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Chapter 2 (Part 1)
Generating and Exploiting New
Entry Strategies

ENT 530
By: Dr. Ruzianisra Mohamed
[email protected]
 Part 1: New Entry
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• 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
• Maximizes the benefits of newness
• Minimizes its cost
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Generation and Exploitation of
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the New Entry
 Generation of a New
0
Entry Opportunity
Resources as a Source of Competitive Advantage
• When a firm engage in a new entry, it is hoped that this new
entry will provide the firm with a sustainable competitive
advantage
• Understanding where a sustainable competitive advantage
comes from will provide some insight into how
entrepreneurs can generate new entries that are likely to
provide the basis for high performance over and extended
period of time
• These resources can be combined in different ways, and
it is this bundle of resources that provides a firm its
capacity to achieve superior performance 0
• For bundle resources to be the basis of a firm’s superior
performance over competitors for an extended period of
time, the resource must be:
• A bundle resources is:
• Valuable when it enables the firm to pursue 0
opportunities, neutralize threats, and offer products and
services that are valuable to the customers
• Rare when it is possessed by few, if any, (potential)
competitors
• Inimitable when replication of this combination of
resource would be difficult and/or costly for (potential)
competitors
• Eg: Breeze Technology Incorporated appeared to have
a bundle or resources that was valuable, rare, and
inimitable. It had invented a technology that could be
applied to the ventilation of athletic shoes to reduce
foot temperature. The technology is value by the
customers and it is rare and inimitable
 Creating A Resource Bundle That is Valuable, Rare
and Inimitable 0
• 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
• Knowledge is important for generating bundle of resources that will lead
to creation of a new venture with a long prosperous life.
• Outsiders that come up with the most radical innovations
• Eg: Pioneers of mountain bikes were biking enthusiast, and it was
quite a considerable time before the industry giants reacted to the
trend
• Those wishing to generate an innovation need to look to unique
experiences and knowledge within themselves and their team
Market Knowledge 0
Technological Knowledge
0
 Assessing the Attractiveness of a New
Entry Opportunity 0

• Having created a new resource combination, the

entrepreneur needs to determine whether it is in
fact valuable, rare and inimitable by assessing
whether the new product and/or the new market are
sufficiently attractive to be worth exploiting and
developing
• Depends on:

Entrepreneur’s
The level of
willingness to make a
information on a new
decision without
entry
perfect information
 Information on the New Entry 0
Prior Knowledge and Information Search

•Moreknowledge ensures:
• Entrepreneur starts from a position of less ignorance
about assessment task at hand
• Less time is spent on information search
• Knowledge can be increased by searching for
information that will shed some light on the
attractiveness of this new entry opportunity
• More knowledge the entrepreneur has the more
efficient the search process
Information on the New Entry
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Window of Opportunity

•Favorable environment for entrepreneurs to

exploit a new entry.
•Window of opportunity closing is when another
entrepreneur has entered the industry and erected
substantial barriers to entry and to imitation
•While more information is desirable, the time
spent in collecting additional information
increases the likelihood that the window
opportunity will close
 Comfort Making Decision Under 0
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
Decision to Exploit or Not to Exploit the New
Entry 0
The decision to exploit or not to exploit the new entry 0
opportunity depends on whether the entrepreneur has what
she or he believes to be sufficient information, and on whether
the window is still open for this new entry opportunity
A determination by an entrepreneur that she or he has sufficient
information depends on the stock of information and the level of
comfort that this entrepreneur has with making the decision
without perfect information
It is important to realize the assessment of new entry’s
attractiveness is less about whether this opportunity “really” exist
or not and more about whether the entrepreneur believe he or she
can make it work – that is, created the market demand, efficiently
produce the product, build reputation, and develop customer
loyalty and other switching cost
Entry Strategy For New
0
Exploitation
Being first can result in a number of advantages that can enhance
performance. These include: 0
• First movers do not always prosper. Many first movers with new 0
products in new markets have been surpassed by firms that entered
later
• Eg: in the market for video recorders, the first movers were
Ampex and Sony, yet they were surpassed by JVC and
Matshusita
• When considering whether to be one of the first to enter with a new
product and/or into new market, entrepreneurs must determine
whether the first mover advantages outweigh the first mover
disadvantage.
• Such assessment depends on:
 Environmental Instability and First-
0
Move (Dis)Advantages
• Firm performance depends upon the fit between external environment and
resources
• If there is a good fit between its resources and the external environment the firm
will be rewarded with superior performance; however if the fit is poor, then the
performance will be poor
• First movers are unaware of key success factors
• Key success factors is the requirement that any firm must meet to successfully
compete in a particular industry. However the first mover will not know these
key success factors in advance; rather, the entrepreneur must commit the firm’s
resources based upon his or her best guess of what these key success factors
might be
• Emerging industries
• Emerging industries are those industries that have been newly formed. The
entrepreneur has considerable freedom in how he or she achieve success,
including establishing the rules of the game for the industry such that the firm is
at a competitive advantage
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 Customer Uncertainty and First-
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Mover (Dis)Advantages
Uncertainty for customers
• Customers may have considerable difficulty in accurately assessing
whether the new product or service provide value for them
• Offering superior product is not sufficient to enable a first mover
to make sales; the entrepreneur must also reduce customer
uncertainties
• The entrepreneur must reduce the customer uncertainty by
offering informational advertising that, for example provide
customers with information about how the product performs and
articulates the product’s benefit
• Creating a frame of reference for potential customers
• Educating customers through demonstration and documentation
 Lead Time and
First-Mover (Dis)Advantages 0

Lead time
• Grace period in which the first mover operates in the
industry under conditions of limited competition
Lead time can be extended by:
Switching Cost
• Building customer loyalties The cost that must be borne
• Building switching costs (reward program) by customer if they are to
• Protecting product uniqueness stop buying from the current
• Securing access to important sources of supply and supplier and begin
distribution (exclusive relationship) purchasing from another
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Thank You