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Strategy in

EntrepreneurialCompanies

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The Function of Strategy

To Provide a general, broad sense of 

direction. To Create a sense of purpose and

builds commitment.

Translates the Corporate Vision intoplans and action steps

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An Entrepreneurial Company

Exists by developing value from

identified opportunities. Grows by continually seeking new

opportunities.

Which means it must allocate andreallocate resources from existing to

new opportunities.

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Strategy in Entrepreneurial

Companies

Strategy is Value-based ; focusing on

creating value through innovation andopportunity.

Strategy must be Emergent  as we

can¶t always predict wh

en or wh

ereinnovations will occur. Thus strategy

cannot be very specific. It evolves, in

part, from what we do.

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Characteristics of Effective

Strategy

It is based on the concepts of:

Don¶t compete, differentiate. Development and exploitation of Core

Competencies:

 You have to know what you are good at and

what you are not so good at.  You have to know where you need to be

good and develop these areas - an aspect

that is getting more and more important.

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Additional Characteristics of 

Effective Strategy

Continuous investment in

innovation. Generalized search for opportunity

at all levels of the organization.

Pivot on Technology/Capabilities

into adjacent markets.

Be Value Oriented.

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Value Oriented Strategy

A basic tenet of 

entrepreneurship -- do notcompete, innovate.

Practice Value Pricing --

deliver value to your customer.

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Value PricingValue Pricing

High Margins

R & D New Products

 RequireGiveCustomer 

Value

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MORE ON VALUE

ORIENTED STRATEGY

But charge enough to keep some

value for yourself - newcompanies usually charge too

little.

Pick your price niches.

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More Characteristics of an

Effective Strategy

Keep a look out for new and

promising areas for innovation. It can put a safety

net under your present

strategy. Aim at the sweet spots of the

product life-cycle curve.

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Basic Product Life CycleBasic Product Life Cycle

Risky

Great

Bad

Good

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Additional Characteristics of 

an Effective Strategy

Adopt a ³options model´ for 

project expenditures. You thenpay to learn more and thus make

better decisions.

Keep a reserve for the hiddenunknowns.

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Strategic management  Strategy formulation (Planning and

analysis)

Strategy implementation (Execution andevaluation)

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Strategy formulationEntry wedges (Methods to get into a business)

Major wedges

New product or service Parallel competition

Franchising

Minor wedges

Customer sponsorship: customer contract 

Parent company sponsorship: Joint venture,Licensing

Government purchasing

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Resource based strategyEvery entrepreneur shall possess

resources and capabilities that are rare,hard to copy and non substitutable.

3 strategies related to resources

Rent seeking strategies

Growth strategies

Quality strategies

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Different types of rent  Ricardian rent: rent due to acquiring, owning

and controlling a scarce and valuable

resources. Monopoly rent 

Entrepreneurial rent: risk taking behavior

Quasi rent: employing firm specific asset in amanner that other firms cannot copy.

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Protecting Rent Isolating mechanism or first mover

advantage

Property rights: Patents, Trademarksand copyrights

Technological leadership

 Acquiring valuable and scarce resourcesahead of others

Imposing switching costs

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Growth strategiesThe optimal growth rate for the new

venture involves a balance between thefull exploitation of existing resourcesand development of new ones

Focus effect growth strategy: Related

diversification

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Synergy effect strategy (combination of technology and marketing)

Contestable synergy: Acquiring andemploying resource which create valuebut can be imitated by others

Idiosyncratic synergy: Synergy that canproduce long lasting rents.

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 Aspects related to successful

TQM Market research

Organization commitment