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					Corporate Entrepreneurship

        Salvatore Sciascia
           23/05/2003



                             1
        Section 1:
      The concept of
Corporate Entrepreneurship




                             2
     C.E. as action:
Entrepreneurship within
 existing organizations




                          3
 The field of Entrepreneurship
“The scholarly examination of how, by whom, and
  with what effects opportunities to create future
  goods and services are discovered, evaluated
  and exploited.
Consequently the field involves the study of
• sources of opportunities;
• the process of discovery, evaluation and
  exploitation of opportunities;
• and the set of individuals who discover, evaluate
  and exploit them”
                                                      4
  Corporate Entrepreneurship
• Strategic Renewal: “corporate entrepreneurial
  efforts that result in significant changes in an
  organization's strategy and structure”
• Corporate Venturing: “corporate
  entrepreneurial efforts that lead to the creation
  of new business organizations within the
  corporate organization”
• The concepts both suggest changes in the
  strategy and structure of an existing
  corporation, which may involve innovation for
  the industry.
                                                      5
             Independent                      Strategic Renewal
             Entrepreneurship
             (strictu sensu)
New
for the
market
                                        Internal
                                    I   Venturing            II
INITIATIVE
             Start-up                          Strategic Renewal

 Old for
 the
 market

                                        Internal
                                   IV   Venturing            III



                Outside any             Whithin an
                existing        CONTEXT existing
                organization            organization



              Independent                 Corporate
              Entrepreneurship            Entrepreneurship
              (latu sensu)                                         6
                                          (latu sensu)
    Designs for Internal Venturing
                      Special       Independent       Complete
                    Business Unit   Business Unit      Spin off



     Operational       New          New Venture
                                                     Contracting
     Relatedness     Department       Division


                                       Micro
                                                    Nurturing and
                     Integration    new venture
                                                     Contracting
                                     department



                               Strategic Importance
(Burgelman, 1983)
                                                                    7
        Types of Strategic Renewal

                         Rejuvenating     Leadership
                          Innovation       Innovation


            Degree of
             Industry
              Change

                        Catch up Change     Kaizen




                             Degree of Internal Change
(Baden-Fuller, 1995)                                     8
       The capacity to change


  Capacity to
  change
                                                 Leadership



                                  Rejuvenating


                       Catch up



(Baden-Fuller, 1995)                               Time       9
  C.E. as strategic
management approach




                      10
          Between two fields

i)                   ii)                 CE as
     SM                    SM
                                         managem
                                         ent
                                         approach


               E                               E
                       CE as
                       action:
                       Strategic
                       Renewal     CE as
                                   action:
                                   Internal
                                   Venturing

                                                    11
       Competition has a
         new meaning

• Competition as positioning (outside
  -in)
• Competition as dominating
  (inside-out)
• Competition as innovating

                                        12
(Miller, 1983)

  The entrepreneurial orientation


                 Innovation          Proactiveness



                              Risk taking



                                                     13
(Stevenson & Gumpert, 1985)

  The entrepreneurial continuum




                                  14
     Promoter Vs Trustee in
      Strategic Orientation
• Where is the           • What resources do
  opportunity?             I control?
• What resources do      • What structure
  I need to capitalize     determines our
  on it?                   organization’s
• What structure is        relationship to its
  appropriate?             mkt?
                         • What opportunity is
                           appropriate?

                                                 15
              A contextual model




(Burgelman, 1983)
                                   16
                  A new Business Idea
               Competitive system
                   Substitutes
                                                             WHO
                                             Niche/segment
   Suppliers      Competitors                  Clients


                                                                                  Stakeholders
                  New entrants        ncea
                                     son




                                                              con
                                 con




                                                               son
                                                                  anc
                                             Normann’s
                                                                    e
                                             Business Idea


                  WHAT                                                      HOW
Product system                                           Firm’s structure         Offered perspectives/
                                                                                  required contributions
                          consonance

                                                                                                     17
Behind the Business Idea...

                                                                Pursued
       Scope                                                     quality
                               Meaning of                      developm
                                 profit                           ent




                              Managerial and
                              organizational
                               ‘philosophy’



                  Role in                      Role towards main
                competitive                      stakeholders
                  arena
       Time                                                     Pursued
                                                              dimensional         Competitive system
      horizon
                                                                 growth
                                                                                     Substitutes
                                                                                                     Niche/s
                                                                      Suppliers      Competitors     egment
                                                                                                      Clients




                                                                                                     e
                                                                                                    anc
                                                                                                                              Stakeholders




                                                                                                   son
                                                                                     New entrants




                                                                                              con




                                                                                                                con
                                                                                                                 son
                                                                                                     Normann’s




                                                                                                                  anc
                                                                                                     Business Idea




                                                                                                                     e
                                                                   Product system                          Firm’s structure   Offered perspectives/
                                                                                                                              required contributions
                                                                                          consonance




                                                                                                                                                       18
…the Underlying Strategic
      Orientation
                                                   Pursued
  Scope                                             quality
                                                 development
                          Meaning of
                            profit




                         Managerial and
                         organizational
                          ‘philosophy’



             Role in                Role towards main
           competitive                stakeholders
             arena                                 Pursued
  Time                                           dimensional
 horizon                                            growth     19
Section 2:
 Cases




             20
Modafil - Bottega Verde




                          21
         Case discussion
• Wich are the main events in the history
  of Modafil?
• Describe Bottega Verde B.I. before and
  after the acquisition by Modafil.
• What is Modafil U.S.O.?
• Which were the tension determinants
  that brought Modafil to grow?
• Which role has the knowledge played
  within the entrepreneurial process?       22
                           1960. Modafil is established
                           as traditional wool mill



                           1965. Modafil starts
                           mail-order of knitting
1967. Euronova is
                           wool


                                                                                                                   Main
established as mail-
order company with
a catalogue of
miscellaneous
products

1971-78.
Euronova holds a
catalogue of              1973. Modafil
                                                                                                                  events
cosmetic                  abandons wool
products: Miss            production, to focus
Beauté                    on mail-order sale of
                                                          1987. Mondoffice is
                          knitting wool
                                                          established, focusing on mail
                                                          -order sale of office furniture
1989-92. Euronova is
sold to the German
group Otto Versand. Non
-competition agreement    1991. Within Modafil,
excluding cosmetics.      a catalogue with
                          household linen is
                          started (Ricami                                                   1992. Bottega Verde is bought
                          Esclusivi)                                                        from Mr. Morriconi. It is active in
                                                                                            mail-order sale of cosmetics,
                                                                                            purchased from outside
                                                                                            contractors.




                                                                                             1994. Bottega Verde buys a
                                                                                             cosmetics plant, hence starting to
                                                          1997-99. Mondoffice is             obtain its products internally.
                                                          sold to a foreign
                                                          multinational
                                                                                                                                  23
                                               Competitive system WHO


      1st B.I.
                                       • Increase of sales in volume
                                       • Predominance of traditional distribution channels
                                       • General tendency towards “complex” cosmetics

        (1)                            • Absence of competitors in mail-order distribution channel
                                       • Small, weak Italian competitors (e.g., L’Erbolario)
                                       • Few large European competitors (e.g., Yves Rocher)
                                       • Common practice of outsourcing production


                        WHAT
    Product system
• Average quality (compared to competitors)
                                                                  HOW
• “Natural-products”, “Herborist-like” image         Structure
• Average/high price (compared to competitors)   • “Randomly-developed” addresses file
• Risk of stock-breaks                           • Outsourcing of production (2-3 small suppliers)
• Absence of promotions and discounts            • Product-formulas developed by suppliers
• “Old fashioned” catalogues                     • In-house made catalogues
                                                 • Store in Pienza
                                                 • 3 employees for packaging
                                                 1 store salesperson
                                                 • Casual help from the 2 children
                                                                                                 24
                           Stakeholders

                      • Relatives (1 son, 1 daughter)
                      • Bank

1st B.I.
                      • 4 Employees



  (2)                                     7 Offered perspectives/
                                          8 required contributions
Structure (1981-92)
                                         7 Limited growth and
                                         development perspectives, due
                                         to a business idea stemming
                                         from the mere need to “survive”
                                         and have fun

                                         8 Unspecific required
                                         contribution
                                         8 Flexibility, due to hectic
                                         business activity and chaotic
                                         organization


                                                                           25
                    Competitive system
    • Stagnation of sales in volume            WHO
    • “Democratization” of cosmetic products
    • Tendency towards “natural” cosmetics
    • Increase in modern-distribution market share
                                                                        2nd B.I.
    • Decline or stagnation of some traditional distribution channels
    • Increasing request for quality-control in production
    • Absence of competitors in mail-order distribution channel
                                                                          (1)
    • Small, weak Italian competitors (e.g., L’Erbolario)
    • Few large European competitors (e.g., Yves Rocher)             HOW Structure
    • Common practice of outsourcing production
                                                      • Addresses file (built in 30 years )
                                                      • In-house made catalogues
                                                      • R&D laboratory
                           WHAT                       • Employees experienced in mail-order sales
        Product system                                • Naj-Oleari brand (for “kickers”, i.e., gifts)
• Average quality (compared to competitors)           • Call center in Pienza (75 part-time employees)
• Chemically and dermatologically tested products • Consultants (product development, raw
• Low price (compared to competitors)                   materials, quality control, plant layout,
• Customer-tailored promotions                          information system, MKTG policies)
• Frequent addition of new products                   • Pavia University (Doctor Berardesca,
• Reliable delivery (no stock-breaks)                   dermathologist): consultants for ‘live’
• On-line service                                       dermatological tests.
• Frequent discounts                                  • Substantial financial resources (from Euronova
• Good-image/low-quality “kickers” (i.e., gifts)        sell-off)
• “Natural-products”, “Herborist-like” image          After 1994
• “Modern”, professional catalogues                   • Chemistry and micro-biology laboratories
                                                                                                      26
                                                      • Property production plant
     Stakeholders

• Relatives (wife, 2 sons, 1 daughter, in-laws)
• Employees                                            7Offered perspectives/
• Banks                                                8required contributions
• Local community (Biella province)

                                                  7 Diversified, growing firm, making
                                                    use of advanced managerial tools.
                                                  7 Responsibility position in growing,
                                                    managerially-sophisticated firms (for
                                                    family members).
                                                  7 Secure job (for employees and local
                                                    community)
    2nd B.I.                                      7 High debt/equity ratio, but considerable
                                                    cash-flows from operations (for banks)

      (2)                                         8 Work activities coherent with
                                                    entrepreneur’s vision
                                                  8 Willingness to work in a partially
                                                    informal, unstructured setting
                                                  8 Willingness to learn (both from internal
                                                    and external sources, i.e., consultants)
                                                  8 Work experience in mail-order business
                                                    (from higher-rank employees)
                                                                                               27
Scope.
• Mail-order.
• “Traditional”, “natural”
                                        U.S.O.                                                  Quality. Stable,
                                                                                                average quality level
  image (when                                                                                   (appropriate to
  appropriate).                          Profit.
                                                                                                targeted segments)
• Location reinforcing                   • Long term objective for
  image (when                              the family
  appropriate).                          • Short term profits
• Broadest targeted                        systematically
  market                                   reinvested



                                    Managerial philosophy.
                                    • Sophisticated managerial tools
                                    • External consultants
                                    • ‘Closed’ governance structure
                                    • ‘Autocratic’ managerial style
                                    • Informal organizational structure
                                    • Incremental commitment of internal
                                      resources
                                    • High propensity towards using
                                      external resources
                                    • High propensity towards
                                      ‘calculated’ risk                    Stakeholders.
             Role in Competition.                                          • Securing a future to successors
             Gradually but                                                 • Offering a secure job to
             aggressively                                                    employees
             dominating entered                                            • Employing people from local
             competitive arenas                                              communities
                                                                           • Developing entrepreneurship
                                                                                                       Growth.
 Time. Long-term, i.e.,
                                                                                                       Primary
 future generations of
                                                                                                       objective
 successors                                                                                                             28
                                      Tension to growth
                 Securing a
                responsibility
entrepreneur’                     Stagnation                                ‘Diffused tension’
                  position in
  s growth                         of Modafil    Sell-off of                determinants
                   growing,
 orientation                      market after   Euronova
                managerially
                                     sharp       (1989-92)
                sophisticated
                                    decline
                     firms
                                                               Availability of    Availability of                                      ‘Direct tension’
                                                                forty-years       address files                                         determinants
                                        Reduced                  mail-order         and data-
 1   Strong will to grow          2                                sales          analysis tools
                                         growth
                                        potential               experience.      and techniques

                                         3 Availability of                                                                            'Cultural' family
                                       financial resources               Existing growth               Non           Previous            tendency
                Tension to grow                                                            4
                                                                            potential               competition   experience (Miss   towards 'natural'
                                                                                                    agreement         Beauté)            products



                                           Tension to grow                                                           Direct tension
                                                                                                            5     towards a specific
                                          in the mail-order
                                                sector                                                               business area
                                                                                                                   (i.e., cosmetics)




                                                                                  Tension to grow in
                                                                                 the mail-order sale of
                                                                                      cosmetics
                                                                                                                                                          29
   The role of knowledge
                                          External context/Environment



    Organizational context
                                         External resources/competencies




    Organizational and
       Governance
        Structure
                                               Attitude towards
                                                                               Content.
                                      resource/knowledge combinations.
                                                                               Entrepreneurial
                                           Pursuit of entrepreneurial
                                                                               behavior:
                                       opportunities, regardless of internal
     Growth orientation                  resources currently controlled




     Strategic context                    Internal resources/competencies




Behavioral context/Past experiences
                                                                                                 30
Barilla - Mulino Bianco




                          31
                   Barilla
• It’s the largest pasta maker in Italy; it holds
  one of the most appealing brands for the
  Italian consumers.
• This family-owned giant has revenues for 2
  billions Euros, employs 8.500 persons,
  produces in 25 different plants (5 of them are
  abroad) and exports in more then 100
  countries.
• Its Italian market share (in pasta) is 25%

                                                    32
             Mulino Bianco
• Mulino Bianco is a line of products that Barilla
  funded 25 years ago: under this umbrella-
  brand we find biscuits, cakes, sweet snacks,
  crackers and bread (the so called “bakery
  products”).
• In all these markets Mulino Bianco has a
  leading position in Italy.
• The division is growing so fast that MB sales
  count for about 50% of the Barilla’s group
  turnover
                                                     33
    A growing and innovating
          company (1)
• 1877 Pietro Barilla settles a pasta and bread shop in
  Parma:
• 1910 he settles the first plant: 80 employees produce 8000
  kilos of pasta daily
• 1911 the famous corporate logo is created
• 1936 the number of employees reaches 700
• 1950 the Barillas visit the States: they come back to Italy
  with new ideas to improve efficiency and customer
  satisfaction
• 1955 Barilla is the first company selling pasta in packs

                                                           34
         A growing and innovating
               company (2)
• 1960 The company become a PLC; it employees
  1300 persons
• 1970 they build a plant in Pedrignano (it’s still the
  largest pasta plant in the world)
• 1971 W.R.Grace buys Barilla for over $70 million;
  they start diversification
• 1975 they fund Mulino Bianco
• 1979 W.R.Grace sells the company to the Barillas for
  $65 million; they build Barilla France, the first
  foreigner subsidiary


                                                          35
    A growing and innovating
          company (3)
• 1987 they structure their internationalization process
  and start focused advertising campaign in several
  foreign countries
• 1991 the Greek pasta leader Misko is taken over
  1992 They take over Pavesi, well known biscuits
  producer
• 1996 On average they reduce prices by 15% to face
  the strong competition of Hard Discount and own
  label products; fresh pasta production starts
• 1999 They buy Wasa from Novartis
• 2000 Barilla launchs the filled dried pasta
• 2002 Barilla launchs the frozen pasta                    36
      Tension to Corporate
       Entrepreneurship
• Mature pasta market
• Declining financial results
• Mono-business company (high risk)




                                      37
    In which industry to diversify?
•   growing market
•   low competition
•   good profitability
•   possibility to innovate
•   relatedness to pasta
                                          WHO

                              Biscuits!

                                                38
      The penetration strategy
Þ step by step they introduce other bakery products under
  the same umbrella-brand:
· 1976 stick bread and toasted bread slices, already produced by
  Barilla, are shifted under MB brand
· 1977 sweet snacks and Pan carrè
· 1983 cream filled biscuits:
· 1985 crackers
· 1986 fresh cakes

Þinside the same segment, they enlarge the range products.
• this policy was implemented because, studying the customer
  behavior, a need of change was found: after some months he is
  in need to change kind of biscuit.
                                                                   39
                  The business Idea
  WHAT
                                                              HOW

üNew Brand “Mulino Bianco”
ü Image of traditional, simple and   üInvestments in R&D
 genuine pdt                         üFrom external to internal production
üOriginal shapes                     üAccurate supplier selection
üInnovating packaging                üSynergy in distribution
üStrong promotion and advertising    üAdvanced information system
üHigh price
üWide range




                                                                        40
    Corporate Support
•   Financial
•   Organizational
•   Bargaining power
•   Brand reputation
•   Efficiency culture
•   Approach to the customer


                               41
              Conclusions
• Today competition means spotting
  entrepreneurial opportunities
• Innovation can be pursued in different ways
  (SR vs IV), requiring different organizational
  levers
• Corporate Entrepreneurship occurs with no
  regards to company size
• Develop an entrepreneurial orientation
• The success of entrepreneurial development
  is related mostly to immaterial factors
                                                   42

				
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