristics of the market, the competitivesituation and the way in which different sectors can beserved.
Internal – mission and goals of the organization, theresources it has to hand and its capabilities.
Strategy content
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Strategy process in the entrepreneurial business
Desired strategy content
Achieved strategy content
Existing strategy content
The way in which the decision
about what the business wishes
to achieve is taken and
communicated
Control over delivering the defined
strategy content
Ongoing processes, routines and decision
making within the organization
The firm’s strategy process is the way in which the business
makes decisions about the strategy content it wishes to achieve.
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The link between existing strategy content and the strategy content achieved in the
future
The strategy content of the business will evolve over time.
The way in which the business modifies its range ofproducts, changes its customer base and develops itscompetitive approach will be the results of a series ofongoing decisions and actions taken by the people whomake up the organization.
These decisions occur even if the organization does nothave an explicit strategy to guide them
They may be made in response to immediate marketopportunities
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The link between existing strategy content and desired strategy content
There are a number of ways in which the organization canbecome aware of the desired strategy content:-
The entrepreneur ‘s communication of their vision
The definition of a mission
The setting of objectives
Through informal discussion
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The link between desired strategy content and achieved strategy
content
The link is manifest in the ability of entrepreneur todeliver the strategy content they desire for theirorganization.
Two (2) things may limits this:- Must be both achievable, given the market conditions
and the competitive forces present, and feasible, interms of the resources available to make the necessaryinvestments.
The degree of control the entrepreneur has over theorganization.
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Controlling strategy process in the venture
If the entrepreneur is to maintain control of theorganization and focus it on the opportunities that itseeks to exploit, then they must control its strategy.
Essential decision includes:- Decision relating to the development of the mission
Decision relating to the development of strategy
Decision relating to the control of resources
Decision relating to the way objectives will be set,monitored and rewarded
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A well defined strategy can help the venture
A strategy….
Encourages entrepreneurs to assess and articulate their vision
Ensures auditing of the organization and its environment
Illuminates new possibilities and latitudes
Provides organizational focus
Guides the structuring of the organization
Acts as a guide to decision making
Provide a starting point for the setting of objectives
Acts as a common language for stakeholders
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The Generation and Exploitation of New Venture
Creation Opportunities
Source : Hisrich, R. D., Peters, 2009
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The Generation and Exploitation of New Venture Creation Opportunities
Stage 1: New entry generation
The new entry generation should concern about theestablishment of new product in new market. A part fromthat creating new organization is also listed as newventure creation.
In this stage, the entrepreneur will learn new knowledgeexperiences and exploiting other resources to get abetter picture about business. This stage is very importantfor new comers in order to capturing new or existingopportunities in business environment.
Stage 2: New entry exploitation
In this stage, entrepreneurs will scan, skimming andexploit the new opportunities with the help fromknowledge. Entry strategy, of course, will become a majorboost for company to go into business.
Most decision, the entrepreneurs make don't fit intoassumption of perfect rationality in entry strategy but it ismost likely influenced by cultural and resources. Some ofthe entry strategies are exporting and licensing.
Stage 3: Feedback loop of resources.
The decision to exploit or not to exploit the new venturecreation opportunity
The Generation and Exploitation of New Venture Creation Opportunities
An overview of entrepreneurial entry strategies
A strategy is the pattern of actions that define an organization.
Two (2) generic strategies are commonly used; product-market domain and competitive approach.
Product-market domain:- Focused entry
Addressing a single well-defined product-market domain
Product spread Offering a wide range of products to single well-defined
market
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An overview of entrepreneurial entry strategies
Customer spread
Delivering a single or narrow range of products to a wide base of customers
Adjacency
Offering a wide range of products to a broad customer base. All product-market segments are adjacent in that the characterizing features of each segment are continuous or can be related to each other
Scatter
A variety of different products are offered to a variety of different customers. The segments are not adjacent.
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An overview of entrepreneurial entry strategies
Competitive approach:-
Offering a new product or service
Offering greater value
Creating new relationships
Being more flexible
Being more responsive
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Creating the Strategic Vision: Articulating Need and Purpose
A process of merging and combining, then deciding and eliminating.
QUESTION/AREA OF INQUIRY
COMPONENT OF STRATEGIC VISION
What opportunity or problem led to venture launch?
Purpose: What we are attempting to do?
What obstacles confront the venture team?
Potential pitfalls to overcome
What blocks progress? Resources needed
How we will know we are on the right track?
Data to be gathered
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Values Creation: Developing Strategy in Good Company
Business ethics and values are the subject of increasinglygreat attention today in light of numerous scandalsinvolving unethical and unlawful actions on the part ofmanagers.
Ethics – behavior that conforms to moral principles andvalues.
Business ethics – the discipline of developing andpracticing business relationships that conform to thesemoral (Alford, 2005)
Many businesses design formal ethics programs, includinga code of ethics.
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Values Creation: Developing Strategy in Good Company
Research has identified key strategic benefits tobusinesses that have ethics programs (Devero, 2003):
Build employee loyalty, reducing hiring and trainingcosts
Reduce theft
Drive sales and build customer loyalty
Attract quality applicants with minimum investment inrecruitment
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Writing a Code of Ethics
It is never too early in the formulation of a newventure to write a code of ethics.
Once written, the document can and should berevisited each year, and as the firm grows, moreinformation can be added to it.
Code of ethics should contain the following types ofinformation (Alford, 2005):
Purpose
policy
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Writing a Code of Ethics
Procedures (e.g. honesty and fairness, labor and employee relations matters etc)
Environmental
Accurate and complete records
Workplace safety
Bidding, negotiation and performance on contracts
Reporting suspected violations
Training
Review procedures
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Strategic attributes for new venture entrepreneur
Sensitive to environment
Dare to take risk
Tolerate with uncertainty
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Entrepreneur’s Strategy
References
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Aashish Mehra, G. S. (2011). Managing rapid growth : How mid caps can leap into the billion dollar club .
Dollinger, M, J. (2008). “ENTREPRENEURSHIP: Strategies and Resources Fourth Edition”, Kelley School of Business, Indiana University. MARSH publications, pp. 33-40.
Drucker, P. F., & Drucker, P. F. (2007). Innovation and entrepreneurship: Practice and principles. Routledge.
Kuratko, D. F., & Hodgetts, R. M. (2004). Entrepreneurship: Theory, process, practice. Mason, Ohio: Thomson/South-Western
Hisrich, R. D., Peters, M. P., & Shepherd, D. A. (2009). Entrepreneurship. New York: McGraw-Hill Higher Education.
Lieberman, M. B., & Montgomery, D. B. (1988). First‐mover advantages. Strategicmanagement journal, 9(S1), 41-58.
R. Barringer, Duane,(2009).Successfully Launching New Ventures: McGraw-Hill Higher Education.
Zimmerer, T., Scarborough, N. M., & Wilson, D. (2002). Essentials of entrepreneurship and small business management (Vol. 2). Upper Saddle River, NJ: Prentice Hall.