Generating and

Exploiting
New Entry Strategies
MODULE 3
 Refers to:
1. Offering a new product to an established or new
market.
2. Offering an established product to a new market.
3. Creating a new organization (regardless of whtr
the product or the market is new to competitors
New Entry or customers)
Newness
Represents something rare (help differentiate a
firm from its competitors).
Newness creates a number of challenges for
entrepreneurs.
What challenges? Find out and update your notes.
 Entrepreneurial strategy
Represents the set of decisions,
actions, and reactions that
generate, and then exploit over
Entrepreneurial time, a new entry in a way that
Strategy maximizes the benefits of
newness and minimizes its costs.
 Elements of entrepreneurial strategy.
Entrepreneurial strategy has three (3) key
stages:
1. The generation of a new entry
Entrepreneurial opportunity,
Strategy 2.The exploitation of a new entry
opportunity, and
3. A feedback loop from the result of a
new entry generation and
exploitation back to stage 1.
Figure 3.1 -
Entrepreneurial
Strategy:
The Generation
and Exploitation
of New Entry The generation of a new entry is the result of a combination of knowledge
Opportunities and other resources into a bundle that its creators hope will be valuable, rare,
and difficult for other to imitate.
If the decision is that the new entry is sufficiently attractive and it warrants
exploitation, then the firm performance is dependent upon the new strategy;
the risk reduction strategy; the way the firm is organize; and the competence
of the entrepreneur, management team and the firm.
 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
Resources performance when they are:
Valuable - enables firm to pursue
opportunities, neutralize threats and
offer products/services that are valued
by customers.
Rare possessed by few competitors
Inimitable replication is difficult of
costly to competitors
 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
Creating a Information, technology, know-how, and skills that
Resource provide insight into a market and its customers
Bundle Customers unfulfilled wants or unsolved problem
with existing product/service.
Technological knowledge
Provides insight into ways to create new knowledge
May lead to new entry (new product yet to be
offered in the market)
 Entrepreneurs need to make
assessment on the attractiveness of
the new entry opportunity. This
Assessing the depends on:
Attractiveness The level of information on the
of a New Entry new entry
Opportunity
Willingness to make a decision
without perfect information
(decision under uncertainty).
 Prior knowledge and Information
Search: More knowledge ensures:
Entrepreneur starts from a position
of less ignorance
Less time is spent on information
search
Information on
Window of opportunity: Favorable
a New Entry environment for entrepreneurs to
exploit a new entry.
Window if opportunity can be open
(favorable) or closed (unfavorable).
 Likelihood that the window of
opportunity will close leads to the
dilemma of choosing between
Comfort with Error of commission: Negative
Making a outcome from acting on the
Decision Under perceived opportunity
Uncertainty Error of omission: Negative
outcome from not acting on the
new entry opportunity
Figure 3.2 - The
Decision to
Exploit or Not
to Exploit the
New Entry
Opportunity
 Decision to exploit depends on
whether entrepreneur:
Has sufficient information to make
decision.
Decision to
Assessment of a new entrys
Exploit or Not attractiveness and window of
to Exploit the opportunity is still open.
New Entry The level of comfort an
Opportunity entrepreneur has in making
decision without perfect
information.
Figure 3.3-
Factors That
Influence the
Decision to
Enter the
Market Now or
to Delay Entry
 Experience curve, Learning Curve. As
Firm produces greater volume, cost per
unit goes down.
Cost are reduced as firm spread its Fixed
Cost costs over a greater number of units
Advantages (Economies of Scale).
Learn by trial and error over time
(Learning curve) to improve products and
services
 First mover face less competitive
rivalry.
Less
Competition As competitor starts to enter, it is
compensated by market growth.
 Opportunity to develop strong
relationship with important
Secure suppliers, distributors and Channels.
Important
Channels Create a barrier to those who want
to enter the market.
 Select the most attractive segments of
the markets.
Prime Ability to adjust quickly if any changes in
Position for the market
Customers Establish their product as industry
standard.
 Improve product from time to time.
Monitor changes in the market
Expertise
from Build up networks
Participation Learning by doing rather than by
observing (Vicarious learning).
 1) Environmental instability
Firm performance depends upon the fit between
external environment and resources
First movers are unaware of key success factors
First-mover (Key success factors The requirements that any
firm must meet to successfully compete in a
(dis)advantages particular industry)
1. Emerging industries Environmental changes are
Environmental highly in emerging industries. Emerging industries
are industries that have been formed and growing.
Instability As such rule of the game has not been set. Changes
will keep occurring until the industry is matured.
 Demand uncertainty: Difficulty in estimating:
Potential size, growth, and the key dimensions
along which a market will grow
Technological uncertainty: Difficulty in assessing
First-mover whether:
(dis)advantages The technology will perform
Alternate technologies will emerge and
1. leapfrog over current technologies
Environmental Adaptation
Instability Changes in market demand and technology do
not necessarily mean that first movers cannot
prosper
The entrepreneur must adapt to the new
environment conditions
 Uncertainty for customers
Difficulty in accurately assessing
whether the new product or service
First-mover provides value
(dis)advantages Overcome customer uncertainty by:
2. Customers Informational advertising
Uncertainty
Highlighting product benefits over
substitutes
 Lead time
Grace period in which the first
mover operates in the industry
under conditions of limited
First-mover competition
(dis)advantages Short lead time can lead to first
mover disadvantages. Therefore
3. Lead time entrepreneur must find ways to
lengthen the lead time to ensure
success.
 Lead time can be extended by:
Building customer loyalties
Building switching costs
Protecting product uniqueness
First-mover Securing access to important sources of
supply and distribution
(dis)advantages Switching costs: Must be borne by
3. Lead time customers if they:
Stop purchasing from the current
supplier
Begin purchasing from new supplier
 Risk
Probability, and magnitude, of
downside loss
Derived from uncertainties over:
Risk Reduction Market demand
Strategies for Technological development
New Entry Actions of competitors
Exploitation Strategies to reduce uncertainties
Market-scope strategies
Imitation 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
Market Scope need
Strategies Focuses on:
Producing customized products
Localized business operations
High level craftsmanship
High-end of the market
 Broad-scope strategy
Offers range of products across different
market segments
Helps gain better understanding of the
whole market
Market Scope Opens the firm up to many different
Strategies fronts of competition
Reduces risks associated with market
uncertainties
Increases exposure to competition
 Copying practices of other
Advantages
Help develop skills necessary to be
successful in the industry
Provide organizational legitimacy
Imitation
Reduce costs associated with R&D
Strategies
Reduce customer uncertainty over the
firm
Make the new entry look legitimate
from day one
 Types of imitation strategies
Franchising
Acquiring a proven formula for
new entry from a franchisor
Imitation
Me-too strategy
Strategies
Copying exist products and
attempting to build an advantage
through minor variations
 Liabilities of newness
Negative implications arising from an
organizations newness
Arise from:
Managing Costs in learning new tasks
Newness Conflict arising from overlap or
gaps in responsibilities
Informal structures of
communication
 Assets of newness
Positive implications arising from
an organizations newness.
Managing Learning advantage.
Newness No need to unlearn old
knowledge and old habits.