chapter 8

Four qualities that make an opportunity viable:

(1) attractive (2) achievable (3) durable (4) value creating

4 ways to look for new entrepreneurial opportunities:

(1) look at what's bugging you (2) talk to the people you know (3) look to other markets (industry-wise, geographically) (4) get inspired by history

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

(1) market commonality (2) resource similarity

3 types of entry strategies ("entry wedge")

(1) pioneering (2) imitative (3) adaptive

3 types of alliances that have been used to strengthen entrepreneurial firms:

(1) technology alliances (2) manufacturing alliances (outsourcing) (3) retail alliances

characteristics of entrepreneurs

- self-confidence - conscientiousness (persistence, organization) - openness to experience - emotional stability (manage stress) - low agreeableness (looking out for their own interests primarily)

Why do companies launch new competitive actions?

-improve market position -capitalize on growing demand -expand production capacity -provide an innovative new solution -obtain first mover advantages

excellence requires entrepreneurs to commit to...

-knowing the customer -providing quality goods -attention to detail -continuous learning

Entrepreneurial resources

Financial resources Human capital Social capital Government resources

angel investors

Private individuals who invest money during the early stages of new start-ups

Who said "every new idea is merely a spin on an old idea."

Tom Monahan

competitor's resources

a firm with financial 'deep pockets' may be able to mount and sustain a costly counterattack

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

new competitive action

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

angel investors favor companies that...

already have a winning business model and dominance in a market niche

How do strategic alliances assist entrepreneurial firms?

by partnering with other companies, new ventures can expand and give the appearance of entering numerous markets or handling a range of operations

overarching factor behind all viable opportunities:

change

venture capitalists

companies organized to place their investors' funds in lucrative business opportunities

adaptive firms are aware of marketplace conditions and...

conceive entry strategies to capitalize on current strategies

Generic Strategies:

cost leadership, differentiation, and focus

example of tactical action

cutting prices, improving gaps in service, strengthening market efforts

market dependence

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

opportunity evaluation

determine if it is viable and strong enough to be developed into a full-fledged new venture

entrepreneurial strategy

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

What is vision?

entrepreneurs envision realities that do not exist

venture capital is a form of financing in which...

entrepreneurs raise money by selling shares in the new venture

sometimes the key to an imitative strategy is to...

fill a market space where the need had previously been filled inadequately

to be successful in a market niche, the key strategic requirement is to stay ______________.

focused

There is a risk of __________ with crowdsourcing from firms that are just looking to scam investors

fraud

crowdfunding

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

SBA programs are designed to...

grow the economy of a region

if a product is unique enough, a pioneering new entrant may...

have little direct competition

What decision do competitors face after being attacked?

how to respond; motivation and capability to respond

success triggers _______________

imitation

majority of EXTERNAL funding for young and small firms comes from...

informal sources like family and friends

competitive dynamics

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

Banks are more likely to provide __________-_________ _____________ to companies with a track record of sales and other cash-generating activity

later-stage financing

example of strategic action

launching a breakthrough innovation, building a new production facility, merging with another company

entrepreneurial leadership

leadership appropriate for new ventures that requires courage, belief in ones convictions, and the energy to work hard even in difficult circumstances

strategic actions

major commitments of distinctive and specific resources to strategic initiatives

what do venture capitalists provide that angel investors do not?

managerial advice and links to key contacts in an industry

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

market dependence competitor's resources actor's reputation

most important factor for feasibility analysis:

market potential; does a market exist for what you are creating?

new ventures started by teams are ________ likely to succeed than "lone-wolf" entrepreneurs

more

durable

must be attractive long enough for the development and deployment to be successful; (window of opportunity must be open long enough for it to be worthwhile)

attractive

must be market demand for the new product

value creating

must be potentially profitable; benefits must surpass the cost of development by a significant margin

achievable

must be practical and physically possible

types of changes in the business environment

new technology, sociocultural trends, or shifts in consumer demand

the cycle of actions/reactions in everyday business leads to...

new value creation and the ongoing advancement of economic well-being

what type of investment system is crowdfunding?

peer-to-peer

The majority of entrepreneurial start-ups are financed with

personal savings

strategic actions require significant ______________ and once initiated are difficult to _____________.

planning; reverse

risk with pioneering

product may not be accepted by consumers; if it is successful, other competitors will rush in to copy it

firms turn to venture capitalists when they are on the verge of ____________ ____________.

rapid growth

the government underwrites loans made by banks to small businesses, thus...

reducing the risk associated with lending to firms with unproven records

tactical actions

refinements or extensions of strategies usually involving minor resource commitments

an imitative new entry is used by entrepreneurs who...

see products/ideas succeed in another market and introduce the same basic product to another segment

in mature industries, growth in demand tends to be _________ and there are often many competitors.

slow

entrepreneurial activities:

start-up ventures major corporations family-owned businesses nonprofit organizations established institutions

Types of competitive actions

strategic actions tactical actions

an adaptive entry approach involves...

taking an existing idea and adapting it to a particular situation

entrepreneurship

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

Resource similarity

the extent to which a competitor has similar amounts and kinds of resources (Google and Yahoo's high caliber software engineers)

market commonality

the extent to which competitors are vying for the same customers in the same markets (Boeing and Airbus)

opportunity recognition

the process of discovering and evaluating changes in the business environment that can be exploited

Why are focus strategies often associated with small businesses?

there is a natural fit between the narrow scope of the strategy and the small size of the firm

Entrepreneurial firms are often in a strong position to offer combination strategies because...

they have the flexibility to approach situations uniquely

what is an entrepreneur's most important asset?

vision

entrepreneurial leadership embodies:

vision dedication and drive commitment to excellence

actor's reputation

whether a company should respond to a competitive challenge will also depend on who launched the attack against it

close competitors that differentiate themselves in the eyes of consumers may...

work together behind the scenes to achieve industrywide efficiencies

social capital support can come from several sources, including:

• past jobs • industry organizations • local business groups

downsides to crowdfunding

• site takes some of funds raised (4-9%) • added pressure from social media • want to share enough info to be captivating without giving too much away

potential pitfalls of alliances

•lack of oversight & control •problems with quality, timely delivery, receiving payment

ways to test opportunities:

•talk to potential target customers •speaking with production/logistics managers about operational requirements

If the opportunity meets the four criteria, what are the other two factors that must be considered?

•the resources available to undertake it •the characteristics of the entrepreneur pursuing it