entrepreneurship chapter 2

7/24/2019 Entrepreneurship chapter 2

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Chapter 2: Strategic Mgt 1Copyright 2003 Prentice Hall Publishing Company

Strategic Managementand the Entrepreneur

Strategic Managementand the Entrepreneur


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A Major Shift . . .A Major Shift . . .

. . . From financial capital to. . . From financial capital to

intellectual capital.intellectual capital.

HumanHuman

StructuralStructural

CustomerCustomer


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Strategic ManagementStrategic Management

Is crucial to building a successful business.Is crucial to building a successful business.

Involves developing a game plan to guide aInvolves developing a game plan to guide a

company as it strives to accomplish its missioncompany as it strives to accomplish its missiongoals and objectives and to !eep it on itsgoals and objectives and to !eep it on its

desired course.desired course.


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Is Strategic "lanning #eally $hatIs Strategic "lanning #eally $hat

Important%Important%

Study of &'' small companies(Study of &'' small companies(

)ne of the most significant factors in)ne of the most significant factors in

distinguishing gro*ing companies from thosedistinguishing gro*ing companies from thosein decline( use of a *ritten business plan.in decline( use of a *ritten business plan.

Another study(Another study(

)nly +,- of small companies had a long)nly +,- of small companies had a longrange plan in *riting.range plan in *riting.


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Strategic Management andStrategic Management and

Competitive EdgeCompetitive Edge

/eveloping a strategic plan is crucial/eveloping a strategic plan is crucial

to creating ato creating a competitive advantagecompetitive advantage

the aggregation of factors that sets athe aggregation of factors that sets a

company apart from its competitorscompany apart from its competitors

and gives it a uni0ue position in theand gives it a uni0ue position in the

mar!et.mar!et.

E1ample( Adventurous $ravelerE1ample( Adventurous $raveler2oo!store2oo!store


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3ey( Core Competencies3ey( Core Competencies

4ni0ue set of capabilities a company develops4ni0ue set of capabilities a company develops

in !ey areas such as superior 0uality customerin !ey areas such as superior 0uality customer

service innovation teambuilding fle1ibilityservice innovation teambuilding fle1ibility

responsiveness and others that allo* it to vaultresponsiveness and others that allo* it to vault

past competitors.past competitors.

$hey are *hat a company does best.$hey are *hat a company does best.

2est to rely on a2est to rely on a natural advantagenatural advantage 5often lin!ed5often lin!edto a company6s smallness7.to a company6s smallness7.


7/30Chapter 2: Strategic Mgt Copyright 2003 Prentice Hall Publishing Company

Strategic Management "rocessStrategic Management "rocess

Step +Step +( /evelop a vision and translate it( /evelop a vision and translate it

into a mission statement.into a mission statement.

Step ,Step ,

( Assess strengths and *ea!nesses.( Assess strengths and *ea!nesses.

Step 8Step 8( Scan environment for( Scan environment for

opportunities and threats.opportunities and threats.

Step 9Step 9( Identify !ey success factors( Identify !ey success factors..


8/30Chapter 2: Strategic Mgt !Copyright 2003 Prentice Hall Publishing Company

Strategic Management "rocess ...Strategic Management "rocess ...

Step &Step &( Analy:e competition( Analy:e competition..

Step ;Step ;( Create goals < objectives.( Create goals < objectives.

Step =Step =( Formulate strategies( Formulate strategies..

Step >Step >( $ranslate plans into actions( $ranslate plans into actions..

Step ?Step ?( Establish accurate controls( Establish accurate controls..

(continued)(continued)


9/30Chapter 2: Strategic Mgt "Copyright 2003 Prentice Hall Publishing Company

Step +(Step +(Develop a VisionDevelop a Visionandand

Create a Mission StatementCreate a Mission Statement

@ision an e1pression of *hat an@ision an e1pression of *hat an

entrepreneur stands for and believes in.entrepreneur stands for and believes in.

A clearly defined vision(A clearly defined vision( "rovides direction"rovides direction

/etermines decisions/etermines decisions

Motivates peopleMotivates people


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Step +( /evelop a @ision andStep +( /evelop a @ision and

Create a Mission StatementCreate a Mission Statement

Mission addresses 0uestion(BhatMission addresses 0uestion(Bhat

business are *e in%Dbusiness are *e in%D

A *ritten e1pression of ho* theA *ritten e1pression of ho* thecompany *ill reflect the o*ner6scompany *ill reflect the o*ner6s

values beliefs and vision.values beliefs and vision.

Sets the tone for the entire companySets the tone for the entire company

and guides the decisions people ma!e.and guides the decisions people ma!e.

E1ample( Fet:er @ineyardsE1ample( Fet:er @ineyards

http(***.fet:er.comhttp(***.fet:er.com
http://www.fetzer.com/letsfetzer/stor_miss.htmlhttp://www.fetzer.com/letsfetzer/stor_miss.htmlhttp://www.fetzer.com/letsfetzer/stor_miss.html


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Step ,( Assess Company StrengthsStep ,( Assess Company Strengths

and ea!nessesand ea!nesses

StrengthsStrengths

"ositive internal factors that"ositive internal factors that

contribute to accomplishing thecontribute to accomplishing the

mission goals and objectives.mission goals and objectives. ea!nessesea!nesses

egative internal factors that inhibitegative internal factors that inhibit

the accomplishment of the missionthe accomplishment of the mission

goals and objectives.goals and objectives.


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Step 8( Scan for )pportunitiesStep 8( Scan for )pportunities

and $hreatsand $hreats

)pportunities)pportunities "ositive e1ternal factors the company can"ositive e1ternal factors the company can

employ to accomplish its mission goals andemploy to accomplish its mission goals and

objectives.objectives.

$hreats$hreats egative e1ternal factors that inhibit the firmGsegative e1ternal factors that inhibit the firmGs

ability to accomplish its mission goals andability to accomplish its mission goals and

objectives.objectives.


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E1ternal Mar!et ForcesE1ternal Mar!et Forces

CompetitiveCompetitive EconomicEconomic

"olitical and

#egulatory"olitical and

#egulatory

$echnological$echnological

Social and

/emographicSocial and

/emographic


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Step 9( Identify 3ey SuccessStep 9( Identify 3ey Success

FactorsFactors

3ey success factors(3ey success factors(

relationships bet*een arelationships bet*een a

controllable variable and acontrollable variable and a

critical factor that influence acritical factor that influence acompany6s ability to competecompany6s ability to compete

in the mar!et.in the mar!et.

$he !eys to unloc!ing the$he !eys to unloc!ing the

secrets of competingsecrets of competing

successfully in a particularsuccessfully in a particular

mar!et segment.mar!et segment.


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Step &( Analy:e CompetitorsStep &( Analy:e Competitors

Analy:ing !ey competitors allo*s an entrepreneurAnaly:ing !ey competitors allo*s an entrepreneurto(to(

avoid surprises from e1isting competitors6 ne*avoid surprises from e1isting competitors6 ne*

strategies and tactics.strategies and tactics.

identify potential ne* competitors and theidentify potential ne* competitors and the

threats they pose.threats they pose.

improve reaction time to competitors6 actions.improve reaction time to competitors6 actions.

anticipating rivals6 ne1t strategic moves.anticipating rivals6 ne1t strategic moves.


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$echni0ues do$echni0ues do notnotre0uire unethicalre0uire unethicalbehavior(behavior(

Monitor industry and trade publications.Monitor industry and trade publications.

$al! to customers and suppliers.$al! to customers and suppliers. isten to employees especially salesisten to employees especially sales

representatives and purchasing agents.representatives and purchasing agents.

Attend trade sho*s and conferences.Attend trade sho*s and conferences.


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$echni0ues do$echni0ues do notnotre0uire unethicalre0uire unethicalbehavior(behavior( Study competitorsG literature andStudy competitorsG literature and

Bbenchmar!B their products and services.Bbenchmar!B their products and services.

et competitorsG credit reports.et competitorsG credit reports. Chec! out the local library.Chec! out the local library.

4se the orld ide eb to learn more about4se the orld ide eb to learn more about

competitors.competitors.

@isit competing businesses to observe their@isit competing businesses to observe their

operations.operations.


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Sample Competitive Profile Matrix

Key Success Factors Your Business Competitor 1 Competitor 2

(from Step 4) ei!"t #atin!

ei!"te$

Score #atin!

ei!"te$

Score #atin!

ei!"te$

Score

Market Share 0.10 3 0.30 2 0.20 3 0.30Price Competitiveness 0.20 1 0.20 3 0.60 4 0.80

Financial Strength 0.10 2 0.20 3 0.30 2 0.20

Prodct !alit" 0.40 4 1.60 2 0.80 1 0.40

Cstomer #o"alt" 0.20 3 0.60 3 0.60 2 0.40

%otal 1.00 2&' 2& 2&1


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Chapter 2: Strategic Mgt 1"Copyright 2003 Prentice Hall Publishing Company

3no*ledge Management3no*ledge Management

$he practice of gathering organi:ing and$he practice of gathering organi:ing anddisseminating the collective *isdom anddisseminating the collective *isdom and

e1perience of a company6s employees for thee1perience of a company6s employees for the

purpose of strengthening its competitive position.purpose of strengthening its competitive position.

3no*ledge management involves(3no*ledge management involves( $a!ing inventory of the special !no*ledge the people$a!ing inventory of the special !no*ledge the people

in the company possess.in the company possess.

)rgani:ing that !no*ledge and disseminating it to)rgani:ing that !no*ledge and disseminating it to

those *ho need it.those *ho need it.


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Step ;( Create Company oalsStep ;( Create Company oals

and )bjectivesand )bjectives oals broad longrange attributes to beoals broad longrange attributes to be

accomplished.accomplished. JJ2HASD one factor that sets apart successful2HASD one factor that sets apart successful

companies from unsuccessful ones.companies from unsuccessful ones.

)bjectives more detailed specific targets of)bjectives more detailed specific targets ofperformance that are S.M.A.#.$.performance that are S.M.A.#.$. SSpecificpecific

MMeasurableeasurable

AAssignablessignable

##ealistic 5yet challenging7ealistic 5yet challenging7

$$imelyimely


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Step =( Formulate StrategiesStep =( Formulate Strategies

StrategyStrategy A Jroad mapD that guides a company through aA Jroad mapD that guides a company through a

turbulent environment as it see!s to fulfill its missionturbulent environment as it see!s to fulfill its mission

goals and objectives.goals and objectives.

A game plan for *inning.A game plan for *inning. $hree basic strategies($hree basic strategies(

Strategy%

Cost leadershipCost leadership

/ifferentiation/ifferentiation

FocusFocus


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$hree Strategic )ptions$hree Strategic )ptions

Competitive AdvantageCompetitive Advantage

TargetTarget

MarketMarket

IndustryIndustry

NicheNiche

Uniqueness PerceivedUniqueness Perceived

by the Customerby the Customer

o! Costo! Cost

PositionPosition

"i#erentiation"i#erentiation o! Costo! Cost

"i#erentiation $ocus

"i#erentiation $ocus

Cost$ocus

Cost$ocus


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Cost eadershipCost eadership

oal( to beoal( to be thethelo*cost producer in the industrylo*cost producer in the industryor mar!et segment.or mar!et segment.

Advantages(Advantages( reaching buyers *ho buy on the basis of price.reaching buyers *ho buy on the basis of price.

po*er to set the industry6s price floor.po*er to set the industry6s price floor. or!s *ell *hen(or!s *ell *hen(

buyers are sensitive to price changes.buyers are sensitive to price changes.

*hen competing firms sell the same commodity*hen competing firms sell the same commodity

products.products. *hen a company can benefit from economies of scale.*hen a company can benefit from economies of scale.


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/ifferentiation/ifferentiation

Company see!s to build customer loyalty byCompany see!s to build customer loyalty bypositioning its goods or services in a uni0ue orpositioning its goods or services in a uni0ue or

different fashion.different fashion.

Idea is to be uni0ue at something customersIdea is to be uni0ue at something customers

value.value. 3ey( 2uild basis for differentiation on a core3ey( 2uild basis for differentiation on a core

competency those things that the smallcompetency those things that the small

company is uni0uely good at doing incompany is uni0uely good at doing in

comparison to its competitors.comparison to its competitors. E1ample( East 2an! ClubE1ample( East 2an! Club


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FocusFocus

Company selects one or more customer segmentsCompany selects one or more customer segmentsin a mar!et identifies customers6 special needsin a mar!et identifies customers6 special needs

*ants or interests and then targets them *ith a*ants or interests and then targets them *ith a

product or service designed specifically for them.product or service designed specifically for them.

Strategy builds onStrategy builds on differencesdifferencesamong mar!etamong mar!etsegments.segments.

#ather than try to serve the total mar!et the#ather than try to serve the total mar!et the

company focuses on serving a niche 5or severalcompany focuses on serving a niche 5or several

niches7 *ithin that mar!et.niches7 *ithin that mar!et.

E1ample( Clo*n Shoes and "ropsE1ample( Clo*n Shoes and "rops


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Step ?( $ranslate StrategiesStep ?( $ranslate Strategies

into Action "lansinto Action "lans

Create projects by defining(Create projects by defining(

"urpose"urpose

ScopeScope

ContributionContribution

#esource re0uirements#esource re0uirements

$iming$iming


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Step +'( Establish Accurate ControlsStep +'( Establish Accurate Controls

$he plan establishes the standards against$he plan establishes the standards against

*hich actual performance is measured.*hich actual performance is measured.

Entrepreneur must(Entrepreneur must(

identify and trac! !ey performanceidentify and trac! !ey performance

indicators.indicators.

$a!e corrective action.$a!e corrective action.


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Chapter 2: Strategic Mgt 2!Copyright 2003 Prentice Hall Publishing Company

2alanced Scorecards2alanced Scorecards

A set of measurements uni0ue to a companyA set of measurements uni0ue to a company

that includes both financial and operationalthat includes both financial and operational

measuresmeasures

ives managers a 0uic! yet comprehensiveives managers a 0uic! yet comprehensive

picture of a company6s overall performance.picture of a company6s overall performance.


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Chapter 2: Strategic Mgt 2"Copyright 2003 Prentice Hall Publishing Company

2alanced Scorecards2alanced Scorecards

Four "erspectives(Four "erspectives(

Customer( Ho* do customers see us%Customer( Ho* do customers see us%

Internal 2usiness( At *hat must *e e1cel%Internal 2usiness( At *hat must *e e1cel%

Innovation and earning( Can *e continueInnovation and earning( Can *e continue

to improve and create value%to improve and create value%

Financial( Ho* do *e loo! to shareholders%Financial( Ho* do *e loo! to shareholders%


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$he 2alanced Scorecard in!s "erformance Measures.$he 2alanced Scorecard in!s "erformance Measures.

Financial "erspectiveFinancial "erspective

oalsoals MeasuresMeasures

Customer "erspectiveCustomer "erspective


Internal 2usiness "erspectiveInternal 2usiness "erspective


Innovation and earning "erspectiveInnovation and earning "erspective


Ho* do customersHo* do customers

see us%see us%

Ho* do *e loo!Ho* do *e loo!

to shareholders%to shareholders%

At *hat mustAt *hat must

*e e1cel%*e e1cel%

Can *e continue toCan *e continue to

improve and createimprove and createl %l %

entrepreneurship chapter 2

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