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Strategic entrepreneurship Topic 8
- 1. STRATEGIC ENTREPRENEURSHIP TOPIC 8 DR ANIS AMIRA AB RAHMAN TAHIRAH BINTI ABDULLAH FACULTY OF ENTREPRENEURSHIP AND BUSINESS UNIVERSITI MALAYSIA KELANTAN [email protected] Dr Anis Amira Ab Rahman 14
- 2. STRATEGIC FOR VENTURE GROWTH Dr Anis Amira Ab Rahman 14
- 3. Concept of Business Venture To organize or to assemble on going interdependent actions into sensible sequences that generate sensible outcomes (Gartner, 1985). Important for new ventures to be competent in transforming inputs into outputs that its stakeholders need and want (Zimmerman, 2002). The characteristics of the entrepreneur, the structure of the industry entered and the strategy of the venture involved were play important role in venture performance (Sandber and Hofer, 1987). Dr Anis Amira Ab Rahman 14
- 4. Concept of Business Venture Criteria for a business venture (Gartner, 1985): 1. Its founders must acquire expertise in products, process, market and/or technology; 2. Results are expected beyond the year in which the investment is made; 3. It is considered a new market entrant by its competitors; and 4. It is regarded as a new source of supply by its potential customers. Dr Anis Amira Ab Rahman 14
- 5. A Framework for Describing the Creation of A New Venture Dimensions Descriptions Individual(s) The person(s) involved in starting a new organization Organization The kind of firm that is started Environment The situation surrounding and influencing the new organization New venture process The actions undertaken by the individual(s) to start the venture Dr Anis Amira Ab Rahman 14
- 6. A Framework for Describing the Creation of A New Venture Dimensions Individual(s) Value in describing entrepreneurs; (i) Need for achievement, (ii) Risk taker, (iii) Previous work experience, (iv) Education, (v) Job satisfaction *entrepreneur characteristics are extremely important for venture success (Baum et al., 2001) Organization Type of firms such as retail, manufacturing, service and wholesale.Dr Anis Amira Ab Rahman 14
- 7. A Framework for Describing the Creation of A New Venture Dimensions Environment (i) sees the environment as an outside set of conditions to which the organization must adapt (ii) sees the environment as a "reality“ that organizations create via the selectivity of their own perceptions Dr Anis Amira Ab Rahman 14
- 8. A Framework for Describing the Creation of A New Venture Dimensions New venture process (i) The entrepreneur locates a business opportunity (ii) The entrepreneur accumulates resources (iii) The entrepreneur markets products and services (iv) The entrepreneur produces the product (v) The entrepreneur builds an organization Dr Anis Amira Ab Rahman 14
- 9. Potential Barriers for The Venture Growth Institutional barriers including the legislative framework. the degree of corruption and bribery a firm encounters. The external market position of a firm the sector in which the firm operates. The degree of competition, whether a firm is facing strategic behavior by competitors. extent of network alliances to support growth. Dr Anis Amira Ab Rahman 14
- 10. Potential Barriers for The Venture Growth Financial barriers Including availability cost of capital and finance Internal organizational barriers including managerial capacity and capability objectives of firm principal-agent difficulties skills Social barriers to do with the support, or lack of it, from local actors and agencies. Dr Anis Amira Ab Rahman 14
- 11. Does every venture need growth? Not all entrepreneurs seek growth, and growth is not a necessary or even desirable objective for all SMEs. Firstly, the SME owners may have objectives other than profit maximisation. Secondly, if profit maximising, they may have already reached the minimum efficient scale of business activity (small retail shops, repair shops and so on). Therefore a lack of growth on its own does not necessarily indicate the presence of significant barriers to growth (Bartlett and Bukvic, 2001). Dr Anis Amira Ab Rahman 14
- 12. STRATEGIES FOR VENTURE GROWTH Venture growth Traits General competencies Specific competencies Motivation Competitive strategies Environment Size Source: Baum et al. 2001 Dr Anis Amira Ab Rahman 14
- 13. STRATEGIES FOR VENTURE GROWTH Traits Tenacity Proactivity Passion for work General Competencies Organizational Skill Opportunity Skill Dr Anis Amira Ab Rahman 14
- 14. STRATEGIES FOR VENTURE GROWTH Specific Competencies Technical skill Industry skill Motivation Vision Growth Goals Self-Efficacy Dr Anis Amira Ab Rahman 14
- 15. STRATEGIES FOR VENTURE GROWTH Competitive strategies Focus Low-cost Differentiation-Innovation Differentiation-Quality/service Dr Anis Amira Ab Rahman 14
- 16. STRATEGIES FOR VENTURE GROWTH Environment Dynamism Munificence Concentration Size Size Dr Anis Amira Ab Rahman 14
- 17. Threat of new entrants Threat of substitute product or service Bargaining power of customer Bargaining power of suppliers Intensity of competitive rivalry Dr Anis Amira Ab Rahman 14 Porter’s Five Forces Model Strategy
- 18. Barriers to Entry Absolute cost advantages Proprietary learning curve Access to inputs Government policy Economies of scale Capital requirements Brand identity Switching costs Access to distribution Expected retaliation Proprietary products Dr Anis Amira Ab Rahman 14 Threat of new entrants
- 19. Switching costs Buyer inclination to substitute Price-performance trade-off of substitutes Dr Anis Amira Ab Rahman 14 Threat of substitute product or service
- 20. Bargaining leverage Buyer volume Buyer information Brand identity Price sensitivity Threat of backward integration Product differentiation Buyer concentration vs. industry Substitutes available Buyers' incentives Dr Anis Amira Ab Rahman 14 Bargaining power of customer
- 21. Supplier concentration Importance of volume to supplier Differentiation of inputs Impact of inputs on cost or differentiation Switching costs of firms in the industry Presence of substitute inputs Threat of forward integration Cost relative to total purchases in industry Dr Anis Amira Ab Rahman 14 Bargaining power of suppliers
- 22. Exit barriers Industry concentration Fixed costs/Value added Industry growth Intermittent overcapacity Product differences Switching costs Brand identity Diversity of rivals Corporate stakes Dr Anis Amira Ab Rahman 14 Intensity of competitive rivalry
- 23. Legitimacy Strategies Using legitimacy strategies to achieve venture growth. legitimacy as "a generalized perception or assumption that the actions of an entity are desirable, proper, or appropriate within some socially constructed system of norms, values, beliefs, and definitions“ (DiMaggio & Powell, 1991) Dr Anis Amira Ab Rahman 14
- 24. Legitimacy Strategies Legitimacy is a relationship between the practices and utterances of the organization and those that are contained within, approved of, and enforced by the social system in which the organization exists. (Zimmerman and Zeitz, 2002) Dr Anis Amira Ab Rahman 14
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- 26. REFERENCES Zimmerman, M. A., & Zeitz, G. J. (2002). Beyond survival: Achieving new venture growth by building legitimacy. Academy of Management Review, 27(3), 414-431. DiMaggio, P. J., & Powell, W. W. 1991. Introduction. In W. W. Powell & P. J. DiMaggio (Eds.), The new institutionalism in organizational analysis: 1-40. Chicago: University of Chicago Press. Baum, J. R., Locke, E. A., & Smith, K. G. (2001). A multidimensional model of venture growth. Academy of management journal, 44(2), 292-303. Baum, J. R., & Locke, E. A. (2004). The relationship of entrepreneurial traits, skill, and motivation to subsequent venture growth. Journal of applied psychology, 89(4), 587. Bartlett, W., & Bukvic, V. (2001). Barriers to SME growth in Slovenia. MOST: Economic Policy in Transitional Economies, 11(2), 177-195. Dr Anis Amira Ab Rahman 14
- 27. REFERENCES Gartner, W. B. (1985). A conceptual framework for describing the phenomenon of new venture creation. Academy of Management Review, 10(4), 696-706. SandbergW. R. and Hofer, C. W. (1987). Improving new venture performance: The role of strategy, industry structure, and the entrepreneur. Journal of Business Venturing, 2(1), 5-28. Dr Anis Amira Ab Rahman 14