Chapter 8 Strategic Management

angel investors

private individuals who provide equity investments for seed capital during the early stages of a new venture.

entrepreneurship

the creation of new value by an existing organization or new venture that involves the assumption of risk.

Dedication and drive

are reflected in hard work.

Market commonality Resource similarity

two factors are used to assess whether or not companies are close competitors:

new competitive action

- acts that might provoke competitors to react, such as new market entry, price cutting, imitating successful products, and expanding production capacity.

Human Capital

Bankers, venture capitalists, and angel investors agree that the most important asset an entrepreneurial firm can have is strong and skilled management.

Forbearance Co-opetition

Choosing Not to React:

Financial Resources Human Capital Social Capital Government Resources

Entrepreneurial Resources:

Entrepreneurial opportunity Entrepreneurial Resources Entreprenuer / entrepreneurial team

For an entrepreneurial venture to create new value, three factors must be present:

Attractive Achievable Durable Value Creating

For an opportunity to be viable, it needs to have four qualities:

Overall Cost Leadership Differentiation Focus

Generic Strategies:

Technology alliances Manufacturing alliances Retail alliances

Here are a few types of alliances that have been used to extend or strengthen entrepreneurial firms:

Market Dependence Competitor's Resources Actor's Reputation

How a competitor is likely to respond will depend on three factors:

New competitive action Threat analysis Motivation and capability to respond Types of competitive action Likelihood of competitive reaction

Model of Competitive Dynamics:

Social Capital

New ventures founded by entrepreneurs who have extensive social contacts are more likely to succeed than are ventures started without the support of a social network.

pioneering new entry imitative new entry adaptive new entry

New-entry strategies typically fall into one of three categories:

Attractive.

The opportunity must be attractive in the marketplace; that is, there must be market demand for the new product or service.

Durable.

The opportunity must be attractive long enough for the development and deployment to be successful; that is, the window of opportunity must be open long enough for it to be worthwhile.

Value creating.

The opportunity must be potentially profitable; that is, the benefits must surpass the cost of development by a significant margin.

Achievable.

The opportunity must be practical and physically possible

the stage of venture development the scale of the venture

The types of financial resources that may be needed depend on two factors:

Vision.

This may be an entrepreneur's most important asset.

Strategic actions Tactical actions

Two broadly defined types of competitive action:

threat analysis

a firm's awareness of its closest competitors and the kinds of competitive actions they might be planning.

forbearance

a firm's choice of not reacting to a rival's new competitive action.

adaptive new entry

a firm's entry into an industry by offering a product or service that is somewhat new and sufficiently different to create value for customers by capitalizing on current market trends.

pioneering new entry

a firm's entry into an industry with a radical new product or highly innovative service that changes the way business is conducted.

imitative new entry

a firm's entry into an industry with products or services that capitalize on proven market successes and that usually has a strong marketing orientation.

co-opetition.

a firm's strategy of both cooperating and competing with rival firms

entrepreneurial strategy

a strategy that enables a skilled and dedicated entrepreneur, with a viable opportunity and access to sufficient resources, to successfully launch a new venture.

entry wedge

another name for entry strategy

resources

are an essential component of a successful entrepreneurial launch.

dedication

calls for an intellectual commitment that keeps an entrepreneur going even in the face of bad news or poor luck.

venture capitalists

companies organized to place their investors' finds in lucrative business opportunities.

market dependence

degree of concentration of a firm's business in a particular industry.

crowdfunding

funding a venture by pooling small investments from a large number of investors, often raised on the internet.

competitive dynamics

intense rivalry, involving actions and responses, among similar competitors vying for the same customers in a marketplace

Drive

involves internal motivation.

entrepreneurial leadership

leadership appropriate for new ventures that requires courage, belief in ones convictions, and the energy to work hard even in difficult circumstances; and embody vision, dedication and drive, and commit to excellence.

strategic actions

major commitments of distinctive and specific resources to strategic initiatives.

discovery phase

refers to the process of becoming aware of a new business concept

tactical actions

refinements or extensions of strategies usually involving minor resource commitments.

market commonality

the extent to which competitors are vying for the same customers in the same markets

resource similarity

the extent to which rivals draw from the same types of strategic resources

discovery phase opportunity evaluation

the opportunity recognition process involves two phases of activity—

opportunity recognition

the process of discovering and evaluating changes in the business environment, such as a new technology, sociocultural trends, or shifts in consumer demand, that can be exploited.

vision, dedication and drive, commitment to excellence—

three characteristics of leadership:

Opportunity evaluation,

which occurs after an opportunity has been identified, involves analyzing an opportunity to determine whether it is viable and strong enough to be developed into a full-fledged new venture