Chapter 3

Entrepreneurial Strategy
Generating and Exploiting
New Strategies
Vishnu Parmar, IBA
University of Sindh, Jamshoro
 New Entry
 Offering a new product to an established or
new market. Offering an established product to
a new market or creating a new organization.
 Entry
Knowledge
Strategy

Assessment of
Resource Risk Reduction Firm
New Entry
Bundle Strategy Performance
Opportunity

Other
Resources Organization
 An entrepreneurial strategy has three Key
Stages
1. Generation of a New Entry Strategy
2. Exploitation of New Entry Strategy
3. A feedback loop from the New strategy
 New Entry
 Entrepreneurial Strategy is the set of decisions
actions, and reactions that first generate, and
then exploit over time a new entry
 Generation of a new Entry
Opportunity
Resources as a source of Competitive
Advantage
Understanding where a sustainable
competitive advantage comes from will
provide some insight into how entrepreneurs
can generate new entries that are likely to
provide the basis for high firm from
performance over an extended period of time
 Generation of a new Entry
Opportunity
Entrepreneurial Resources: The ability to obtain, and
then recombine, resources into a bundle that is
valuable, rare, and inimitable
 Entrepreneurs combines the resources into such a

different ways as this bundle of resources provides a

firm its capacity to achieve superior performance
 For Example: A high skilled workforce will be

useless if the organization’s culture, teamwork,

communication does not support them
 Generation of a new Entry
Opportunity
Resources must be:
1. Valuable: enables a firm to pursue opportunities,
neutralize threats, and offer valuable product and
services to the customers
2. Rare: Possessed by few, (potential) competitors
3. Inimitable: Replication of this bundle of resources
would difficult or costly for the potential
competitors
 Generation of a new Entry
Opportunity
Market Knowledge: Possession of Information,
technology, know-how, and skills that provide
insight into a market and its customers
Technological Knowledge: Possession of
information, technology, know-how and skills
that provide insight into ways to create new
knowledge
 Generation of a new Entry
Opportunity
Assessing the Attractiveness of a New Entry
Opportunity
 The entrepreneur needs to determine whether

it is in fact valuable, rare, and inimitable by

assessing whether the new product or the new
market are sufficiently attractive to be worth
exploiting and developing
 Generation of a new Entry
Opportunity
Assessing the Attractiveness of a New Entry
Opportunity
 Information on a New Entry: The prior
market and technological knowledge used to
create the potential new entry can also be of
benefit in assessing the attractiveness of a
particular opportunity
 Generation of a new Entry
Opportunity
 Window of Opportunity: The period of time
when the environment is favorable for
entrepreneurs to exploit a particular new entry
 Generation of a new Entry
Opportunity
Comfort with making a decision under
Certainty
The trade-off between more information and the
likelihood that the window of opportunity will
close provides a dilemma for entrepreneurs
Here entrepreneurs usually commits two types of
errors
 Generation of a new Entry
Opportunity
1. Error of Commission occurs from the decision
to pursue this new entry opportunity, only to
find out later that the entrepreneur had over
estimated his/her ability to create customer
demand and/or to protect the technology from
imitation by competitors. The cost of the
entrepreneur were derived from acting on the
perceived opportunity
 Generation of a new Entry
Opportunity
2. Error of Omission occurs from the decision
not to act on the new entry opportunity only to
find out later that the entrepreneur had
underestimated his/her ability to create
customer and/or protect the technology from
imitation by competitors. In this case, the
entrepreneur must live with the knowledge that
he let an attractive opportunity slip through his
fingers
 Generation of a new Entry
Opportunity
Decision to Exploit or Not Exploit the New
Entry Figure 3.2

Assessment of the new entry’s attractiveness

determining whether the entrepreneur believes
she or he can make the proposed new entry
work
Figure 3.2 - The Decision to Exploit or Not to
Exploit the New Entry Opportunity
 ENTRY STRATEGY FOR NEW
ENTRY EXPLOITATION
Competitive Advantages of ‘being first’
1. First mover develop a cost advantage
2. First mover face less competitive rivalry
3. First movers can secure important channels
4. First movers are better positioned to satisfy
customers
5. First mover gain expertise through
participation
 ENTRY STRATEGY FOR NEW
ENTRY EXPLOITATION
Disadvantages of ‘Being First’
1. Demand Uncertainty: Considerable difficulty in
accurately estimating the potential size of the
market, how fast it will grow, and the key
dimensions along which it will grow
2. Technological Uncertainty: Considerable difficulty
in accurately assessing whether the technology will
perform and alternate technologies will emerge and
leapfrog (game) over current technologies
 ENTRY STRATEGY FOR NEW
ENTRY EXPLOITATION
3. Uncertainty of Customers: Customers may
have considerable difficulty in accurately
assessing whether the new product or service
provides value for them
 Trends
 The start of a trend that lasts for a considerable
period of time provides one of the greatest
opportunities for starting a new venture.
 Trends that will provide opportunities include:
green trend, clean-energy trend, organic-
orientation trend, economic trend, social trend,
health trend, and Web trend.
 Sources of New Ideas
 Consumers
 Informally monitor potential ideas and needs.
 Formally arrange for consumers to express their opinions.
 Existing Products and Services
 Analysis uncovers ways to improve offerings that may
result in a new product or service.
 Distribution Channels
 Channel members can help suggest and market new
products.
Sources of New Ideas (cont.)

 Federal Government
 Files of the Patent Office can suggest new product
possibilities.
 New product ideas can come in response to
government regulations.
 Research and Development
 A formal endeavor connected with one’s current
employment.
 An informal lab in a basement or garage.
Methods of Generating New Ideas
 Focus Groups
 A moderator leads a group of 8 to 14 participants
through an open, in-depth discussion in a directive
or nondirective manner.
 An excellent method for generating and screening
ideas and concepts.
Methods of Generating New Ideas
(cont.)

 Brainstorming
 Allows people to be stimulated to greater creativity.
 Good ideas emerge when the brainstorming effort
focuses on a specific product or market area.
 Rules of brainstorming:
 No criticism.
 Freewheeling is encouraged.
 Quantity of ideas is desired.
 Combinations and improvements of ideas are encouraged.
Methods of Generating New Ideas
(cont.)

 Brainwriting
 A form of written brainstorming.
 Participants write their ideas on special forms or cards
that circulate within the group.
 Problem Inventory Analysis
 Consumers are provided with a list of problems and are
asked to identify products that have those problems.
 Results must be carefully evaluated as they may not
actually reflect a new business opportunity.
 Creative Problem Solving
 Creativity tends to decline with age, education,
lack of use, and bureaucracy.
 Latent creative potential can be stifled by
perceptual, cultural, emotional, and
organizational factors.
 Creativity can be unlocked by using any of the
creative problem-solving techniques.
Creative Problem Solving (cont.)

 Brainstorming
 Session starts with a problem statement.
 No group member should be an expert in the field of the
problem.
 All ideas must be recorded.
 Reverse Brainstorming
 A group method that focuses on the negative aspects of
a product, service, or idea as well as ways to overcome
these problems.
 Care must be taken to maintain group morale.
Creative Problem Solving (cont.)

 Gordon Method
 Method for developing new ideas when the individuals
are unaware of the problem.
 Solutions are not clouded by preconceived ideas and
behavioral patterns.
 Checklist Method
 Developing a new idea through a list of related issues.
 Free Association
 Developing a new idea through a chain of word
associations.
Creative Problem Solving (cont.)

 Forced Relationships
 Developing a new idea by looking at product
combinations.
 A five step process which focuses on generating
ideas from relationship patterns between elements
of a problem.
 Collective Notebook Method
 Developing a new idea by group members
regularly recording ideas.
Creative Problem Solving (cont.)

 Attribute Listing
 Developing a new idea by looking at the positives
and negatives.
 Big-Dream Approach
 Developing a new idea by thinking without
constraints.
 Parameter Analysis
 Developing a new idea by focusing on parameter
identification and creative synthesis.
Figure 4.1 - Illustration of
Parameter Analysis
 Innovation
 Types of Innovation
 Breakthrough
 Fewest number of innovations.
 Establishes the platform on which future innovations in an area
are developed.
 Should be protected by patents, trademarks, and copyrights.
 Technological
 Occurs more frequently; not at the same level of breakthrough
inventions.
 Offers advancements in the product/market area.
 Needs to be protected.
Innovation (cont.)

 Ordinary
 Occurs most frequently.
 Extends a technological innovation into a better product
or service or one that has a different market appeal.
 Usually come from market analysis and pull, not
technology push.
Innovation (cont.)

 Defining a New Innovation (Product or Service)

 Newness can be:
 In the consumer concept.
 A change in the package or container.
 Slight changes or modifications in the appearance of the
product. (Industrial market)
 Companies also add products to their product line
that are already marketed by other companies;
products are new to the manufacturer but not the
consumer.
Innovation (cont.)

 Classification of New Products

 Consumer’s Viewpoint
 The continuum proposed by Thomas Robertson is based
on the disrupting influence that use of the product has on
established consumption patterns.
 Continuous innovations.
 Dynamically continuous.
 Discontinuous innovations.
 This approach is consistent with the marketing
philosophy that “satisfaction of consumer needs” is
fundamental to a venture’s existence.
Figure 4.3 - Continuum for
Classifying New Products
Innovation (cont.)

 Firm’s Viewpoint
 Distinction can be made between new products and new
markets.
 Situations with a new technology and a new market are
the most complicated and pose the highest degree of risk.
Figure 4.4 - New Product
Classification System
 Figure 4.5 - A Model of the
Opportunity Recognition Process
 Product Planning and
Development Process
 Establishing Evaluation Criteria
 Criteria should be established at each stage of the
product planning and development process.
 It should be all-inclusive and quantitative in nature.
 Criteria should evaluate the idea in terms of:
 Market opportunity.
 Competition.
 Marketing system.
 Financial factors.
 Production factors.
Figure 4.6 - The Product Planning
and Development Process
Product Planning and Development
Process (cont.)
 Idea Stage
 Promising ideas should be identified and impractical ones
eliminated.
 Evaluation method – Systematic market evaluation checklist.
 Determine the need for the new idea as well as its value to
the company.
 Concept Stage
 Refined idea is tested to determine consumer acceptance
which can be measured through the conversational interview
method.
Product Planning and Development
Process (cont.)
 Product Development Stage
 Consumer reaction to the product/service is
determined.
 A consumer panel is given a product sample and
preference is determined through methods such as
multiple brand comparisons, risk analysis, etc.
 Test Marketing Stage
 Increases certainty of successful commercialization.
 Actual sales reflect consumer acceptance.
 E-commerce and Business Start-
up
 E-commerce offers entrepreneurs an
opportunity to be creative and innovative.
 Factors that facilitate high-growth in electronic
commerce:
 Widespread use of personal computers.
 Adoption of intranets in companies.
 Acceptance of the Internet as a business
communications platform.
 Faster and more secure systems.
E-commerce and Business Start-up
(cont.)

 Using E-Commerce Creatively

 Entrepreneurs have to decide whether to:
 Run Internet operations within the company.
 Outsource these operations to Internet specialists.
 Use e-commerce packages provided by software
companies.
 The integration of front-end and back-end
operations represents the greatest challenge for
doing Internet business.
E-commerce and Business Start-up
(cont.)

 Web Sites
 Ease of use.
 Structure and organization of information.
 Search capability.
 E-mail response system.
 Speed.
 Compatibility with different browsers and
platforms.
E-commerce and Business Start-up
(cont.)

 Tracking Customer Information

 Electronic databases track the activity of the
industry, segment, and company.
 It supports personal marketing targeted at
individual clients.
 Care must be taken to follow the laws protecting
the privacy of individuals.
E-commerce and Business Start-up
(cont.)

 Doing E-Commerce as an Entrepreneurial Company

 Products should be delivered economically and
conveniently.
 Products need to interest a wide market; company must
be ready to ship the product outside its own geographical
location.
 Online operations should bring significant cost
reductions.
 Company must be able to economically draw customers
to its Web site.