STRATEGIC ENTREPRENEURSHIP

TOPIC 8
DR ANIS AMIRA AB RAHMAN
TAHIRAH BINTI ABDULLAH
FACULTY OF ENTREPRENEURSHIP AND BUSINESS
UNIVERSITI MALAYSIA KELANTAN
anisamira@umk.edu.my

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 STRATEGIC FOR VENTURE
GROWTH

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 Concept of Business Venture

 To organize or to assemble on going

interdependent actions into sensible sequences
that generate sensible outcomes (Gartner, 1985).
 Important for new ventures to be competent in
transforming inputs into outputs that its
stakeholders need and want (Zimmerman, 2002).
 The characteristics of the entrepreneur, the
structure of the industry entered and the strategy
of the venture involved were play important role
in venture performance (Sandber and Hofer,
1987).
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 Concept of Business Venture
Criteria for a business venture (Gartner, 1985):
1. Its founders must acquire expertise in products, process,
market and/or technology;
2. Results are expected beyond the year in which the
investment is made;
3. It is considered a new market entrant by its competitors;
and
4. It is regarded as a new source of supply by its potential
customers.

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 A Framework for Describing
the Creation of A New Venture
Dimensions Descriptions
Individual(s) The person(s) involved in starting a
new organization

Organization The kind of firm that is started

Environment The situation surrounding and

influencing the new organization

New venture The actions undertaken by the

process individual(s) to start the venture
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 A Framework for Describing
the Creation of A New Venture
Dimensions

Individual(s)
Value in describing entrepreneurs; (i) Need for
achievement, (ii) Risk taker, (iii) Previous work
experience, (iv) Education, (v) Job satisfaction
*entrepreneur characteristics are extremely important for
venture success (Baum et al., 2001)

Organization
Type of firms such as retail, manufacturing, service
and wholesale.
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 A Framework for Describing
the Creation of A New Venture

Dimensions
Environment
(i) sees the environment as an outside set of conditions to which
the organization must adapt
(ii) sees the environment as a "reality“ that organizations create
via the selectivity of their own perceptions

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 A Framework for Describing
the Creation of A New Venture
Dimensions

New venture process

(i) The entrepreneur locates a business opportunity
(ii) The entrepreneur accumulates resources
(iii) The entrepreneur markets products and services
(iv) The entrepreneur produces the product
(v) The entrepreneur builds an organization

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 Potential Barriers for The Venture Growth
Institutional barriers
• including the legislative framework.
• the degree of corruption and bribery a firm encounters.
The external market position of a firm
• the sector in which the firm operates.
• The degree of competition, whether a firm is facing strategic
behavior by competitors.
• extent of network alliances to support growth.
Financial barriers
• Including availability
• cost of capital and finance
Internal organizational barriers
• including managerial capacity and capability
• objectives of firm
• principal-agent difficulties
• skills
Social barriers
• to do with the support, or lack of it, from local actors and agencies.
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 Does every venture need growth?

 Not all entrepreneurs seek growth, and growth is not

a necessary or even desirable objective for all SMEs.
 Firstly, the SME owners may have objectives other
than profit maximisation.
 Secondly, if profit maximising, they may have already
reached the minimum efficient scale of business
activity (small retail shops, repair shops and so on).
 Therefore a lack of growth on its own does not
necessarily indicate the presence of significant
barriers to growth (Bartlett and Bukvic, 2001).

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 STRATEGIES FOR VENTURE GROWTH

Motivation
Specific Competitive
competencies strategies

General
Environment
competencies

Traits
Venture Size
growth
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Source: Baum et al. 2001
 STRATEGIES FOR VENTURE GROWTH

Traits
Tenacity
Proactivity
Passion for work

General Competencies
Organizational Skill
Opportunity Skill

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 STRATEGIES FOR VENTURE GROWTH

Specific Competencies
Technical skill
Industry skill

Motivation
Vision
Growth Goals
Self-Efficacy

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 STRATEGIES FOR VENTURE GROWTH

Competitive strategies
Focus
Low-cost
Differentiation-Innovation
Differentiation-Quality/service

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 STRATEGIES FOR VENTURE GROWTH

Environment
Dynamism
Munificence
Concentration

Size
Size

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 Porter’s Five Forces Model Strategy
 For understanding the competitiveness of the
business environment and for identifying company
strategy’s potential profitability.

Threat of
Threat of new Bargaining power
substitute product
entrants of customer
or service

Bargaining power Intensity of

of suppliers competitive rivalry

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 Threat of new entrants
 Barriers to Entry – ability of people to enter in the market
Absolute cost advantages
Proprietary learning curve
Access to inputs
Government policy
Economies of scale
Capital requirements
Brand identity
Switching costs
Access to distribution
Expected retaliation
Proprietary products

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 Threat of substitute product or
service
 The likelihood of customers to find other products
 Switching costs
 Buyer inclination to
substitute
 Price-performance
trade-off of substitutes

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 Bargaining power of customer

 How easy it is for buyers to drive the prices down?

 Bargaining leverage
 Buyer volume
 Buyer information
 Brand identity
 Price sensitivity
 Threat of backward integration
 Product differentiation
 Buyer concentration vs. industry
 Substitutes available
 Buyers' incentives

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 Bargaining power of suppliers

 How easy it is for suppliers to increase their prices?

 Supplier concentration
 Importance of volume to supplier
 Differentiation of inputs
 Impact of inputs on cost or differentiation
 Switching costs of firms in the industry
 Presence of substitute inputs
 Threat of forward integration
 Cost relative to total purchases in industry

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 Intensity of competitive rivalry

 Number and strength of competitors

 Exit barriers
 Industry concentration
 Fixed costs/Value added
 Industry growth
 Intermittent overcapacity
 Product differences
 Switching costs
 Brand identity
 Diversity of rivals
 Corporate stakes

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 Legitimacy Strategies

 Using legitimacy strategies to achieve venture

growth.
 Legitimacy defined as conformity to the laws or to
rules
 legitimacy as "a generalized perception or
assumption that the actions of an entity are desirable,
proper, or appropriate within some socially
constructed system of norms, values, beliefs, and
definitions“
(DiMaggio & Powell, 1991)

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 Legitimacy Strategies

 Legitimacy is a relationship between the practices

and utterances of the organization and those that are
contained within, approved of, and enforced by the
social system in which the organization exists.
(Zimmerman and Zeitz, 2002)

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 REFERENCES
 Zimmerman, M. A., & Zeitz, G. J. (2002). Beyond survival:
Achieving new venture growth by building legitimacy. Academy of
Management Review, 27(3), 414-431.
 DiMaggio, P. J., & Powell, W. W. 1991. Introduction. In W. W.
Powell & P. J. DiMaggio (Eds.), The new institutionalism in
organizational analysis: 1-40. Chicago: University of Chicago Press.
 Baum, J. R., Locke, E. A., & Smith, K. G. (2001). A multidimensional
model of venture growth. Academy of management journal,
44(2), 292-303.
 Baum, J. R., & Locke, E. A. (2004). The relationship of
entrepreneurial traits, skill, and motivation to subsequent venture
growth. Journal of applied psychology, 89(4), 587.
 Bartlett, W., & Bukvic, V. (2001). Barriers to SME growth in
Slovenia. MOST: Economic Policy in Transitional Economies, 11(2),
177-195.
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 REFERENCES
 Gartner, W. B. (1985). A conceptual framework for describing the
phenomenon of new venture creation. Academy of Management
Review, 10(4), 696-706.
 SandbergW. R. and Hofer, C. W. (1987). Improving new venture
performance: The role of strategy, industry structure, and the
entrepreneur. Journal of Business Venturing, 2(1), 5-28.

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