Entrepreneurial Strategy:

Generating and Exploiting New

Entries

Chapter: 13
Opening Profile
 Justin parker
 Australian entrepreneur
 He was thrown out of Uni for gross failing --His first entrepreneurial venture
failed – he started his mobile pizza business when he was 18 years old –
local council terminated permits for these type of mobile food business
 He said, “ I am not sure that straight after the failure I was that motivated
to get back into it. I knew I enjoyed business and was frustrated that I
couldn’t make it work, but I felt more like a failure than a ‘ success waiting
to happen’. My confidence was hurt and I was looking for a lot more
security. I had few option but no clear vision. When opportunity came along
to go back to university, I grabbed it with both hands. University gave me
an options”.
 Justin’s second attempt at university became him an exceptional student
with a passion to learn and passion to apply that knowledge
 He majored in accounting and had his first job out of Uni with Ernst and
Young
 Page 423
New Entry
 Offering a new product to an established or new
market, offering an established product to a new
market, or creating a new organisation
 Entrepreneurial strategy represents the set of
decisions, actions, and reactions that first generate,
and then exploit over time
 Entrepreneurial strategy has three elements:
 The generation of new entry opportunity
 The exploitation of new entry generation
 Exploitation back to stage 1

 Figure 13.1
Generation of a new entry
opportunity
 Resources as a Source of Competitive Advantage
 When a firm engages in a new entry, it is hoped that this new entry will
provide the firm with a sustainable competitive advantage
 What are resources?
 The inputs into the production process, such as machinery, financial
capital, and skilled employees
 What is a bundle of resources?
 These are the basis of the firm’s superior performance over competitors
for an extended period of time
 The resources must be valuable, rare and inimitable
 The bundle of resources is:
 Valuable: when it enables the firm to pursue opportunities, neutralize threats
and offer products and services that are valued by the customers
 Rare: when it is possessed by few, if any competitors
 Inimitable: when replication of this combination of resources would be difficult
and costly for potential competitors
 Example: Breeze Technology – ventilation of athletic shoes
 Page 426
Generation of a new entry
opportunity
 Creating a Resource Bundle that is Valuable, Rare and
Inimitable
 The ability to obtain, and then recombine, resources
into bundle that is valuable, rare and inimitable
represents an important entrepreneurial resource
 Knowledge is built up over time through experience
and it resides in the mind of the entrepreneur and in
the collective mind of management and employees
 Knowledge is important for generating a bundle of
resource that will lead to the creation of a new
venture with a long and prosperous life --- customers
plays an important source of providing innovation
 Example – mountain bike enthusiast
 Page 426-427
Creating a Resource bundle that is
valuable, Rare and Inimitable
 Market Knowledge
 It is a basis for generating new entry opportunities
 Refers to the entrepreneur’s possession of
information, technology, know-how, and skills that
provide insight into a market and its customers
 Technological Knowledge
 It is also a basis for generating new entry
opportunities
 Refers to the entrepreneur’s possession of
information, technology, know-how, and skills that
provide insight into ways to create new knowledge.
 The technological knowledge might lead to a
technology that is basis for a new entry
 Page 427-428
Assessing the attractiveness of a
new entry organization
 After creating a new resource combination,
the entrepreneur needs to determine
whether it is valuable, rare and inimitable
by assessing whether new product are
sufficiently attractive to be worth exploiting
and developing.
 Information on a New Entry
 Comfort with making a decision under
uncertainty
 Decision to exploit or not to exploit the new
entry
 Page 429
Assessing the attractiveness of a
new entry organization
 Information on a new entry
 Prior knowledge and information search
 The prior market and technological knowledge used to
create the potential new entry can also be of benefit in
assessing the attractiveness of a particular opportunity
 Window of opportunity
 The dynamic nature of viability of a new entry can be
described in terms of a ‘window of opportunity’.
 When the window is open, the environment is favorable
for entrepreneurs to exploit a product
 When window is closed, leaving the environment for
exploitation unfavorable
 Page 429-430
Assessing the attractiveness of a
new entry organization
 Comfort with making a decision under uncertainty
 The less information and the likelihood of closing of ‘window of
opportunity’ provides a dilemma for entrepreneurs
 HOW?
 This dilemma involves a choice of which error they prefer to
commit:
 Error of commission
 It occurs from the decision to pursue the new entry
opportunity only to find out later that the entrepreneur had
overestimated his or her ability to create customer demand or
to protect the technology from imitation by competitors
 Error of omission
 It occurs from the decision not to act on the new entry
opportunity, only to find out later that the entrepreneur had
underestimated his or her ability to create customer demand
and to protect the technology from imitation by competitors
 Page 430
Assessing the attractiveness of a
new entry organization
 Decision to exploit not to exploit the new
entry
 The decision on whether to exploit or not to
exploit the new entry opportunity depends on:
 whether the entrepreneur has what he or she
believes to be sufficient information to make a
decision
 whether the window is still open for this new
entry opportunity
 figure 13.2
 Page 430
Entry strategy for new entry
exploitation
 The common catch phrase used by entrepreneur
when asked about their source of competitive
advantage is “ Our competitive advantage comes
from being first”.
 First movers develop a cost advantage
 Costs are reduced because the firm can spread its fixed
cost over a greater number of units (economies of
scale)
 First movers face less competitive rivalry
 More market share to first movers
 First movers can secure important channels
 Good and strong relationships with the suppliers and
distribution channels
 Page - 431
Entry strategy for new entry
exploitation
 First movers are better positioned to satisfy
customers
 They have a chance to select and secure the most
attractive segment of the market, position themselves
at the centre of the market, establish their products as
the industry standard
 First movers gain expertise through participation
 They have the opportunity to learn from the first
generation products and improve
 Monitor changes
 Built up their networks, which can provide early
information about attractive opportunities
 Page 431
Risk reduction strategies for new
entry organization
 A new entry involves considerable risk for
the entrepreneur and his or her firm
 Risk here is – probability, magnitude, of
downside loss which could result
bankruptcy
 To reduce uncertainties, there are two
strategies:
 Market Scope Strategy
 Imitation strategy
 Page 439
Risk reduction strategies for new
entry organization
 Market Scope Strategies
 Scope is a choice about which customer groups to serve and
how to serve them
 There are two types of strategies:
 Narrow scope strategy
 A narrow scope strategy focuses the firm on producing customised
products, localised business operations
 By focusing on a specific group of customers, the entrepreneur can
build up specialized expertise and knowledge
 The high end of the market represents a highly profitable niche
that is well suited to those firms that can produce customized
products
 Broad scope strategy
 A broad scope strategy can be thought of as taking a portfolio
approach to dealing with different market segments
 By offering a range of products across many different market
segments, the entrepreneur can gain an understanding of the
whole market by determining which products are the most
profitable
 Page 440
Risk reduction strategies for new
entry organization
 Imitation Strategies
 Copying the practices of other firm
 Entrepreneur may simply find it easier to imitate the
practices of a successful firm than to go through the
process of a systematic and expensive
 An imitation strategy cannot be rare or inimitable
 Types of imitation strategies:
 Franchising
 MacDonald’s
 Me-too Strategy
 Copying products that already exists in the market. The
successful firms occupies a prime position in the minds of
customers, and now the imitator is there too and hopes to
be considered by customers
 Ice cream shops
 Page 441