Ch 7 Small Business Strategies: Imitation with a Twist

Innovative Strategy

An overall strategic approach in which a firm seeks to do something that is very different from what others in the industry are doing.

Resource

Any asset, capability, organizational process, information, or knowledge that contributes to the firm's performance. (what are you looking at)

Competitor

Any other business in the same industry as yours.

Imitative Strategy

An overall strategic approach in which the entrepreneur does more or less what others are already doing.

Incremental Innovation

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

Cost Strategy

A generic strategy aimed at mass markets in which a firm offers a combination of COST BENEFITS that appeals to the customer.

Tangible Resources

Assets of a firm that can be easily and concretely identified. (assets that can be seen)

Focus Strategy

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

Brainstorming

A group discussion in which criticism is suspended in order to generate the maximum number of ideas.

Difficult to Imitate

A resource characteristic which enhances value through offering uniqueness to the buyer.

Five initial key decisions

1.As owner, what do you expect out of the business? 2.What is your product or service idea (and its industry)? 3.For your product or service, how innovative or imitative will you be?4.Scale: Who do you plan to sell to—everyone or targeted markets? 5.Scope: Where do you plan to sell—locally, regionally, nationally, globally?

Scope

A characteristic of a market defines the geographic range covered by the market- from local to global.

Scale

A characteristic of a market that describes the SIZE of the market-a mass market or a niche market.

Mass Market

A customer group that involves large portions of the population.

Niche Market

A narrowly defined segment of the population that is likely to share interests or concerns.

Industry Analysis

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

Value Resource

An asset, capability, organizational process, information, or knowledge that lets a firm take advantage of opportunities or lock out the competitors.

Rare Resource

An assett, capability, organizational process, information, or knowledge that is not generally available to competitors.

Parallel Competition

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

Growth Stage

An industry life cycle stage in which customer purchases increase at a dramatic rate.

Entry Wedge

An opportunity that makes it possilble for a new business to gain a foothold in a market.

Intangible Resources

Capabilties, organizational processes, information, or knowledge of a firm that are not clearly evident. (assets that cannot be seen)

Industry Dynamics

Changes in competitors, sales and profits in an industry over time. (the dynamic changes)

Gross Profit

Funds left over after deducting the cost of goods sold.

Strategy in SB

Good strategy leads to greater chances for survival and higher profits for small businesses What makes a strategy good is its fit to the particulars of your business and the resources you can bring to it

Combinational Competencies

Organizational capabilities that come from combining tangible and intangible resources in ways superior to the competition.

Transformational Capabilities

The abilities of a firm to make its product or service in a way that enhances value or efficiency compared to other firms.

Organizational Capabilities

The abilities, skills, and competencies, used by the firm to make profits from tangible and intangible resources.

Degree of Similarity

The extent to which a product or service is like another.

Industry

The general name for the line of product or service being sold, or the firms in that line of business.

Introduction Stage

The life cycle in which the product or service is being invented and initially developed.

Competitive Advantage

The particular way a firm implements customer benefits that keeps the firm ahead of other firms in the industry or market.

Pure Innovation

The process of creating new products or services, which results in a previously unseen product or service.

Maturity Stage

The third life cycle stage, marked by a stabilization of demand, with firms in the industry moving to stabilize or improve profits thorugh cost strategies.

Generic Strategies

Three widely applicable classic strategies for all types of businesses : 1. differentiation. 2. cost. 3. focus

Strategy

the idea and actions that explain how a firm will make its profit. Whether you know it or not, all small businesses have a strategy. The strategy may be a blueprint for planning or a standard to compare actions against. Either way, strategy defines for you, your customers, and your competition how your business operates

Goal decisions

will set the stage for the kind of business you will have and are the foundation for further analyses.

Differentiation Strategy

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

Strategic Direction

The conceptualization of how a business might best move in response to the findings of a SWOT analysis- Flaunt, Fix, Fight, Flee, Find, or Fire-up.

Net Profit

The amount of money left after opereating expenses are deducted from gross profit.

Profit Before Taxes

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

Market

The business term for the population of customers for your product or service.

Retrenchment

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

Decline Stage

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

Boom

A type of life cycle growth stage marked by a very rapid increase in sales in a relatively short time.

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.