Strategic entrepreneurship Topic 5

STRATEGIC ENTREPRENEURSHIP

TOPIC 5DR ANIS AMIRA AB RAHMAN

RAJA ROSNAH BINTI RAJA DAUDFACULTY OF ENTREPRENEURSHIP AND BUSINESS

UNIVERSITI MALAYSIA KELANTANanisamira@umk.edu.my

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NEW VENTURE CREATION STRATEGIC APPROACH

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Strategic Entrepreneurship and Strategic Management

Source : Wheelen, T. L. and Hunger, J. D. (2000 cited in Kuratko, D. F. & Hodgetts,

R. M., 2004: 521).Dr Anis Amira Ab Rahman 14

What is a business strategy?

The actions an organization takes to pursue itsbusiness objectives.

Strategy drives performance and an effective strategyresults in a good performance.

A basic distinction exists among the content of abusiness’s strategy, the strategy process that thebusiness adopts to maintain that strategy and theenvironmental context within which the strategymust be made to work.

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Strategy content

The strategy content relates to three (3) things: thefinal product range, the customers it serves and theadvantage it seeks in the marketplace.

The product range:-

Covers the types and range of products that the firmssupplies to its market.

E.g. what type of products should the business offer?What should their features be?

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Strategy content

Market scope:-

Defines the customer groups and market segments thatwill be addressed by the firm.

Key decision includes:

How is the total market to be defined?

What features are important for characterizing the marketand defining its sectors?

On what groups of customers should the businessconcentrate?

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Strategy content

Competitive approach:-

Refers to the way in which the firm competes within itsproduct-market domain to sustain and develop itsbusiness in the face of competitive pressures.

Reflects the way in which the firm tries to influence thecustomers to favor their offerings.

E.g. how should the product be priced relative tocompetitors? What distribution route will be used to getthe product to the customer?

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Decisions about strategy content must be made in the lightof understanding of ‘external’ conditions and ‘internal’concerns.

External – characteristics of the market, the competitivesituation and the way in which different sectors can beserved.

Internal – mission and goals of the organization, theresources it has to hand and its capabilities.

Strategy content

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Strategy process in the entrepreneurial business

Desired strategy content

Achieved strategy content

Existing strategy content

The way in which the decision

about what the business wishes

to achieve is taken and

communicated

Control over delivering the defined

strategy content

Ongoing processes, routines and decision

making within the organization

The firm’s strategy process is the way in which the business

makes decisions about the strategy content it wishes to achieve.

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The link between existing strategy content and the strategy content achieved in the

future

The strategy content of the business will evolve over time.

The way in which the business modifies its range ofproducts, changes its customer base and develops itscompetitive approach will be the results of a series ofongoing decisions and actions taken by the people whomake up the organization.

These decisions occur even if the organization does nothave an explicit strategy to guide them

They may be made in response to immediate marketopportunities

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The link between existing strategy content and desired strategy content

There are a number of ways in which the organization canbecome aware of the desired strategy content:-

The entrepreneur ‘s communication of their vision

The definition of a mission

The setting of objectives

Through informal discussion

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The link between desired strategy content and achieved strategy

content

The link is manifest in the ability of entrepreneur todeliver the strategy content they desire for theirorganization.

Two (2) things may limits this:- Must be both achievable, given the market conditions

and the competitive forces present, and feasible, interms of the resources available to make the necessaryinvestments.

The degree of control the entrepreneur has over theorganization.

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Controlling strategy process in the venture

If the entrepreneur is to maintain control of theorganization and focus it on the opportunities that itseeks to exploit, then they must control its strategy.

Essential decision includes:- Decision relating to the development of the mission

Decision relating to the development of strategy

Decision relating to the control of resources

Decision relating to the way objectives will be set,monitored and rewarded

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A well defined strategy can help the venture

A strategy….

Encourages entrepreneurs to assess and articulate their vision

Ensures auditing of the organization and its environment

Illuminates new possibilities and latitudes

Provides organizational focus

Guides the structuring of the organization

Acts as a guide to decision making

Provide a starting point for the setting of objectives

Acts as a common language for stakeholders

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The Generation and Exploitation of New Venture

Creation Opportunities

Source : Hisrich, R. D., Peters, 2009

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The Generation and Exploitation of New Venture Creation Opportunities

Stage 1: New entry generation

The new entry generation should concern about theestablishment of new product in new market. A part fromthat creating new organization is also listed as newventure creation.

In this stage, the entrepreneur will learn new knowledgeexperiences and exploiting other resources to get abetter picture about business. This stage is very importantfor new comers in order to capturing new or existingopportunities in business environment.

Stage 2: New entry exploitation

In this stage, entrepreneurs will scan, skimming andexploit the new opportunities with the help fromknowledge. Entry strategy, of course, will become a majorboost for company to go into business.

Most decision, the entrepreneurs make don't fit intoassumption of perfect rationality in entry strategy but it ismost likely influenced by cultural and resources. Some ofthe entry strategies are exporting and licensing.

Stage 3: Feedback loop of resources.

The decision to exploit or not to exploit the new venturecreation opportunity

The Generation and Exploitation of New Venture Creation Opportunities

An overview of entrepreneurial entry strategies

A strategy is the pattern of actions that define an organization.

Two (2) generic strategies are commonly used; product-market domain and competitive approach.

Product-market domain:- Focused entry

Addressing a single well-defined product-market domain

Product spread Offering a wide range of products to single well-defined

market

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An overview of entrepreneurial entry strategies

Customer spread

Delivering a single or narrow range of products to a wide base of customers

Adjacency

Offering a wide range of products to a broad customer base. All product-market segments are adjacent in that the characterizing features of each segment are continuous or can be related to each other

Scatter

A variety of different products are offered to a variety of different customers. The segments are not adjacent.

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An overview of entrepreneurial entry strategies

Competitive approach:-

Offering a new product or service

Offering greater value

Creating new relationships

Being more flexible

Being more responsive

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Creating the Strategic Vision: Articulating Need and Purpose

A process of merging and combining, then deciding and eliminating.

QUESTION/AREA OF INQUIRY

COMPONENT OF STRATEGIC VISION

What opportunity or problem led to venture launch?

Purpose: What we are attempting to do?

What obstacles confront the venture team?

Potential pitfalls to overcome

What blocks progress? Resources needed

How we will know we are on the right track?

Data to be gathered

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Values Creation: Developing Strategy in Good Company

Business ethics and values are the subject of increasinglygreat attention today in light of numerous scandalsinvolving unethical and unlawful actions on the part ofmanagers.

Ethics – behavior that conforms to moral principles andvalues.

Business ethics – the discipline of developing andpracticing business relationships that conform to thesemoral (Alford, 2005)

Many businesses design formal ethics programs, includinga code of ethics.

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Values Creation: Developing Strategy in Good Company

Research has identified key strategic benefits tobusinesses that have ethics programs (Devero, 2003):

Build employee loyalty, reducing hiring and trainingcosts

Reduce theft

Drive sales and build customer loyalty

Attract quality applicants with minimum investment inrecruitment

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Writing a Code of Ethics

It is never too early in the formulation of a newventure to write a code of ethics.

Once written, the document can and should berevisited each year, and as the firm grows, moreinformation can be added to it.

Code of ethics should contain the following types ofinformation (Alford, 2005):

Purpose

policy

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Writing a Code of Ethics

Procedures (e.g. honesty and fairness, labor and employee relations matters etc)

Environmental

Accurate and complete records

Workplace safety

Bidding, negotiation and performance on contracts

Reporting suspected violations

Training

Review procedures

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Strategic attributes for new venture entrepreneur

Sensitive to environment

Dare to take risk

Tolerate with uncertainty

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Entrepreneur’s Strategy

References

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Aashish Mehra, G. S. (2011). Managing rapid growth : How mid caps can leap into the billion dollar club .

Dollinger, M, J. (2008). “ENTREPRENEURSHIP: Strategies and Resources Fourth Edition”, Kelley School of Business, Indiana University. MARSH publications, pp. 33-40.

Drucker, P. F., & Drucker, P. F. (2007). Innovation and entrepreneurship: Practice and principles. Routledge.

Kuratko, D. F., & Hodgetts, R. M. (2004). Entrepreneurship: Theory, process, practice. Mason, Ohio: Thomson/South-Western

Hisrich, R. D., Peters, M. P., & Shepherd, D. A. (2009). Entrepreneurship. New York: McGraw-Hill Higher Education.

Lieberman, M. B., & Montgomery, D. B. (1988). First‐mover advantages. Strategicmanagement journal, 9(S1), 41-58.

R. Barringer, Duane,(2009).Successfully Launching New Ventures: McGraw-Hill Higher Education.

Zimmerer, T., Scarborough, N. M., & Wilson, D. (2002). Essentials of entrepreneurship and small business management (Vol. 2). Upper Saddle River, NJ: Prentice Hall.