Part 2 PowerPoint Presentation by Charlie Cook Copyright © 2003 South-Western College Publishing....

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PowerPoint Presentation by Charlie CookPowerPoint Presentation by Charlie Cook

Copyright Copyright © © 2003 South-Western College Publishing.2003 South-Western College Publishing. All rights reserved.All rights reserved.

Strategies That Strategies That Capture Capture OpportunitiesOpportunities

22

Entrepreneurial Strategy

12e

Copyright © by South-Western College Publishing. All rights reserved. 2–2

Looking AheadLooking AheadLooking AheadLooking Ahead

After studying this chapter, you should be able to:

1. Define competitive advantage.

2. Describe the factors that comprise external environments.

3. Describe the factors that comprise internal environments.

4. Identify and compare broad-based strategy options for the entrepreneurial venture.

5. Explain the focus strategy concept and its importance to small business.

6. Discuss the importance of the sustainability of competitive advantage.


The Path to Competitive AdvantageThe Path to Competitive AdvantageThe Path to Competitive AdvantageThe Path to Competitive Advantage

• Strategy–A plan of action that coordinates the resources

and commitments of an organization to achieve superior performance.

• Competitive Advantage–A benefit that exists when a firm has a product or

service that is seen by its target market as better than those of competitors.


The Path to Competitive AdvantageThe Path to Competitive AdvantageThe Path to Competitive AdvantageThe Path to Competitive Advantage

Fig. 2.1

IdentifyOpportunities

Select StrategiesThat CaptureOpportunities

Manage theOutcomes

fromExploiting

Opportunities


Bases for Competitive AdvantageBases for Competitive AdvantageBases for Competitive AdvantageBases for Competitive Advantage

Fig. 2.2

Unique ServiceFeatures

Notable ProductAttributes

CustomerExperience

CustomerConvenience

CompetitiveCompetitiveAdvantageAdvantage

Price/Value


Identifying Entrepreneurial OpportunitiesIdentifying Entrepreneurial OpportunitiesIdentifying Entrepreneurial OpportunitiesIdentifying Entrepreneurial Opportunities

• Types of Evaluation–External Analysis

Understanding the nature of the external environment by studying the general trends and dynamics of competition (what business potentials exist)

–Internal Analysis Identifying the firm’s competitive capabilities and

strengths (what the firm can do)


A Model of Competitive AdvantageA Model of Competitive AdvantageA Model of Competitive AdvantageA Model of Competitive Advantage

Fig. 2.3

Strategies• Cost-Based Strategies • Differentiation-Based Strategies

FoundationsEnvironmental Assessment Organizational Assessment

• Profits• Market Share• Customer Satisfaction• Survival

ResultsReinvestment Reinvestment

Fig. 2.3


Assessing The External EnvironmentAssessing The External EnvironmentAssessing The External EnvironmentAssessing The External Environment

• The General Environment–A broad environment, encompassing factors that

influence most businesses in a society

• Industry Environment–The combined forces that

directly impact a given firm and its competitors


Segments of Segments of the General the General EnvironmentEnvironment

Segments of Segments of the General the General EnvironmentEnvironment

General Environment

Sociocultural Macroeconomic

EcologicalPolitical/Legal

Technological Global

Fig. 2.4


Major Major Factors Factors

OffsettingOffsettingMarket Market

Attractive-Attractive-nessness

Major Major Factors Factors

OffsettingOffsettingMarket Market

Attractive-Attractive-nessness

Bargaining Powerof Buyers

Threat of SubstituteProducts or Services

Bargaining Powerof Suppliers

Intensity of RivalryAmong Existing

Products

Threat of NewCompetitors

Attractiveness andProfitability of aTarget Market

Fig. 2.5


Competitor AnalysisCompetitor AnalysisCompetitor AnalysisCompetitor Analysis

• Who are the new venture’s current competitors?• What resources do they control?• What are their strengths and weaknesses?• How will they respond to the new venture’s

decision to enter the industry?• How can the new venture respond?• Who else might be able to observe and exploit

the same opportunity?• Are there ways to co-opt potential or actual

competitors by forming alliances?


Market AttractivenessMarket AttractivenessMarket AttractivenessMarket Attractiveness

Attractive Competitive Force Unattractive

Weak Overall Competitive Forces Strong

Weak Threat of New Competitors Strong

Weak Threat of Substitute Products/Services

Strong

Weak Intensity of rivalry among competitors

Strong

Weak Bargaining Power of Suppliers Strong

Weak Bargaining Power of Buyers Strong


Response to Change as an OpportunityResponse to Change as an OpportunityResponse to Change as an OpportunityResponse to Change as an Opportunity

• Innovation–is “the means by which the entrepreneur either

creates new wealth-producing resources or endows existing resources with enhanced potential for creating wealth.” (Drucker)

• Paradox of Attraction–The concept that an attractive industry

opportunity is likely to draw multiple new entrants, diminishing its attractiveness.


Change-based Sources ofChange-based Sources ofEntrepreneurial OpportunitiesEntrepreneurial OpportunitiesChange-based Sources ofChange-based Sources of

Entrepreneurial OpportunitiesEntrepreneurial Opportunities

Industry Factors

Change Factor Definition

The unexpected Unanticipated events lead to either enterprise success or failure.

The incongruous What is expected is out of line with what will work.

Process needs Current technology is insufficient to address an emerging challenge.

Structural change Change in technology, markets, etc., alter industry dynamics.

Table 2.1a


Change-based Sources ofChange-based Sources ofEntrepreneurial OpportunitiesEntrepreneurial OpportunitiesChange-based Sources ofChange-based Sources of

Entrepreneurial OpportunitiesEntrepreneurial Opportunities

Human and Economic Factors

Change Factor Definition

Demographics Shifts in population size, age structure, ethnicity, and income distribution impact product demand.

Changes in perception

Perceptual variations determine product demand.

New knowledge Learning opens the door to new product opportunities with commercial potential.

Table 2.1b


Organizational AssessmentOrganizational AssessmentOrganizational AssessmentOrganizational Assessment

• Organizational Resources and Capabilities–Basic inputs that a firm uses to conduct its

business Tangible and intangible resources Organizational capabilities

• Core Competencies–Those resources and capabilities that provide a

firm with a competitive advantage over its rivals.


Examples of SWOT Factors Examples of SWOT Factors Examples of SWOT Factors Examples of SWOT Factors

Internal• Strengths

– Core Competencies– Financial strength– Well-planned strategy– Skilled management

• Weaknesses– Production inefficiencies– Inadequate financial

resources– Poor management– Poorly planned strategy

External• Opportunities

– Untapped market potential– Favorable shift in market– Emerging technologies– New product

• Threats– New competition– Rising demand– Increased government

regulations


Strategies that Capture Opportunities Strategies that Capture Opportunities Strategies that Capture Opportunities Strategies that Capture Opportunities

• Broad-Based Strategy Options–Seek an advantage in cost or competition.

• Cost-Based Strategy and Options–Requires the firm to be the lowest-cost producer.

• Differentiation-Based Strategy–Emphasizing the uniqueness of the firm’s product

or service

• Focus strategy–Targeting a specific market segment (niche)


Implementation of Focus StrategiesImplementation of Focus StrategiesImplementation of Focus StrategiesImplementation of Focus Strategies

• Restricting focus to a single subset of customers.

• Emphasizing a single product or service.• Limiting the market to a single geographical

region.• Concentrating on superiority of product or

service.


Segmented MarketsSegmented MarketsSegmented MarketsSegmented Markets

• Focus markets can quickly erode if:–The focus strategy is imitated.–The target segment is structurally unattractive.–The target segment’s differences from other

segments narrow.–New firms subsegment the industry.


Strategic TermsStrategic TermsStrategic TermsStrategic Terms

• Strategic Decision–A decision regarding the direction a firm will take

in relating to its customers and competitors.

• Sustainable competitive advantage–A value-creating industry position that is likely to

endure over time.


The Competitive Advantage Life CycleThe Competitive Advantage Life CycleThe Competitive Advantage Life CycleThe Competitive Advantage Life Cycle

Fig. 2.6

Develop

Deploy

Decline

Stage 1 Stage 2 Stage 3

Time


Sustaining Competitive AdvantageSustaining Competitive AdvantageSustaining Competitive AdvantageSustaining Competitive Advantage

Fig. 2.7

Advantage#1

Advantage#2

Advantage#3

Advantage#4

Time

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