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THE ENTREPRENEUR

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THE ENTREPRENEUR Powered By Docstoc
					       Week 2


Analysis of Resources and
     Opportunities
      THE PROCESS OF
        CREATIVITY
• CONNECTION

•    DISCOVERY

•        INVENTION

•                APPLICATION
         REQUIREMENTS FOR
            CREATIVITY
• TIME
      • Reflection
• CONFIDENCE
      • Value your ideas
• STIMULATION
      • Diversity in experiences and acquaintances
• RECEPTIVE CULTURE
      • Celebration of creativity & even mistakes
• DISCIPLINES
      • Think outside the box; be a contrarian & assess your
        environment.
How can we become more aware
      of opportunities?
• Keep a journal
• Write down at least one example per day
• Identify someone who notices, complains,
  takes strange positions, etc.
• OTHER IDEAS THAT YOU HAVE????
    DRUCKER’S 7 SOURCES OF
        OPPORTUNITY
                SEE: Peter Drucker – Innovation & Entrepreneurship

•   The Unexpected -Success, failure & events
•   Incongruities - MSEM program
•   Process needs - Capital Steel
•   Industry/Market Structure - telecomm
•   Demographics - Personal Resources, Inc.
•   Changes in perception
•   New Knowledge & the Bright Idea
       • Riskiest & hardest
           HOW DO WE DO
          ENVIRONMENTAL
             ANALYSIS?
•   Scanning
•   Monitoring/Tracing
•   Forecasting
•   Assessing - Scenarios are particularly
    helpful
         ENVIRONMENTAL
            ANALYSIS
•   The Global Economy
•   Science and Technology
•   Sociodemography
•   Ecology
•   Government and Regulatory Issues
        The Global Economy

• Business conditions

• Structural changes

• Trade patterns

• International agreements
      Science and Technology
• Scientific discoveries - beware of time
• Inventions - Patents on the net
• Innovation - Commercialization AND
  Continuous Improvements
            Sociodemography

•   Population size and growth
•   Age profile
•   Ethnic profile
•   Immigration
•   Values
•   Social trends
                  Ecology

•   Environmental constraints
•   Implications of environmental improvement
•   Sustainable development
•   “Green” engineering
     Government and Regulatory
             Issues
•   Stakeholders
•   Politics
•   Assistance--> opportunities
•   Regulation--> “          “
•   Licensing
•   Antitrust laws
•   Government spending & incentives
 The Resource Based Theory of
       Entrepreneurship
• The theory of the firm
     • Pure Competition
     • Monopoly
• Sustainable Competitive Advantage - SCA
• SCA comes from Strategic Resources
     •   Valuable
     •   Rare
     •   Hard to Copy
     •   Non-substitutable
      Strategic resources produce
                 SCA’s
• Strategic Resources are

  –   RARE - not generally available
  –   VALUABLE - people pay for the uniqueness
  –   HARD TO COPY- e.g., culture, complexity
  –   NON-SUSTITUTABLE - legal barriers, stars
ASSESSING OPPORTUNITIES
•   TALK TO CUSTOMERS!!!!!!!
•   Identify SCA’s
•   Assess capabilities
•   Seek competitive advantage
•   Develop strategy
•   Monitor feedback
      • Identify resource gaps
      • Replentish resources & refresh technology
• TALK TO CUSTOMERS!!!!!!!
    Questions to determine business
               potential
• WHAT is the product or service?
         – FEATURES vs. BENEFITS

•   WHO is the customer?
•   WHY will she buy?
•   HOW can she be reached?
•   WHO are the competitors?
•   HOW MUCH will people pay?
•   HOW MUCH will it cost?
•   HOW MUCH will sell?
TAKE A VALUE CHAIN VIEW
Resources   Production   Distribution   Service
        TYPES OF RESOURCES
             “PROFIT”
•   Physical - unique source of raw materials
•   Reputational - integrity, experience, image
•   Organizational - need for speed & quality
•   Financial - Unlikely SCA source?
•   Intellectual and human
       • Knowledge and relationships
• Technological - Patents, copyrights, secrets
    Framework of Competitive
           Analysis
• Michael Porter has contributed by applying
  industrial organization economics to
  business analysis
• Understanding each dimension of the
  marketplace is critical to survival
        ENTRY BARRIERS
• Economies of scale
        – The larger the enterprise, the lower the average cost
        – Due to indivisibilities, e.g., Research & Development
        – Prevalent in many high tech businesses

• Product differentiation
        –   Brands can be enormously valuable
        –   Proprietary features can insulate
        –   Switching costs can be significant
        –   Distribution channels are often critical
        ENTRY BARRIERS
           continued
• Capital Requirements
       – Limited but real protection for existing firms
       – Often overcome by alliances

• Absolute Cost Advantages
       – Can come from intellectual property
       – Learning can be a major source
       – New technology is often the solution
         ENTRY BARRIERS
            continued
• Government & Institutional Barriers
     • Licensing
     • Regulatory hurdles
     • De Facto constraints - prejudice, customs, etc.
• Expected Retaliation
     • Price, promotion, legal, supply squeezes, etc.
• Barriers to exit
     • Reduce willingness to enter
     • Arise due to long term contracts, specialized assets
       ENTRY BARRIERS
          continued
• THE PARADOX OF
  ENTREPRENEURSHIP

 – Easy entry-->lots of competitors-->low profit

 – Hard entry-->high costs of entry-->low profit
          SUPPLIER POWER
•   Input Control
•   Switching costs
•   Substitute availability
•   Concentration i.e., size relative to market
•   Importance of the volume to the supplier
•   Cost role in total cost
•   Impact of inputs on cost or differentiation
•   Integration threats - Backward & Forward
            SUBSTITUTES
• Price
• Switching costs
• Propensity to substitute
 RIVALRY DETERMINANTS
• How will existing firms react to entry?
• Determinates
  –   Growth                Concentration&Balance
  –   Fixed costs           Complexity
  –   Overcapacity          Diversity of competitors
  –   Product differences   Corporate stakes
  –   Brand identity        Exit barriers
  –   Switching Costs       Bureaucracy&arrogance
           BUYER POWER
–   Concentration         Price/All purchases
–   Volume                Product differences
–   Switching costs       Brand
–   Information           Impact on quality
–   Integration threats   Buyer profits
–   Pull through          Decision maker
                                incentives
           TECHNOLOGY
                   (Again)


• Major driver in many businesses.
• Seldom sufficient to make a firm the
  winner.
• Rapid changes alter methods of planning
  and implementation.
  COMPETITIVE ANALYSIS
• No competitors is NOT good news!
• Ideally, competitors have established a
  market and are vulnerable.
• Grids like Figure 4.2 are a good way of
  analyzing competitors.
• Use both secondary & primary data
• TALK TO CUSTOMERS!!!!
       Entry Strategies

  Using analysis of resources and
markets to be more effective in entry
WEDGES-Ways Into the Market
       (SEE P. Drucker – Innovation and Entrepreneurship & M. Dollinger -
                      Entrepreneurship:Strategies &Resources)


 –   First Mover - New Product or Service
 –   Low cost provider
 –   Using a niche
 –   Parallel competition – (See Dollinger – Entrepreneurship:Strategies
     &Resources)

       • Creative imitation e.g., Wendy’s
       • Entrepreneurial judo - Hit ‘em where they ain’t!
       • Existing firm behavior which invites judo
            – Not Invented Here Syndrome
            – Skimming the market
            – Technical tunnel vision
                  Wedges
                (continued)
• Customer sponsorship
• Parent company facilitation
     • spin-off, licensing, relinquishment
     • BEWARE - Ownership & non-compete constraints
• Government
• Green marketing
      Resource-Based Strategy
• Goal is to protect “rent” or abnormal profits
• First mover advantage is not an SCA
• Growth requires balance, focus & synergy
• Goal is idiosyncratic rather than contestable
  synergy
• Quality is unlikely to provide SCA by itself
 Types of Market Environments
• Industry life cycle - S-shaped curve
        – See Figure 4.1 in your text
  – EMERGING - creating utility, creating value,
    changing reality
  – TRANSITIONAL - Going through shakeout
  – MATURING - Consolidation/stability
  – DECLINING - Decreasing profits & sales

  – You can make or lose money in all of these!
 Types of Market Environments
          (continued)
• Fragmented industries
  – funeral homes, trash removal, car dealers
  – significant opportunities here
  – redefinition, management application,
    unbundling, standardization, niches
• Global industries
  – Increasing globalization in all types of fields
  – Global behavior is essential

				
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posted:5/26/2012
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