CHAPTER 13

STRATEGIC ACTIONS: STRATEGY IMPLEMENTATION

Strategic Entrepreneurship

Strategic Management
Competitiveness and Globalization: Seventh edition Concepts and Cases
Michael A. Hitt • R. Duane Ireland • Robert E. Hoskisson

PowerPoint Presentation by Charlie Cook The University of West Alabama © 2007 Thomson/South-Western. All rights reserved.

KNOWLEDGE OBJECTIVES Studying this chapter should provide you with the strategic management knowledge needed to:

1. Define strategic entrepreneurship and corporate entrepreneurship.
2. Define entrepreneurship and entrepreneurial opportunities and explain their importance.

3. Define invention, innovation, and imitation and describe the relationship among them.
4. Describe entrepreneurs and the entrepreneurial mindset. 5. Explain international entrepreneurship and its importance.
© 2007 Thomson/South-Western. All rights reserved. 13–2

The World of the Entrepreneur
• In the U.S., entrepreneurs start between 3 million and 4.5 million businesses a year! • Study of influential Americans – the defining issue of the 21st Century: Entrepreneurship. • Approximately 10.5% of Americans are actively involved in trying to start a new business.

© 2007 Thomson/South-Western. All rights reserved.

13–3

Total Entrepreneurial Activity (TEA) Index

20.0 18.0 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0

© 2007 Thomson/South-Western. All rights reserved.

Entrepreneurial Activity Across the Globe

Persons per 100 Adults, 18-64 Years Old Engaged in Entrepreneurial Activity

Country

Japan Russia Belgium France Hong Kong Croatia Sweden Taiwan Poland Spain Netherlands Finland Slovenia Germany United Italy Singapore South Denmark Hungary Switzerland Israel Australia Norway Canada Ireland United Iceland China Mexico Brazil New Argentina Korea Chile India Thailand

TEA Index

Global TEA Average

13–4

What is an Entrepreneur?
One who creates a new business in the face of risk and uncertainty for the purpose of achieving profit and growth by identifying opportunities and assembling the necessary resources to capitalize on them.

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13–5

Characteristics of Entrepreneurs
• • • • • • • • Desire for responsibility Preference for moderate risk Confidence in their ability to succeed Desire for immediate feedback High level of energy Future orientation Skilled at organizing Value achievement over money

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13–6

Entrepreneurship
• One characteristic of entrepreneurs stands out: Diversity! • Anyone – regardless of age, race, gender, color, national origin, or any other characteristic – can become an entrepreneur (although not everyone should).

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13–7

Strategic Entrepreneurship
• Strategic Entrepreneurship
 Taking entrepreneurial actions using a strategic perspective.  Engaging in simultaneous opportunity seeking and competitive advantage seeking behaviors.  Designing and implementing entrepreneurial strategies to create wealth.

• Strategic entrepreneurship actions can be taken by:
 Individuals  Corporations
© 2007 Thomson/South-Western. All rights reserved. 13–8

Strategic Entrepreneurship and Innovation
• Entrepreneurship is concerned with:
 The discovery of profitable opportunities  The exploitation of profitable opportunities

• Firms that encourage entrepreneurship are:
 Risk takers.  Committed to innovation.  Proactive in creating opportunities rather than waiting to respond to opportunities created by others.

© 2007 Thomson/South-Western. All rights reserved.

13–9

Entrepreneurial Opportunities
• Entrepreneurial Opportunities
 Conditions in which new products or services can satisfy a need in the market.

• Entrepreneurs or entrepreneurial managers must be able to:
 Identify opportunities not perceived by others.  Take actions to exploit the opportunities.

 Establish a competitive advantage.

© 2007 Thomson/South-Western. All rights reserved.

13–10

Benefits of Small Business Ownership
The opportunity to: • Create your own destiny • Make a difference • Reach your full potential • Reap impressive profits • Contribute to society and to be recognized for your efforts • Do what you enjoy and to have fun at it

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13–11

Owner Age at Business Formation
18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0%

16 . 8 %

16 . 7 % 15 . 9 % 15 . 2 %

9.8%

9.3%

8.5%

3.9% 2.2% 1. 7 %

Under 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 25 Age

65+

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13–12

• • • • • • •

Feeding the Entrepreneurial Fire

Entrepreneurs as heroes Entrepreneurial education Demographic and economic factors Shift to a service economy Technological advancements Independent lifestyles E-Commerce and the World Wide Web

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13–13

• • • • • • •

Feeding the Entrepreneurial Fire

Entrepreneurs as heroes Entrepreneurial education Demographic and economic factors Shift to a service economy Technological advancements Independent lifestyles E-Commerce and the World Wide Web

International opportunities
13–14

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The Cultural Diversity of Entrepreneurship
• • • • • Young entrepreneurs Women entrepreneurs Minority-owned enterprises Immigrant entrepreneurs Part-time entrepreneurs

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13–15

The Cultural Diversity of Entrepreneurship
• • • • • Home-based businesses Family businesses Copreneurs Corporate castoffs Corporate dropouts

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13–16

A Profile of Small Business by Industry
Construction 12% Retail 20% Wholesale 8% Manufacturing 6% Finance 8%

Other 6%

Service 40%

© 2007 Thomson/South-Western. All rights reserved.

13–17

Small Businesses...
• Make up 99% of all the businesses in the U.S. • Employ 51% of the nation's private sector workforce. • Create more jobs than big businesses. • Are leaders in offering training and advancement opportunities to workers.

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13–18

Innovation Process
Invention

• The act of creating or developing a new product or process • Brings something new into being. • Technical criteria are used to determine the success of an invention.

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13–19

Innovation Process (cont’d)
Invention • The process of creating a commercial product from an invention. • Brings something new into use. • Commercial criteria are used to determine the success of an innovation.

Innovation

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13–20

Innovation Process (cont’d)
Invention • The adoption of an innovation by similar firms • Usually leads to product or process standardization. • Products based on imitation often are offered at lower prices but with fewer features.

Innovation

Imitation

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13–21

The Importance of Innovation
• Innovation
 Is a key outcome firms seek through entrepreneurship.  Is often the source of competitive success.

• Corporate Entrepreneurship
 Innovations produced in large established firms.

© 2007 Thomson/South-Western. All rights reserved.

13–22

International Entrepreneurship
• Entrepreneurship can:
 Fuel economic growth  Create employment  Generate prosperity for citizens

• There is a strong positive relationship between the rate of entrepreneurial activity and economic development in a nation.

© 2007 Thomson/South-Western. All rights reserved.

13–23

International Entrepreneurship (cont’d)
• There must be a balance (in the culture) between
 Individual initiative and  The spirit of cooperation and group ownership of innovation.

• Successful entrepreneurial firms:
 Provide appropriate autonomy.  Offer incentives for individual initiative.  Promote cooperation and group ownership of an innovation.

© 2007 Thomson/South-Western. All rights reserved.

13–24

Incremental and Radical Innovation
• Incremental Innovation  Is the usual case for innovation in organizations.  Provides small increments in current product lines.  Improves existing knowledge and processes.  Can create value. • Radical Innovation  Is rare because of difficulty and risk.  Provides significant technological breakthroughs.  Creates new knowledge and processes.  Can create value.

© 2007 Thomson/South-Western. All rights reserved.

13–25

Venturing: Strategic Behaviors
• Autonomous Strategic Behavior
 Based on a firm’s knowledge and resources that are the sources of the firm’s innovation.  A firm’s technological capabilities and competencies are its basis for new products and processes.

• Induced Strategic Behavior
 A top-down process whereby the firm’s current strategy and structure foster product innovations.

 The strategy in place is filtered through a matching structural hierarchy.
© 2007 Thomson/South-Western. All rights reserved. 13–26

Implementing New Product Development and Internal Ventures
• To be innovative and develop internal ventures requires:
 An entrepreneurial mindset  Risk propensity  An emphasis on execution

• Individuals with an entrepreneurial mindset
 Engage the energies of everyone in their domain both inside and outside the organization.

© 2007 Thomson/South-Western. All rights reserved.

13–27

Acquisitions to Buy Innovation
• Acquisitions
 Can rapidly extend the product line.  Can quickly increase the firm’s revenues.

• Key risks of acquisitions
 The firm may substitute the ability to buy innovations for an ability to produce innovations internally.  The firm may lose intensity in R&D efforts.  The firm may lose its ability to produce patents.

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13–28

Capital for Entrepreneurial Ventures
• Venture Capital Firms
 Seek high returns on their investment.  Value the competence of the entrepreneur or the human capital in the firm.  Place weight on the expected scope of competitive rivalry the firm is likely to experience.  Evaluate the degree of instability in the market addressed.

© 2007 Thomson/South-Western. All rights reserved.

13–29

Creating Value through Strategic Entrepreneurship
• Be effective in identifying opportunities. • Be flexible and willing to take risks. • Have sufficient resources and capabilities to exploit identified opportunities.

• Sustain a competitive advantage while identifying and exploiting opportunities.
• Develop an entrepreneurial mind-set among managers and employees. • Seek to enter and compete in international markets.
© 2007 Thomson/South-Western. All rights reserved. 13–30

Small Businesses...
(continued)

• Produce 51% of the nation's private GDP. • Account for 47% of business sales. • Create 4X more innovations per R & D dollar spent than medium-sized firms and 24X as many as large companies.

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13–31

Small Business Survival Rate
100% 100% 81% 65% 54% 46% 40% 36% 32% 29% 27%

% of Small Firms Surviving

90% 80% 70% 60% 50% 40% 30% 20% 10% 0% New

25%

1

2

3

4

5

6

7

8

9

10

# of Years in Business

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13–32

Ten Deadly Mistakes of Entrepreneurship
1. 2. 3. 4. 5. Management mistakes Lack of experience Poor financial control Weak marketing efforts Failure to develop a strategic plan

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13–33

Ten Deadly Mistakes of Entrepreneurship
(continued)

6. 7. 8. 9. 10.

Uncontrolled growth Poor location Improper inventory control Incorrect pricing Inability to make the “entrepreneurial transition”

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13–34

Putting Failure Into Perspective
• Entrepreneurs are not paralyzed by the prospect of failure. • Failure – a natural part of the creative process. • Successful entrepreneurs learn to fail intelligently.

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13–35

Avoiding the Pitfalls of Small Business Failure
• • • • • • Know your business in depth Develop a solid business plan Manage financial resources Understand financial statements Learn to manage people effectively Keep in tune with yourself

© 2007 Thomson/South-Western. All rights reserved.

13–36

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