Chapter 3

ntrepreneurial Strategy:
enerating and Exploiting
ew Entries
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Learning Objectives
To understand that the essential act
of entrepreneurship involves new
entry
To be able to think about how an
entrepreneurial strategy can first
generate, and then exploit over time,
a new entry
To understand how resources are
involved in the generation of
opportunities

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Learning Objectives
To acknowledge that
entrepreneurship involves making
decisions under conditions of
uncertainty
To be able to assess the extent of
first-mover advantages and weigh
them against first-mover
disadvantages
To understand that risk is associated
with newness, but there are

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New Entry
Includes:
New product in an established or new
market
Established product in a new market
A new organization

Entrepreneurial strategy
Set of decisions, actions, and reactions
that generate, and exploit, a new entry
over time
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Figure 3.1 - Entrepreneurial Strategy:

The Generation and Exploitation of New Entry
Opportunities

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Generation of a New Entry

Opportunity
Resources
Inputs into the production process
Source of competitive advantage
Basic building blocks to a firms
functioning
Can be combined in different ways
Provide capacity to achieve superior
performance when they are:
Valuable
Rare
Inimitable

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Generation of a New Entry

Opportunity
Creating a resource bundle that is
valuable, rare, and inimitable
Entrepreneurial resource
Ability to obtain, and recombine, resources
into a bundle that is valuable, rare, and
inimitable
Drawn from the unique experiences and
knowledge of the entrepreneurs

Market knowledge
Information, technology, know-how, and
skills that provide insight into a market and
its customers

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Generation of a New Entry

Opportunity
Technological knowledge
Provides insight into ways to create new
knowledge

Assessing the attractiveness of a

new entry opportunity depends on:
The level of information
Willingness to make a decision without
perfect information

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Generation of a New Entry

Opportunity
Information on a new entry
More knowledge ensures:
Entrepreneur starts from a position of less
ignorance
Less time is spent on information search

Window of opportunity: Favorable

environment for entrepreneurs to exploit
a new entry

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Generation of a New Entry

Opportunity
Comfort with making a decision
under uncertainty
Likelihood that the window of
opportunity will close leads to the
dilemma of choosing between
Error of commission: Negative outcome
from acting on the perceived opportunity
Error of omission: Negative outcome from
not acting on the new entry opportunity

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Figure 3.2 - The Decision to Exploit

or Not to Exploit the New Entry
Opportunity

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Generation of a New Entry

Opportunity
Decision to exploit or not to exploit
the new entry opportunity
Assessment of a new entrys
attractiveness

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Figure 3.3- Factors That Influence the

Decision to Enter the Market Now or to
Delay Entry

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Entry Strategy for New Entry

Exploitation
Environmental instability and firstmover (dis)advantages
Firm performance depends upon the fit
between external environment and
resources
First movers are unaware of key success
factors
Emerging industries

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Entry Strategy for New Entry

Exploitation
Demand uncertainty: Difficulty in
estimating:
Potential size, growth, and the key
dimensions along which a market will grow

Technological uncertainty: Difficulty

in assessing whether:
The technology will perform
Alternate technologies will emerge and
leapfrog over current technologies

Adaptation
Persistence and determination can inhibit
the ability to adapt

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Entry Strategy for New Entry

Exploitation
Customers uncertainty and firstmover (dis)advantages
Uncertainty for customers
Difficulty in accurately assessing whether
the new product or service provides value

Overcome customer uncertainty by:

Informational advertising
Highlighting product benefits over
substitutes

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Entry Strategy for New Entry

Exploitation
Creating a frame of reference for potential
customers
Educating customers through demonstration
and documentation

Lead time and first-mover

(dis)advantages
Lead time
Grace period in which the first mover
operates in the industry under conditions of
limited competition

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Entry Strategy for New Entry

Exploitation
Lead time can be extended by:

Building customer loyalties

Building switching costs
Protecting product uniqueness
Securing access to important sources of
supply and distribution

Switching costs: Must be borne by

customers if they:
Stop purchasing from the current supplier
Begin purchasing from new supplier
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Risk Reduction Strategies for

New Entry Exploitation
Risk
Probability, and magnitude, of downside
loss
Derived from uncertainties over:
Market demand
Technological development
Actions of competitors

Strategies to reduce uncertainties

Market-scope strategies
Imitation strategies
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Market Scope Strategies

Scope: Choice about which customer
groups to serve and how to serve
them
Narrow-scope strategy
Offers small product range to a small
number of customers to satisfy a
particular need
Focuses on:
Producing customized products
Localized business operations
High level craftsmanship

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Market Scope Strategies

Broad-scope strategy
Offers range of products across different
market segments
Helps gain better understanding of the
whole market
Opens the firm up to many different
fronts of competition
Reduces risks associated with market
uncertainties
Increases exposure to competition
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Imitation Strategies
Copying practices of other
Advantages
Help develop skills necessary to be
successful in the industry
Provide organizational legitimacy
Reduce costs associated with R&D
Reduce customer uncertainty over the
firm
Make the new entry look legitimate from
day one
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Imitation Strategies
Types of imitation strategies
Franchising
Acquiring a proven formula for new entry
from a franchisor

Me-too strategy
Copying exist products and attempting to
build an advantage through minor variations

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Risk Reduction Strategies for

New Entry Exploitation
Liabilities of newness
Negative implications arising from
an organizations newness
Arise from:
Costs in learning new tasks
Conflict arising from overlap or gaps in
responsibilities
Informal structures of communication

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Risk Reduction Strategies for

New Entry Exploitation
Assets of newness
Positive implications arising from an
organizations newness
Learning advantage

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