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Chapter Seven
Small Business Strategies:
Imitation with a Twist
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Education.
Strategy in the Small Business
Strategy is the idea and actions that explain how a firm will make its profit
– it defines how your business operates.
The strategic planning process for small businesses are taken in steps.
• The first step involves reviewing and confirming the goals that define
your firm and knowing your magic number.
• The second step is finding your distinctive competence – plot your
customers and the benefits you want to offer against competitors.
• The third step is studying dynamics and trends of your industry using
industry analysis to identify the best way and time to enter business.
• The fourth step involves building on the prior three steps to determine
the best strategic direction and strategy for the firm.
After this four-step process, there is a continuing effort called post start-
up, refining your strategies/tactics to maintain a competitive advantage.
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Figure 7.1: The Small Business Strategy Process
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Goals: The First Step of Strategic Planning
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Goals: Owner Rewards
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Goals: Product/Service Idea and Industry
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Goals: Imitation and Innovation
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Goals: To Whom Will You Sell?
There are two strategic decisions about your market in general you need
to make early in the process of going into business.
• One is the scale of the market, the size of the market – mass or
niche.
• The other is the scope of the market, the range – from local to global.
A mass market is broad, while a Market scope is important.
niche market is narrowly defined. • Your scope focuses your sales
• Most industries have both and advertising efforts and
mass and niche markets. identifies potential competitors.
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Customers and Benefits:
The Second Step of Strategic Planning
The focus here is on the kinds of customers you want to sell to and the
benefits that will attract them.
• If you seek wealth, having wealthy customers may be rewarding.
• If your goal is growth, having customers you can learn from is best.
Some types of customers are particularly attractive.
• Corporate customers may produce greater profits.
• Loyal customers return and are already presold, they also refer others.
• Local customers are now less about geographic distance and more
about social relationships.
• Passionate customers are not just loyal, they rave about your product.
Thinking ahead about your customers is the best way to orient your
strategic planning process.
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Customers and Benefits:
Value and Cost Benefits
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Value Benefits and Cost Benefits
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Industry Dynamics and Analysis:
The Third Step of Strategic Planning
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Figure 7.4: The Industry Life Cycle
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Tool: Industry Analysis
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Strategy Selection: The Fourth Step in Strategic Planning
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Strategy Selection: Entry Wedges
Most of the time your preferences for a type of business or industry and
your industry analysis are closely tied together.
• But there are times when an opportunity pops up and you must decide
if the opportunity is right for you
• These are entry wedges and seven types come up again and again.
Supply shortages.
Un-utilized resources.
Customer contracting.
Second sourcing.
Market relinquishment.
Favored purchasing.
Government rules.
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Post Start-Up Tactics
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Strategic and Tactical Competitive Actions
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