Entrepreneurship

Week Three

Recap

Stage3: Feedback loop

Knowledge

Entry Strategy

Resource Bundle

Assessment

of new opport.

Risk Reduction Strategy

Firm’s Performance

Other resources

Org. Stage 2: New Entry Exploitation

Stage1: New Entry Generation

Entry Strategy for New Entry Exploitation

Advantage from being “first”

First movers develop a cost advantage – moving down from “experience curve” (economies of scale.reducing trial and error)  Competitive rivalry – losing market share to competitors versus growth)  Securing channels .ability to monitor changes than those not participating  .suppliers and distribution channels  Satisfying customers  Gaining expertise through participation. learning curve.

First movers always prosper? Sony and JVC .Coming back to….

weighing advantages and disadvantages How? .

technology Env. low price.1) Environmental instability and first movers Good or poor fit – valued by customers or not How to obtain good fit. changes and emerging industries – rules of the game . stability/ instability and key success factors Env.key success factors – superior service.

Demand uncertainty.changes customer choices overestimating(wastage) / underestimating (ad hoc activities) Predicting key dimensions of growth? E. computers – reputation to quality to low cost (Dell) What to do? Delaying entry? – hybrid technology? .g.

Technological uncertainty – ATM Machines Delaying entry ? What does this all mean? .

ADAPTATION Difficult to move away from activities that brought initial success . org inertia Medtronics – heart pace makers and lithium technology Escalation of commitment .

home shopping concept describing how to use product. comparison adv.2) Customer uncertainty and first mover disadvantage How much beneficial? How to use product? – informational advertising . how it is superior to existing ones Does providing information always work? . .

barriers to entry into market . loyalty .non.stick pans How it works with their existing productssoftware .delaying entry? what about being “founder”.helplines So….No…. Customer’s frame of reference. setting industry standards .

secure supply/distribution channels The other side of picture – less efficiency maybe? – substitutes? . protecting uniqueness.3) Lead time and first mover disadvantage Lead time – customer loyalties. switching costs(frequent flying points).

Reading : Provide advice to entrepreneur .

How to reduce risks? .

specialized knowledge vs mass production ……customer unwillingness. high levels of product quality. market niche. market changes and loss (putting all eggs in one basket) . Market scope strategies – narrow to broad scope strategy 1) Narrow scope strategy – customized products. localized business operations.

drop unsuccessful products . mature vs emerging markets .Broad scope strategy – multiple products. Which one to choose – competition. competitors. risk .

rare and inimitable? .Imitation strategy as way of reducing risks? What about valuable.

Imitation Strategies:  Franchising  “me t00”.ice cream shops .

New ventures have strategic advantage over mature organizations. Entrepreneurs need to capitalize on opportunities by creating a learning organization. Less emphasize on strategic plans to greater emphasize on strategic learning and flexibility of entrepreneur . it is not all doom and gloom.Entrepreneurs must be aware of and manage liabilities of newness.

small and large. not for profit. In the private. fast and slow growing. in all geographic points and in all stages of a nation’s development .and fail to occurin firms that are old and new. and public sectors.Entrepreneurship can occur.

Continuing the opportunity discussion .

Class exercise 1: (15 min) Idea generation guide .

The Timmons Model .

Opportunity Very large . Community and society . growing and undefined Communication Resources Very limited Ambiguity Creativity Business Plan Fits and gaps Innumerable: Money and mgt Team Exogenous Factors Leadership Creativity Capital Market context Founder Sustainability: For Env.

Communication Opportunity Larger and . Community and society . growing faster Resources Money to launch Ambiguity Creativity Business Plan Fits and gaps Resources and team Catching up Team Exogenous Factors Leadership Creativity Capital Market context Founder Sustainability: For Env.

Opportunity Even bigger and faster growing Competitors Communication Ambiguity Creativity Business Plan How large & profitable we can be Team Can play with the best Resources Great balance sheet Great freee cash flow Exogenous Factors Leadership Creativity Capital Market context Founder Sustainability: For Env. Community and society .

Community and society .Opportunity Major growth potential Competitors Communication Ambiguity Creativity Business Plan Fits and gaps sustaining and reinventing Exogenous Factors entre. Org Leadership Team One of the best Resources Unlimited access to capital markets and resources Creativity Capital Market context Founder Sustainability: For Env.

From Idea to opportunity .

Trends: What are these trends ? .

Sources of new Ideas? .

Innovation    Breakthrough innovation Technological innovation Ordinary innovation .

“Newness” .

Consumer’s viewpoint:    Continuous innovations Dynamically continuous innovations Discontinuous innovations .

New New tech Mkt Products Objectives No market Change No Technological Change Improved Technology New Technology Reformation Change in formula or physical product to optimize costs and quality Replacement Replace existing product with new one based on improved technology Product life extension Add new similar products to line Diversification New markets new products Strengthene d Market Remerchandising Increase sales to existing customers New use Add new segments that can use present products Improved products Improve product’s utility to customers Market Extension Add new segments modifying present products New market .

outsourcing customer services. distribution. conventions.Class Exercise 2: (15 min) Opportunity creating concepts and the quest for breakthrough ideas Think of a product Value chain analysis  What prevailing industry practices. IT   and capital investment are significant for this business? . wisdom in marketing.

Screening Venture opportunities .

Time is the ultimate ally and enemy of the entrepreneur…… “you do not have a strategy until you are saying no to lots of opportunities” .

for which someone is willing to pay a premium .Ideas that turn into superior businesses are consistent with the previous model discussed and with following four anchors:   They create or add significant value to a customer or end user They do so by solving a significant problem removing a serious pain point or meeting significant need.

strong steady cash flow. high growth . high profit potential and offer attractive realizable return for investors  . They are good fit with the founders and management team at the time and marketplace – along with an attractive reward-risk balance They have robust market. margin and money making characteristics that will allow the entrepreneur to estimate and communicate sustainable value to potential stakeholders: large enough.

Quick screen 3 out of 100 rule .

Class Exercise 3… Opportunity concept and strategy statement .

.

The business plan is obsolete as soon as it comes off the printer .

30-50%  Market capacity  Market share attainable .Industry and market issues  Market  Market size  Market structure – imperfect?  Growth rate.

Management team issues  Team  Expertise  Integrity  Intellectual honesty .

Personal criteria     Good fit Opportunity costs Upside/downside issues Risk/reward/stress tolerance .

Strategic orientations           Degree of fit Team Service management Distribution channels Timing Technology Flexibility Opportunity orientations Pricing Room for error .

Competitive advantage issues    Degree of control Fixed and variable costs Entry barriers .

Harvest issues   Value added potential Exit mechanism Economics  Time to break even  Capital requirements .

“ .Starting businesses is like starting love affairs (paraphrasing George Bernard Shaw) “Any fool can start one. it takes a genius to end one successfully.