Chapter 2: Developing

Entrepreneurial Competence
Prepared by:
Dr. Nazatul Shima Abdul Rani
School of Management
 Learning outcomes
• By the end of this chapter, you should be able to:
• Define competitive advantage;
• Explain how to identify and build the core
competencies;
• Discuss the strategic orientation;
• Explain the business level strategy;
• Analyze the importance of management team in
launching a new venture; and
• Analyze how the board of directors or board of
advisors can be used to support in the management of
a new venture.
Definition: Competitive Advantage
Entrepreneurs have to use their resources and capabilities to create reputation as
a source of competitive advantage.
Entrepreneurship that rely on reputation as a competitive advantage want that
advantage to be sustainable.
Several factors in the global economy including the rapid development of the
internet capabilities make it difficult for entrepreneurs to maintain its competitive
advantage.
Sustainable competitive advantage depends on:
1.The rate of core competency’s obsolescence.
2.The availability of the substitutes.
3.The imitation of the core competence.
Core Competence as a Strategic
Capability
• There are two ways to identify and build a
firm core competencies which are:
– 1. Four criteria to determine strategic capabilities
which are: valuable capabilities, rare capabilities,
costly-to-imitate capabilities and non-
substitutable capabilities.
– 2. Value chain analysis
 Video break….
• Competitive Advantage
– Competitive Advantage 777
• http://www.youtube.com/watch?
v=hF_UL2tCZJY&feature=relmfu
– Power to create profit: Competitive Advantage
• http://www.youtube.com/watch?
v=fbCdMW76sCA&feature=related
• Core Competence
– http://www.youtube.com/watch?
v=jzLtTJgkIjM&feature=related
Four Criteria for Determining
Strategic Capabilities
 Video break….
• Capabilities
– http://www.youtube.com/watch?v=VX14hBxPY9A
 Value Chain Analysis
• Value chain analysis allows the firm to understand the parts of its operations that create value and
he those that do not.
• The value chain helps firm understand their cost position and identify the multiple means that
might be used to facilitate implementation of a chosen business-level strategy.
• Primary activities: are involved with a product’s physical creation, its sale and distribution to
buyers and its service after the sale.
• Support activities: provide the support necessary for the primary activities to take place.
• Source of competitive advantage, a resource capability to the firm:
– To perform an activity in a manner that is superior to the way competitors perform it.
– To perform a value
 Video break….
• Value chain analysis

– What’s core competence?

• http://www.youtube.com/watch?
v=jzLtTJgkIjM&feature=related
– Coke Value Analysis
• http://www.youtube.com/watch?v=gN8bhTfwpdQ
 Strategic Orientation

• Entrepreneurial management is distinct from traditional management in terms of eight

dimensions as above.
• The first two factors that help distinguish more entrepreneurially managed firms from those
that are more traditionally managed relate to strategic issues–strategic orientation and
commitment to opportunity.
• Strategic orientation refers to those factors that are inputs into the formulation of the firm’s
strategy.
• It dictates the firm decision on strategy; the way that it looks at the world and the way it
looks at itself and these perceptions are the driving factors behind the firm’s strategy.
 Strategic Orientation
• The strategy of entrepreneurial management is driven by the
presence or generation of opportunities for new entry and less
concerned on the resources required to pursue such opportunities.
 Business Level Strategy
• Business level strategy is defined as an integrated and coordinated set of commitments and
actions the firm uses to gain a competitive advantage by exploiting core competencies in
specific product markets.
• The choice are important, as there is an established link between a firm’s strategies and its
long-term performance.
• It is the firm’s core strategy: the strategy that must be formed to describe how the firm will
compete.
• To choose a business-level strategy, the firm determines:
1. Who will be served?
2. What needs those target customers have that it will satisfy?
3. How those needs will be satisfied?
 Video Break….
• Business level strategy
1. UniqLo
http://www.youtube.com/watch?v=32EnPXJ-
QMU
 Customers: Who, What and How
• Strategic competitiveness is achieved when a firm is able to satisfy a group of
customers by using its competitive advantages to compete with other products.
• Most successful companies constantly seek to chart new competitive advantage in
order to serve new customers and find better way to serve existing customers.
• Flexibility is important to the firm that emphasizes customers as a vital component
of its strategies.
• Firm’s relationship with customers is strengthened when it is committed to offering
them superior value.
• In business-to-business transactions, superior value is created when firm’s product
helps its customers to develop a new competitive advantage or to enhance its
existing competitive advantages.
• Receiving superior value enhances customers’ loyalty to the firm that provides it.
• Loyalty has a positive relationship with profitability.

Ways of improving profitability

Customers: Who, What and How
• Who: Determining the customers to serve
– To determine target customers for the firm’s goods or services
(who)
– To make this decision, companies divide customers into groups
based on differences in the customers’ needs (market
segmentation)
– Market segmentation is a process that cluster people with similar
needs into individual and identifiable groups.
– Part of business level strategy, the firm develops a marketing
program to effectively sell products to its target customer groups.
– Based on companies core competencies and opportunities in the
external environment, companies choose a business-level
strategy to deliver value to target customers and satisfy their
specific needs.
 Customers: Who, What and How
MARKET SEGMENTATION
CONSUMER MARKETS
1. Demographic factors (age, income, sex, etc.)
2. Socioeconomic factors (social class, stage in
the family life cycle)
3. Geographic factors (cultural, regional and
national differences)
4. Psychological factors ( heavy, moderate and
light users)
5. Consumption patterns ( heavy, moderate
and light users)
6. Perceptual factors (benefit segmentation,
perceptual mapping)
INDUSTRIAL MARKETS
1. End-user segments (identified by SIC code)
2. Product segments (based on technological
differences or production economics)
3. Geographic segments (defined by
boundaries between countries or by regional
differences within them)
4. Common buying factor segments (cut across
product market and geographic segments)
5. Customer size segments
Customers: Who, What and How
• Need (what) are related to the benefits and features of goods and services.
• Basic need of all customers is to buy products that create value for them.
• Generalized forms of value that the products provide are either low cost with
acceptable features or highly differentiated with acceptable cost.
• Successful firm constantly seek new customers as well as ways to serve existing
customer better.
 Customers: Who, What and How
• How: determining core competencies necessary to satisfy customer
needs.
– Core competencies are resources and capabilities that serve as a source of
competitive advantage for the firm over its rivals.
– Firms use core competencies to implement value-creating strategies and
satisfy customers’ needs (how).
– Those firms with the capacity to continuously improve, innovate and upgrade
competencies to meet and exceed customers’ expectations across time.
– All organizations, including IBM, SAS and Vans Inc., use their core
competencies (how) to satisfy the needs (what) of the target group of
customers (who) the firm has chosen to serve by using its business-level
strategy.
Types of Business-
Level Strategy
 Video Break….

Strategic Leadership
http://www.youtube.com/watch?v=RFgQZjLr9Nw
 The Management Team
• The entrepreneur must be able to assemble the
right mix of people to assume the responsibilities
outlined in the organization structure.
• Team must accomplish three functions which are:
– Execute the business plan.
– Identify fundamental changes in the business as they
occur.
– Make adjustments to the plan on changes in the
environment and market that will maintain
profitability.
Effective Strategic Leader
1. Determining strategic direction
2. Exploiting and maintaining core
competencies
3. Developing human capital
4. Sustaining an effective organizational culture
5. Emphasizing ethical practices
6. Establishing balanced organizational controls
The Management Team
Best Practices: The model of board-level
competencies
 Entrepreneurial Orientation
• Organizational culture often
encourages the pursuit of
entrepreneurial opportunities,
especially in large firms.
• Entrepreneurial opportunities
are an important source of
growth and innovation.
• Strategic entrepreneurship is
more likely to be successful when
employees have an
entrepreneurial orientation.
• 5 dimensions of entrepreneurial
orientation firms are: autonomy,
innovativeness, risk taking, pro-
activeness, and competitive
aggressiveness.
Entrepreneurial Orientation
• THANK YOU….