Entrepreneurship ch.7

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entry wedge

an opportunity that makes it possible for a new business to gain a foothold in a market

incremental innovation

an overall strategic approach in which a firm patterns itself on other firms, with the exception of one or two key areas

Industry Dynamics

changes in competitors, sales and profits in an industry over time

benefits

characteristics of a product or service that the target customer would consider worthwhile

strategic actions

competitive responses requiring a major commitment of resources

tactical actions

competitive responses with low resource requirements

growth stage

customer purchases increase at a dramatic rate

gross profit

funds left over after deducting the cost of goods sold

scope

geographic range

4 step process

goals, customer benefits, industry dynamics and analysis, strategy selection

strategy

ideas and actions that explain how a firm will make its profit -- leads to greater chances for survival and higher profits

imitation plus one degree of similiarity

incremental innovation

industry analysis

life cycle, trends Tool: industry analysis

goals

owner rewards, product/service (industry, imitation, innovation), markets (scale and scope)

intro stage

p/s is being invented and initially developed

market scale

size

decline stage

A life cycle stage in which sales and profits of the firm begin a falling trend.

parallel competition

An imitative business that competes locally with others in the same industry.

retrenchment

An organizational life cycle stage in which established firms must find new approaches to improve the business and its chances for survival.

shake-out

a type of life cycle stage following a boom in which there is a rapid decrease in the number of firms in an industry

imitation itself

Patterning a business on existing firms and processes • Not copying like franchising, because you are unlikely to have all the info about the model businesses/processes • Parallel competition

net profit

The amount of money left after operating expenses are deducted from the business

magic number

The post-tax income the entrepreneur personally seeks from the business

mass market

a customer group that involves large portions of the population

Cost Strategy

a generic strategy aimed at mass markets in which a firm offers a combination of cost benefits that appeals to the customer

focus strategy

a generic strategy that targets a portion of the market, called a segment or niche

perceptual mapping

a graphic display which positions products, services, brands, or companies according to their scores of important strategic dimensions

industry analysis

a research process that provides the entrepreneur with key information about the industry, such as its current situation and trends

differentiation strategy

a type of generic strategy aimed at clarifying how one product is unlike another in a mass market

profit before taxes

the amount of profit earned by a business before calculating the amount of income tax owed

Imitation minus one degree of similarity is

the business equivalent of cloning (franchising)

maturity stage

the third and longest stage in the product life cycle, during which sales peak and profit margins narrow

generic strategies

three widely applicable classic strategies for businesses of all types- differentiation, cost, and focus

customer and benefits

value benefits and cost benefits Tool: Perceptual mapping


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