12. Entrepreneurship Flashcards
Intrapreneurship
“An intrapreneur is an inside entrepreneur, or an entrepreneur within a large firm, who uses entrepreneurial skills without incurring the risks associated with those activities
entrepreneur
the innovator who implements change within markets through the carrying out of new combinations.
Contradiction btw strategy and entrepreneurship
Strategy is about the pursuit of a clear defined path, systemically defined in advance, a carefully chosen set of activities
Entrepreneurship is the epitome of opportunism, requiring ventures to pivot in new directions continuously. About adjusting with the inflow of new information & market shifts.
Strategy can assist entrepreneurs to overcome the challenges faced by
- choosing viable opportunities (OC)
- staying focused on goal, (despite unforeseen implications)
- Align entire organisation by identifying core values, recognising that decisions are interdependent
- Making the necessary commitments
Lean strategy process
- Vision
- analysis (Examination of external environment and internal resources)
- Deliberate strategy
- Learning (Making daily decisions and conduct experiments guided by the strategy)
- Emergent strategy
How can other frameworks be linked into lean strategy process?
For 1. Identify role of business as direction (ie PM, CSR, CSV)
For 2. Analysis, use RBV, Porter’s 5 forces to assess internal and external factors
for 3. Deliberate strategy, potentially applying Strategic diamond
Lean strategy process is a solution to the contradiction
between strategy and entrepreneurship as it guards against the extremes of both rigid planning and unrestrained experimentation.
In lean strategy framework,
strategy provides overall direction and alignment providing a screen for novel ideas and yardstick for evaluating success of experiments with them.
Entrepreneurship can also be defined as
“the pursuit of opportunity without regard to resources currently controlled (Howard Stevenson, Harvard Business school)
Business model canvas overview
Describes how the rationale of how an organisation creates, delivers and captures value (the choices it makes as to how it operates + how it operates.
BMC is important because choices have consequences and it’s successful in that
- aligns goals
- reinforcement (internal consistency)
- Virtuosness
- Robustness
9 building blocks of BMC
- Customer segments
- Value proposition
- Channels
- Customer relationships
- Revenue streams
- Key resources
- Key activities
- Key partnerships
- cost structure
customer segments for LAN
(1) Passenger flight business (split into low cost and premium pricing)
2. Cargo business
3. Aircraft ground services
Value propositions LAN
Performance- high quality, reliable service built strong reputation building customer loyalty and making it a better preference in comparison to competitors
Getting the job done → cargo and ground services
Brand/status- reputation for quality
Price- low cost model for domestic flights catering to the needs of price sensitive customer segment –> creates accessibility for low income consumers
Cost reduction - ground services in Santiago for other aircraft
Risk reduction - for cargo of perishable goods and livestock, providing a service level guarantee
Convenience/usability- convenience of purchasing tickets online + multiple destinations
Channels
- Raising awareness among customers about a company’s products and services
- Helping customers evaluate a company’s Value Proposition
- Allowing customers to purchase specific products and services
- Delivering a Value Proposition to customers
- Providing post-purchase customer support” ( p. 26)
Through their loyalty program
Customer relationships
Customer relationships may be driven by the following motivations:
1. Customer acquisition Via loyalty program Low cost model Brand image for reliability 2. Customer retention High quality service Wide number of destinations 3. Boosting sales (upselling)” (p. 28) Having sales during off-peak seasons, low cost model for domestic flights
REvenue streams
A business model can involve two different types of Revenue Streams:
Transaction revenues resulting from one-time customer payments
One-off purchases of tickets
Recurring revenues resulting from ongoing payments to either deliver a Value Proposition to customers or provide post-purchase customer support
Potentially for recurring cargo flight deliveries
Pricing model for lan (Revenue streams)
Domestic flights- low cost model
International flights premium pricing
Fuel surcharge add-on payment scheme
Revenue streams ways to generate revenue
- Asset sale- some asset sale via in-flight catalogue sales
- Usage fee- use of plane fee sold via tickets, use of ground services by other airlines
- Subscription fees
- Lending/Renting/Leasing
- Licensing
- Brokerage fees
- Advertising
Key resources (what enables business to offer and create value propositions)
Physical → aeroplanes, hubs, hangars,
Intellectual → brand image, partnerships, customer databases,
Human→ critical, highly efficient ground crew, flexible pilots, well-trained customer service members
Financial
Key activities Lan
→ Describes the most important things a company must do to make its business model work
Production→ delivering of service (ie the flight itself, baggage handling), in a reliable, trustworthy manner
Problem solving→ providing faster ways for domestic passengers to travel via low cost model
Platform/Network
Key partnerships
- Optimisation & economy of scale → outsourcing data management systems to experienced data businesses,
- Reduction of risk & uncertainty → utilising complex hedge fund managing systems in order to reduce risk around the fluctuation of fuel prices
- Acquisition of particular resources & activities → supply of aeroplanes by boeing, travel agents selling tickets
- Four different types of partnerships
Strategic alliances between non-competitors → oneworld alliance (put Lan on global platform along with reputable airlines - Coopetition: strategic partnerships between competitors → oneworld allinace enabled
- Joint ventures to develop new businesses
Buyer-supplier relationships to assure reliable supplies
Cost structure
Cost-driven → low frill low cost model for domestic flights
Value-driven → higher quality service provided for first class passengers, and overall for long haul international flights
Fixed costs: salaries
Variable costs: fuel prices
Economies of scale- larger company with multiple hubs, and larger planes,
Economies of scope- yes! Larger scope of operations, an international airline with majority ownership of domestic airlines within LA. Has benefited from having multiple hubs so that passengers can smoothly transfer between flights and stop overs to numerous destinations
Criticisms of BMC
Fails to capture external environment
Blind to levels outside organisation
Designed around SME’s and startups
Focused on some key stakeholders and not others
BMC is less applicable to
established businesses
Nature of entrepreneur
attempt to predict and act upon changes within markets. Bears the uncertainty of market dynamcis
Harvey leibenstein
Entrepreneurial activity involves
“activities necessary to create or carry on an enterprise where not all markets are well established or clearly defined and/or in which relevant parts of the production function are not completely known”
Strategies used by entrepreneurs
strategic adaption
population ecology
Strategic adaptation (individual focused, about making of appropriate adjustments to the business and its strategic focus, as the venture evolves from an initial idea to a successful business)
Process: 1. Existence of key success (or failure) factors that enhance/reduce the chances of survival 2. Entry strategy: (New or imitation product/service/both Sponsorship (customer/self/institution)) 3. Contingent factor- effect of experience curve (the more experience a firm has in producing a particular product, the lower its production costs).
population ecology
(→ individual goal driven behaviour largely irrelevant
→ environmental selection procedures are most powerful determining factor,
→ Environmental selection mechanism determines the characteristics of populations of organisations)
As environments change, often due to innovations introduced by organizations within them, mortality rates increase for organizations experiencing high levels of resistance to change. Inertial forces guarantee that most innovations will come from new entrants and not from incumbents resisting change. Organizational inertia is caused by a combination of internal (e.g., sunk costs, impaired managerial cognition, or organizational culture and history) and external restraints (e.g., government regulations, groupthink, or barriers to entry and exit).
Population ecology: environmental niches can be exploited by
specialist organizations that risk adaptation to the requirements of a smaller number of customers. Generalist organizations span many niches, but they do so sub-optimally—catering to a subset of customers in each niche in return for diversified risk.
Process of population ecology
Process:
Technological/demographic change
Expansion of existing/founding of new organization
Creation of new opportunities
Contingent factor: nature of existing organisations
Reconciling strategic adaptation and population ecology
- Competence enhancing (strategic adaptation)- LAN did this by upgrading to more fuel economic aircraft, plus adapting to low cost model
- Competence destroying (population ecology)
Aggressive strategy is more likely to succeed under conditions of
competence destroying
Competence enhancing for technological discontinuity favours
existing organisations
