ENTREPRENEURIAL STRATEGY AND COMPETITIVE DYNAMICS

CHAPTER EIGHT

Written Report

Prepared by:
Abrazaldo, Lorie Anne M.
Aquino, Julie Ann S.
Grajera, Angelica C.
Mayo, Ericka Jane
Mia, Charles Wilbert
Paner, Martin D.
Valderama, Krizette Aia T.

Course/Course Code:
Strategic Management (MNG253)

Professor:
Ms. Lalaine Manguiat

Date:
September 4, 2017
Recognizing Entrepreneurial Opportunities
Entrepreneurship - the creation of new value by an existing organization or new venture that involves
the assumption of risk.

Entrepreneurial Opportunities
Discovery phase

The process of becoming aware of a new business concept.

May be spontaneous and unexpected
May occur as the result of deliberate search for new venture projects or creative solutions to
business problems

Opportunity Recognition
It is the process of identifying potential ways to discover new business opportunities and at the same
time, identifying better ways of providing products and services that will meet the customers'
expectations.

Discovery Phase
During the discovery phase, an opportunity is identified and an idea is developed into a business form,
which often involves serving customers differently and better.
Includes:
1. Creating a business plan - whether to develop a new product or service or to innovate an existing one
2. Determine the required resources
- There is also a need to consider whether the customer would be willing to pay for a new
product or services.
- The firm must also determine the time and area to enter into the market.
- Questions that must be answered:
a. What market research should be performed in order to determine the market need
that the new product or service has to meet?
b. What competition exists for that product or service?
c. What resources are needed to bring the product or service to market?

Opportunity Recognition Process

Opportunity evaluation phase Involves analyzing an opportunity to determine whether it is viable and
strong enough to be developed into a full-fledged new venture.
Talk to potential target customers
Discuss it with production or logistics managers
Conduct feasibility analysis

Characteristics of Good Opportunities

1. Attractive The opportunity must be attractive in the marketplace; that is, there must be market
demand for the new product or service.
2. Achievable The opportunity must be practical and physically possible.
3. Durable The opportunity must be attractive long enough for the development and deployment to
be successful; that is, the window of opportunity must be open long
enough for it to be worthwhile.
4. Value Creating The opportunity must be potentially profitable; that is, the benefits
must surpass the cost of development by a significant margin.
Dynamic capitalism is the process of wealth creation and distribution resulting from the process of new
firm formation and growth through innovation. This activity causes the eventual decline and failure of
large businesses as new firms form, innovate, grow, and die. Old industry and market structures are
altered, and new industries and market structures are created

Four Quadrants of Dynamic Capitalism Typology

1. Economic Core Firms in Quadrant I (low rate of innovation and low rate of growth) are called the
economic core. This group represents the largest number of small firms. The rate of growth slows or
stops after the owner's objectives are met. Any effects from early innovations have been reduced,
therefore, the level of creative destruction of these firms is quite low. Examples of these firms include
most types of "Morn and Pop" corner stores, small printing businesses, and professional firms such as
doctors, dentists, and accountants. It is not the industry that defines these businesses as part of the
economic core, but instead their rate of growth and rate of innovation.

2. Ambitious Firms Firms in Quadrant II (low rate of innovation and high rate of growth) are called
ambitious firms. These firms grow rapidly based on a few early innovations. Some of these firms may
actually grow quite large and as a result, the creative destructive capacity of these firms may be
substantial. However, as the long-run innovations lose their "newness," the rate of growth declines.

3. Constrained Growth Firms Firms in Quadrant III (high rate of innovation and low rate of growth) are
called constrained growth firms. High rates of innovation require a choice or commitment to innovate,
and, perhaps more importantly, the input of substantial resources. Research and development, which
often leads to innovation, is expensive. Although not every innovation is costly in terms of upfront
capital commitments, often innovations are costly in terms of implementation, production down-time,
and other human capital costs including training, etc. Therefore, if the required resources are not
obtained, the rate of growth remains low. The constraints limiting growth may be seen as a result of
either characteristics of the entrepreneur or the environment.

4. Glamorous Firms Finally, firms in Quadrant IV (high rate of innovation and high rate of growth) are
called glamorous firms, referred to by other researchers as high potential and entrepreneurial. These
firms continually destroy markets, create wealth, and redistribute wealth. Creating glamorous firms
requires substantial amounts of all types of resources. Microsoft represents the theoretical ideal type of
firm in this quadrant, being a company whose growth is of an almost unprecedented scale and whose
innovations become international news.

Entrepreneurial Leadership
Three characteristics
1. Vision
2. Dedication and drive
3. Commitment to excellence

Entry Strategies
1. Imitative new entry a firms entry into an industry with products or services that capitalize on
proven market successes and that usually has a strong marketing orientation.
2. Adaptive new entry a firms 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.
Blue Ocean Strategy
Two Business Professors, W. Chan Kim and Renee Mauborgne, published, Blue Ocean Strategy in 2005
with the aim of showing business people how could they create uncontested markets. In which their
companies could flourish.
Kim and Mauborgne wanted to show how business could break through the normal zero-sum game of
competition- where companies with similar goals compete for scarce resources and customer dollars.

They believed that companies must find new ways to compete, by finding blue oceans- markets where
no other companies have established themselves. Their method involved reconstructuring market
boundaries, focusing on the bigger picture and getting the right strategic sequence. They believed their
blue ocean strategy was more effective than a red ocean strategy where companies compete to sell
very similar products in a single market.

Kim and Mauborgne realized that blue oceans wont remain so forever because other businesses will
always catch on and follow the leader but if this leading company remains focused on the bigger
picture and uses the blue ocean strategy they should be able to remain profitable.

Elements of a Blue Ocean Strategy

Create uncontested market space
Make the competition irrelevant
Create and capture new demand
Break the value/cost tradeoff
Pursue differentiation and low cost simultaneously.

Generic Strategies
Three Generic Strategies
Generic Strategies and Industry Forces

1. Cost Leadership
In cost leadership, a firm sets out to become the low cost producer in its industry. The sources of cost
advantage are varied and depend on the structure of the industry. They may include the pursuit of
economies of scale, proprietary technology, preferential access to raw materials and other factors. A
low cost producer must find and exploit all sources of cost advantage. if a firm can achieve and sustain
overall cost leadership, then it will be an above average performer in its industry, provided it can
command prices at or near the industry average.

Example: Mcdonalds

2. Differentiation
In a differentiation strategy a firm seeks to be unique in its industry along some dimensions that are
widely valued by buyers. It selects one or more attributes that many buyers in an industry perceive as
important, and uniquely positions itself to meet those needs. It is rewarded for its uniqueness with a
premium price.

Examples: Starbucks & Apple

3. Focus
The generic strategy of focus rests on the choice of a narrow competitive scope within an industry. The
focuser selects a segment or group of segments in the industry and tailors its strategy to serving them to
the exclusion of others.

The focus strategy has two variants.

(a) In cost focus a firm seeks a cost advantage in its target segment, while in
(b) differentiation focus a firm seeks differentiation in its target segment. Both variants of the focus
strategy rest on differences between a focuser's target segment and other segments in the
industry. The target segments must either have buyers with unusual needs or else the
 production and delivery system that best serves the target segment must differ from that of
other industry segments. Cost focus exploits differences in cost behaviour in some segments,
while differentiation focus exploits the special needs of buyers in certain segments.
Examples: Ferrari & Pepsi Cola

Competitive dynamics Intense rivalry, involving actions and responses, among similar competitors
vying for the same customers in a marketplace.
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.
resource similarity the extent to which rivals draw from the same types of strategic resources.