partpart
22
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.
Copyright © by South-Western College Publishing. All rights reserved. 2–3
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.
Copyright © by South-Western College Publishing. All rights reserved. 2–4
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
Copyright © by South-Western College Publishing. All rights reserved. 2–5
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
Copyright © by South-Western College Publishing. All rights reserved. 2–6
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)
Copyright © by South-Western College Publishing. All rights reserved. 2–7
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
Copyright © by South-Western College Publishing. All rights reserved. 2–8
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
Copyright © by South-Western College Publishing. All rights reserved. 2–9
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
Copyright © by South-Western College Publishing. All rights reserved. 2–10
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
Copyright © by South-Western College Publishing. All rights reserved. 2–11
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?
Copyright © by South-Western College Publishing. All rights reserved. 2–12
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
Copyright © by South-Western College Publishing. All rights reserved. 2–13
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.
Copyright © by South-Western College Publishing. All rights reserved. 2–14
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
Copyright © by South-Western College Publishing. All rights reserved. 2–15
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
Copyright © by South-Western College Publishing. All rights reserved. 2–16
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.
Copyright © by South-Western College Publishing. All rights reserved. 2–17
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
Copyright © by South-Western College Publishing. All rights reserved. 2–18
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)
Copyright © by South-Western College Publishing. All rights reserved. 2–19
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.
Copyright © by South-Western College Publishing. All rights reserved. 2–20
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.
Copyright © by South-Western College Publishing. All rights reserved. 2–21
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.
Copyright © by South-Western College Publishing. All rights reserved. 2–22
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
Copyright © by South-Western College Publishing. All rights reserved. 2–23
Sustaining Competitive AdvantageSustaining Competitive AdvantageSustaining Competitive AdvantageSustaining Competitive Advantage
Fig. 2.7
Advantage#1
Advantage#2
Advantage#3
Advantage#4
Time
Top Related