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Strategic Issues in Entrepreneurial Ventures and Small Businesses

Prof. Rushen Chahal

Entrepreneurial Ventures & Small Businesses

99% of all businesses


23 million small businesses 60% -80% new jobs annually

Entrepreneurial Ventures & Small Businesses

Small business firm


Independently owned & operated Not dominant in field Not engaged in innovative practices Employs fewer than 500 people and sales of less than $20 million annually

Entrepreneurial Ventures & Small Businesses

Entrepreneurial venture
Primary goals profitability and growth Characterized by innovative strategic practices

Entrepreneurial Ventures & Small Businesses

Differences
Not in types of goods and services but in Fundamental views on growth and innovation

Entrepreneurial Ventures & Small Businesses

Entrepreneur
Ultimate strategist All 3 levels
  

Corporate Business Functional

Entrepreneurial Ventures & Small Businesses

Lack of strategic planning in small business


Not enough time Unfamiliar with strategic planning Lack of skills Lack of trust and openness

Entrepreneurial Ventures & Small Businesses

However, a survey of the high growth Inc.500 firms revealed that 86% performed strategic planning and 94% of those reported improved profits.


Degree of formality
Process far more informal in small companies than in large corporations

Informal questions to begin strategic management process

Entrepreneurial Ventures & Small Businesses




Strategic decision-making process for entrepreneurial ventures


Develop basis business idea


Product/service with target market/customers

Scan external environment




Locate factors of opportunity/threat

Scan internal factors




Relevant to the new business

Strategic decision-making process for entrepreneurial ventures

Analyze strategic factors




Current situation using SWOT

Decide go or no go


Opportunity to go

Generate business plan




Transform idea into reality

Entrepreneurial Ventures & Small Businesses

Entrepreneurial Ventures & Small Businesses

Advisory Boards
External business people voluntary Discuss strategic and other issues

Entrepreneurial Ventures & Small Businesses

Sources of Innovation (Peter Drucker)


The unexpected The incongruity Innovation based on process need Changes in industry or market structure Demographics Changes in perception, mood, meaning New knowledge

Entrepreneurial Ventures & Small Businesses

Factors affecting new venture success


Structure of industry (rapidly changing industries vs. stable industries). Business strategy of new venture (focus differentiation). Behavioral characteristics of entrepreneur

Entrepreneurial Ventures & Small Businesses

Entrepreneurial Characteristics
Identify opportunities better Sense of urgencyaction oriented Detailed knowledge-physical stamina Access to outside help

Entrepreneurial Ventures & Small Businesses

Sub-stages of small business development


Existence Survival Success (disengagement vs. growth) Take-off Resource maturity

Entrepreneurial Ventures & Small Businesses

Evaluation and Control


Line between debt and equity is blurred Lifestyle is a part of financial statements Standard financial formulas dont apply Personal preference determines financial policies Banks combine personal and business wealth

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