Entrepreneurial resources

Resources are important for a successful

business launch

For new firms, the most important one is

usually the financial resource

Other resources like human and social capital

are also important for firms to thrive.
 Financial resources
The types of financial resources that may be
needed depend on two factors

the stage of business development and

the scale of the business.
1. Start-up stage
2. Growth stage
 Start-up

Entrepreneurial firms that are starting at the

earliest stage of development are called start-
up firms.
Most start-ups also begin on a relatively small
scale. The funding available to young and
small firms tends to be quite limited.
 In start-up stage businesses usually start with
the contribution of
1. Family and friends
2. Angel investors
3. Venture capital
 Growth stage
other sources of financing become readily
available.
Banks, for example, are more likely to provide
later-stage financing to companies with a track
record of sales or other cash-generating activity
 Crowdfunding
individuals striving to grow their business post
their business ideas on a crowdfunding website.
Potential investors go to the site evaluate the
proposals and makes a small funding allotment.
Most investors contribute up to a few hundred
dollars to any investment
If a few thousand investors sign up for a venture,
it can potentially raise over a million dollars.
 Strategy spotlight 8.3
Since raising funds through crowdfunding are
lax, investors need to do their homework.
1. Financial statements
2. Licenses and registrations
3. Litigation
4. Employment and educational history
5. Required disclosure
 Human capital
Businesses need to invest in very smart people
with very high integrity.
Managers need to have a strong base of
experience and extensive domain knowledge,
as well as an ability to make rapid decisions
and change direction as shifting circumstances
may require.
 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.
Strategic alliances can provide a key avenue for
growth by entrepreneurial firms.
Technology alliances
Manufacturing alliances
Retail alliances
 Entrepreneurial leadership
Whether a venture is launched by an
individual entrepreneur or an entrepreneurial
team, effective leadership is needed.

Launching a new venture requires a special

kind of leadership. It involves courage, belief
in ones convictions, and the energy to work
hard even in difficult circumstances.
 The three characteristics of leadership should
be passed on to others who work with them.

vision
Dedication and drive
commitment to excellence
 Entrepreneurial strategies

Entry strategies provide a guideline on how a new

entrant will enter a new market and get a foothold
in the market. There are three types of entry
strategies:
Pioneering new entry strategy
Imitative new entry strategy
Adaptive new entry strategy
The selection of the strategy type depends on how
risky and innovative the new business concept is.
 Pioneering new entry strategy

Product is highly innovative and new to the

business or market
Breakthrough product or service
Little or no competition
Less substitute products
Pandora
customized playlist for every individual based on
the music they listen to
 Pitfalls of this strategy

There is a strong risk that the innovative product

or service will not be accepted by the customers
or the innovative idea never leaves the
launching phase.
Smell-O-Vision was an invention that used to
pump odors into movie theaters at specific
moments it was only tried once before it got
declared as a flop idea.
 Imitative new entry

A product or service that is successful in one

market location and implement the same thing
into a different market segment
Pitfalls
A serious problem arises for startups when the
imitator is an established company with more
resources.
 Square
A small company that provides credit and
debit cards without the traditional
agreements.
It has a small device that attaches to a
smartphone to read the card.
After initial success strong companies like
PayPal imitated this invention and gave tough
competition.
 Adaptive new entry strategy

It is about using an existing idea and adapting

to a particular situation.
Under Armour that launched moisture wicking
fabric to produce its athletic gear.
Pitfalls:
Not perceived unique by the customers and
they may have little motivation to try it.
Other competitors may imitate the strategy.
 Generic Strategies:

An entrepreneurial firm must also decide its

strategic positioning in the market.
Low cost
Differentiation
Focus
 Overall cost leadership

Reducing cost and making efficient use of

resources in order to offer low prices to the
customers to gain competitive advantage.
New ventures cut cost through
Simple and small organizational structures
Quick decision making
Flexibility to upgrade to new technological
changes
Outsourcing
Acquiring raw material from cheap sources
 Vizio inc
Used imitation strategy to copy the technology of
high tech industry of producing flat screens.
They achieved low cost through being lean in
their processes, working with cheap suppliers and
focusing on one product thus having a simple
organization structure.
Tough competition to Samsung and Sony by
offering flat panel TVs at half the price of its
competition.
 Differentiation

Unique product or service

Both adaptive and pioneering strategies are
related to differentiation.
Amazon revolutionized the ways books are sold
by using internet technology and excellent
customer service
 Pitfalls

It is an expensive strategy because it involves

high level of promotion and advertisement
campaigns in order to build brand identity.
Other costly factor is about the high end
technology and innovation required to create
a unique factor.
 Focus

It can include low cost or differentiation or a

combination of both.
Niche market
Running Press launched Miniature Editions that
offers small sized books at the cash counters for
impulse buying. This is a small segment but
make good profits for the company.
 Combination Strategies:

Combination of low cost, differentiation and

focus strategies
Hard to copy
Warby Parker
Manufactures eyeglasses at low cost, takes
advantage of social responsibility and has a
balance of fashion.
 Competitive dynamics
Ongoing actions and responses taking place
among all firms competing within a market for
advantageous positions
Model of competitive dynamics
 New competitive action
New competitive action is acts that might
provoke competitors to react such as new
market entry, price cutting, imitating
successful product and expanding production
capacity.
companies are also motivated to launch
competitive challenges because they want to
build their reputation for innovativeness or
efficiency.
 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
 Five Hardball Strategies
Devastate rivals profit sanctuaries
Plagiarize with pride
Deceive the competition
Unleash massive and overwhelming force
Raise competitors costs
 Devastate rivals profit sanctuaries

attack areas where money is made easily and

requires knowledge of competition so you can
be prepared for counter-attack.
For example:
In 2005 Walmart began offering low price
extended warranties on home electronics after
learning that its rivals such as best buy and
circuit city derived most of their profits from
extended warranties.
 Plagiarize with pride

steal any idea and make it your own and

better and also needs full support of firm.
For example:
Ufone offered super card and rivals imitated
super card but could not successfully compete
ufones super card.
 Deceive the competition

try to implement such strategies that are only to deceive its competition and
involve its competition to react in negative way(for them) that there focus
diverts from right direction but keep in mind that the ways should be legally
correct so that the company does not get sued by its competitors.
For example:
Boeing spent several years hyping its plans for a
new high-speed airliner. After it became clear the
customer valued efficiency over speed, Boeing
quietly shifted its focus. When Boeing announced
its new Dreamliner, its competitor, Airbus
Industries, was surprised and caught without an
adequate response, which helped the dreamliner
set new sales records.
 Unleash massive and overwhelming
force
In this strategy company plays aggressively and invest a
lot on destroying their competitors. They spend a lot
on campaign against their competitors to finish them
once for all means direct attack.
For example:
Unilever has taken a dominant position with 65%
market share in the Vietnamese laundry detergent
market by employing a massive investment and
marketing campaign.in doing so they reduced the
market position of the local incumbent competitors.
 Raise competitors costs

The company that knows about the profit and cost trend of
the market can trick its competitors to invest in some
segments in which they lets them win because they have
high cost and low profit which can be disastrous to the
competitor growth.
For example:
Daewoo bus started its operations in small cities and Bilal
travel followed them to such markets but Daewoo had the
high profit saving from other successful terminals so they
survived but Bilal travels had to spend a lot on operational
cost and the profit from passenger was very low as in
comparison if they invested that money in big cities.
 2. Threat analysis:
A firms awareness of its closest competitors and
the kinds of competitive actions they might be
planning.
Market commonality
The extent to which competitors are vying for the
same customers in the same markets.
For example:
For example: Automobile industry i.e. Toyota and
Honda have a high degree of market commonality
because they make very similar products and have
many buyers in common.
 Resource similarity

The extent to which rivals draw from the same

types of strategic resources.
For example:
Home page of google and yahoo may
look very different but behind the scenes, they
both rely on the talent pool of high-caliber
software engineers to create the cutting-edge
innovations that help them compete.
Motivation and capability to respond
Once the competitors face the attack, they
need to evaluate what problems are to be
responded, how they can be responded and
what type of problems can be created by the
response.
 Factors
The intensity of the impact to which they are
responding?
The Barnes and Nobles overreacted to the
Amazons
Their motivation for responding.
Wall Street Journal and New York Times
 Factors
The age and size of the firm.
Startup firms are not well known and may not
have enough financial resources to give a
competitive response.
Whether a company is equipped to retaliate?
A company may require a new product
innovation in counterattack, so a form must
have enough resources and social capital to
make the respond effective and efficient.
 Types of Competitive Actions
Strategic actions:
It represents major commitments of
distinctive and specific resources.
Tactical actions:
It includes the refinements or extension
strategies.
 Types of Competitive Actions
a low cost strategy
Guerilla technique
defensive actions
For example,
Apple and amazon are in constant battle of
competition. Although they belong to different
backgrounds of the business category, but share
similar traits
 Likelihood of Competitive Reaction

evaluate the competitors response

Factors:
Market dependence.
Competitors resources.
Actors reputation.
 Choosing Not To React: Forbearance
and Co-Opetition

Forbearance is when a firm chooses not to

react to the competitive actions.
Co-opetition is a term introduced by Novells
founder that suggests that a company often
benefits from a combination of competing and
cooperating.
Strategy Spotlight 8.8: Cleaning Up In
The Soap Business
Colgate-Palmolive, Unilever, Procter and
Gamble and Hankel are competitors in
customers eyes.
sharing the price information since 1980s to
limit the intensity of competition.
set up prearranged prices at which they would
sell to the retailers.
Strategy Spotlight 8.8: Cleaning Up In
The Soap Business
The collusion lasted for 10 years until Unilever
started an offer
The Autorite De La Concurrence, French
antitrust watch dog and these firms were
fined with $484 million.