MGT 368

Entrepreneurship
Chapter 3 : Entrepreneurial Strategy:
Generating and Exploiting New Entries

MD Asif Hossain
Today's Topic

 New-Entry
 The Generation of new-entry.
 Different Steps of generating new-entry
 The decision to exploit the opportunity of
new-entry
 Advantages and Disadvantages of first
mover. How to overcome them
 Reduce the risk involved with new-entry
 Offering a New product/Service to an established or new market
 Offering an established product to a New market (Ex Pathao)
 Creating a New Organization

 Newness represents something rare, which can help differentiate a firm

from its competitors.
 The generation of a new-entry is the result of a combination of knowledge
and other resources into a bundle that its creators hope will be valuable,
rare, and difficult for others to imitate

 On the other hand, newness creates a number of challenges for

entrepreneurs. Newness can increase entrepreneurs uncertainty over the
value of a new product and place a greater strain on the resources
necessary.
Company Life Cycle (Feedback Loop)
The Generation and Exploitation of new-
entry Opportunities
Tk 5 Lac to start a business
Advertising- Tk 1 lac
Advertising
cost
Raw
Budget
materials

Capital Time

Skilled Resource Effort

Employee Bundle
Generation of a new-entry Opportunity
 Resources as a source of competitive advantage
 Resources are the basic building blocks to a firm’s functions
and performance; the inputs into the production process.
(Example- Machinery, financial capital, Skilled Employees)
 Resource Bundle is combining the resources with the
right balance to achieve maximum efficiency.
 They can be combined in different ways.
 A bundle of resources, provides a firm its capacity to
achieve superior performance.
Generation of a new-entry Opportunity

 Resources must be (Characteristics):

 Valuable (Enables firms to pursue opportunities)
 Rare (have few or no competitors)
 Inimitable (Difficult to replicate)
Generation of a new-entry Opportunity (cont.)

 Creating a Resource Bundle That Is Valuable, Rare,

and Inimitable
 Entrepreneurs need to draw from their unique experiences
and knowledge.
 Market knowledge - Information, technology, know-hows,
and skills that provide insight into a market and its
customers.
 Technological knowledge - Information, technology, know-
hows, and skills that provide insight into ways to create new
knowledge.
Generation of a new-entry Opportunity
(cont.)
 Assessing the Attractiveness of a new-entry Opportunity
 Depends on the level of information and the willingness
to make a decision without perfect information.
 Information on a new-entry
 Prior knowledge and information search
 More knowledge ensures a more efficient search process.
 Search costs include time and money.
 The viability of a new-entry can be described in terms of a window
of opportunity.
Example

 You want to set up a restaurant in the ‘Best’ Place

in Dhaka.

What are the steps you need to take to find the best place?

Result: Found a place in Banani. 1000 Sqft for Tk 150,000 per

month
Generation of a new-entry Opportunity
(cont.)
 Comfort with Making a Decision under
Uncertainty
 The trade-off between more information and the
likelihood that the window of opportunity will close
provides a dilemma for entrepreneurs.

 Error of commission - Negative outcome from acting

on the perceived opportunity.
 Error of omission - Negative outcome from not acting
on the new-entry opportunity.

Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.

The Decision to Exploit or Not to Exploit the
new-entry Opportunity
Entry Strategy for new-entry Exploitation- Advantages

 Being a first mover can result in a number of

advantages that can enhance performance. These
include:

 First Movers face Cost advantages.

 First movers face less competitive rivalry
 First movers can secure important
supplier/distribution channels
 First movers are better positioned to satisfy
customers (Secure attractive segments, position
themselves in the center)
 First movers gain expertise through participation
 Example of first
movers failure

VS
Example of first movers failure

VS
Factors That Influence the Decision to
Enter the Market Now or to Delay Entry
Entry Strategy for new-entry
Exploitation (cont.) -Disadvantages
 Environmental Instability and First-Mover problems that
might arise
 The entrepreneur must first determine the key success factors of
the industry being targeted for entry; are influenced by
environmental changes.
 Environmental changes are highly likely in emerging
industries.

 Demand uncertainty - Difficulty in estimating the potential size of

the market, how fast it will grow, and the key dimensions along
which it will grow.
Entry Strategy for new-entry
Exploitation (cont.) -Disadvantages
 Technological Uncertainty - Difficulty in assessing whether
the technology will perform and whether alternate
technologies will emerge and leapfrog over current
technologies.

 Adaptation - Difficulty in adapting to new environmental

conditions.
 Entrepreneurial attributes of persistence and
determination can inhibit the ability of the
entrepreneur to detect, implement and change.
Technological Uncertainty Example
 Blue Ray vs. HD DVD
Entry Strategy for New-Entry Exploitation (cont.)

 Customers’ Uncertainty and First-Mover

(Dis)Advantages
 Uncertainty for customers - Difficulty in accurately
assessing whether the new product or service provides value
for them.
 Overcome customer uncertainty through:
 Informational advertising.
 Highlighting product benefits over substitutions.
 Creating a frame of reference for a potential
customer.
 Educating customers through demonstration and
documentation.
Educating customers through demonstration
 Informing the customer
 Addressing they are better than substitute
 Creates a frame of reference
Entry Strategy for new-entry
Exploitation (cont.)
 Lead Time and First-Mover (Dis)Advantages
 Lead time – The grace period in which the first mover
operates in the industry under conditions of limited
competition.
 Lead time can be extended if the first mover can create
barriers to new entrants by:
 Building customer loyalty.
 Building switching costs.
 Protecting product uniqueness.
 Securing access to important sources of supply and
distribution.
Switching Cost Example
Risk Reduction Strategies for new-entry
Exploitation
 Risk is derived from uncertainties over market
demand, technological development, and actions
of competitors.
 Two strategies can be used to reduce these uncertainties:
 Market scope strategies - Focus on which customer
groups to serve and how to serve them.
 Imitation strategies - Involves copying the practices of
others.
Risk Reduction Strategies for new-entry
Exploitation (cont.)

 Market Scope Strategies

 Narrow-scope strategy involves offering a small
product range to a small number of customer groups to
satisfy a particular need. (Eg Pickaboo/banglashoppers)

 Broad-scope strategy involves offering a range of

products across many different market segments. (Eg
Daraz)
Risk Reduction Strategies for new-entry
Exploitation (cont.)
 Imitation Strategy – Copying Practices of other firms
 Why do it?
 It is easier to imitate the practices of a successful firms.
 It can help develop the skills necessary to be successful in the
industry.
 It provides organizational legitimacy.
 Types of imitation strategies
 Franchising - A franchisee acquires the use of a “proven formula”
for new-entry from a franchisor.
 “Me-too” strategy - Copying products that already exist and
attempting to build an advantage through minor variations.
Franchise “Me too”

 An imitation strategy can

potentially:
 Reduce the entrepreneur’s costs
associated with R&D.
 Reduce customer uncertainty over
the firm.
 Make the new-entry look legitimate
from day one. (for franchising)
Risk Reduction Strategies for new-entry
Exploitation (cont.)
 Managing Newness
 Liabilities of newness arise
from unique conditions:
 Costs in learning new tasks.
 Conflict arising from overlap
or gaps in responsibilities.
 Unestablished informal
structures of communication.
 Managing Newness
 Assets of Newness
 Lack of established
routines, systems, and
processes provide a learning
advantage.
 A heightened ability to
learn new knowledge in a
continuously changing
environment is an
important source of
competitive advantage
Summary
 New-entry is offering a New product/Service to an
established or new market and starting a new business.
 The Entrepreneurial strategy includes (1) the generation of
a new-entry opportunity, (2) the exploitation of a new-
entry opportunity, and (3) a feedback loop from the
culmination of a new-entry generation and exploitation
back to stage 1
 Advantages & Disadvantages of First mover & how to
overcome it.
 There are many methods of Generating new-entry
including Creating a Resource Bundle That Is Valuable,
Rare, and Inimitable
 Reduce the risk involved with new-entry through Market
scope strategies and Imitation strategies
ANY QUESTIONS ?
Further Read

 9 Building block business model canvas

https://animasmarketing.com/9-building-blocks-business-
model-canvas/
 Chapter 3- Entrepreneurship 10th Edition, Robert D.
Hisrich
Business Plan
9 Building Blocks of Business Model
Canvas
 https://www.youtube.com/watch?v=QoAOzMTLP5
s
 https://www.youtube.com/watch?v=LEq5Yx42fEE