Entrepreneurship Chapter 7 Ethan Chazin

ORGL 2900ENTREPRENEURSHIPENTREPRENEURSHIP

Chapter 7

Small Business Small Business StrategiesStrategies::

Imitation with an Imitation with an Innovative twistInnovative twist

This Week’s KEY This Week’s KEY ResourcesResources

Resources

Developing Your Developing Your StrategyStrategy

• Defines how your business operates:– How you develop new offerings– How you “Go To” market– How to identify ideal prospects– How to manage existing accounts– How to engage partners, vendors, investors, the

media, suppliers– How to recruit, retain and develop talented people– How to manage your finances– How to manage inventory

Your Strategy

• Chances are you are pursuing a business model that ALREADY EXISTS

• Copy others’ successes, avoid their failures• Developing a strategy requires four key

decisions you make about your business:– Pre-strategy– Benefits– Strategy– Competitive Analysis

Your Strategy

Step 1Step 1: Your: Your

Pre-strategyPre-strategy

• Choose your product / service• Identify the industries you will pursue• Find all relevant industry trade associations• SIC versus NAICS Codes?

Pre-Strategy

Industries

My Industries

• A “market” is a population of customers for your product / service:– Understand the scale and scope

•Scale: Mass versus Niche•Scope: Local to global

Selecting Your Markets

To Imitate, Or To Imitate, Or Innovate???Innovate???

66% 66% choose to IMITATE

WHY?WHY?

Innovate Approach

• Incremental innovationIncremental innovation: Imitation plus one or two ways in which you do things completely different

• Pure InnovationPure Innovation: Results in a new product or service:– Occurs VERY rarely– Enables you to make your business fit your

values, beliefs, strengths, ideas, preferences

Imitate Approach

• BY imitating, customers already understand/know about your offerings.

• Most use imitation plus/minus one degree of similarity (akin to cloning, manifests in franchising.)

• Parallel competition: Copying with minor adjustments.

• Innovate approach enables you to make your business fit your values, beliefs, strengths, ideas, preferences.

Innovate Approach

INNOVATE Path

INNOVATE Path

INNOVATE Path

ConductingConducting

Industry AnalysisIndustry Analysis

• Obtain industry codes• Size the industry• Profitability (www.bizstats.com)• How profits are made• Competitors• Analysis: consolidate data into summary

report format• Source your references

Industry Analysis

ResourcesResources

Assn. Directories

Resources

Resources

Resources

Resources

Resources

Resources

Step 2Step 2: Benefits: Benefits

• What benefits benefits do you plan on offering your customers?

• ValueValue benefits: Quality, style, service, technology, personalization.

• CostCost benefits: lower cost, volume (scale) savings, learning (greater efficiency) scope (ex. Multifunction printer.)

• OrganizationalOrganizational: you automate processes or mastered the production of a product or service, so you can offer it more cheaply than anybody else.

Benefits

S.W.O.T Analysis

Strengths

ThreatsOppor-tunities

Weaknesses

SWOT Analysis

• Information provided can be useful• Price sensitivity, product/service features

and benefits, feelings about the product, the company, competitors

• People say one thing in a closed room, act differently when purchase is involved

• Find a representative sample that fits ideal customer profile or existing clients if possible

Brainstorming

Step 3Step 3: Strategy : Strategy SelectionSelection

• There Are THREE Primary Strategies – DifferentiationDifferentiation: Show how you offer a

combination of VALUE benefits unlike anyone else to pursue MASS markets

– CostCost: Tell how do you offer a combination of COST benefits

– FocusFocus: Limit your efforts to a small portion of the overall market, called a segment or niche

Strategy Selection

Step 4Step 4: Competitive : Competitive AdvantageAdvantage

• Implement customer benefits• Know EXACTLY what your competitors are

doing• Customer service – it’s lip service or it’s a

true advantage– Your clients will tell you what you’re doing

wrong & right– Listen to customers…EXCEPT WHEN YOU

DON’T!• Needs to be sustained over time• Know your markets inside & out

Competitive Advantage

• Infuse the benefits your customers are looking for into every area of your business.

• Michael Porter popularized VCA, looking at the processes and activities a small business conducts to design, produce, market, deliver and support its products and services with an with an emphasis on four key areasemphasis on four key areas:– Infrastructure: Location, physical assets– HR– Technology– Procurement

Value Chain Analysis

• Existing Competitors• Potential Entrants• Substitutes• Suppliers• Buyers/Customers

Porter’s Five Competitors

• Leverages Jay Barney’s Jay Barney’s model for competitive advantage:

–Value

–Rareness

–Imitability

–Organization

• Used to test whether a resource will give your firm competitive advantage

• How are you leveraging all your resources

VRIO Analysis

VRIO Analysis

• Match your company’s strategy to the lifecycle of the industry:– Introduction– Early Adopters– Growth – Maturity– Decline – Laggards

Lifecycle Analysis