Chapter 3 (risk reduction/new entry) Flashcards
New entry can be both … and …
Good and bad
What does entrepreneurial strategy do?
Maximizes benefits of newness and minimizes its costs
New entry performance depends on what?
-entry strategy
-risk reduction strategy
-organizational structure
-competence
What is considered a building block in new entry?
Resources, to achieve superior performance
A resources is set to be valuable if …
it enables the firm to pursue opportunities, neutralize threats and offer products and services valued by customers
A resource is said to be rare if…
Few or no other competitor has it
A resource is said to be inimatible if…
when it is hard to replicate and/or costly for competitors
Draw the scale with the factors that influence the decision to enter the market now or delay entry
What does performance depend on environmental instability
depends on the fit between a firm’s bundle of resources and the external environment
What is likely to happen in emerging industries
Environmental changes
What makes it difficult to estimate demand
Demand uncertainty
First movers often need to commit to…
To a new, unproven technology resulting in technological uncertainty
What are the two types of things entrepreneurs can use to reduce customer uncertainty
-informative advertising
-comparison marketing
What is informative advertising
Advertising that aims to educate people on the product or service providing them with info they need to make a decision
What is comparison marketing
comparing your product to the one of competitors with the intention of showing that yours is better
What does lead time allow a business to do, before competition in the market increases
-build customer loyalties
-building switching costs
-protecting product uniqueness
-securing important sources of supply and distribution
If there is not enough customer demand, what can be done
Allow competitors into the industry to share pioneering costs
What are the 3 risk reduction strategies
1) market scope strategies
2) imitation strategy
3) managing newness
What is market scope risk strat
Choice between narrow or broad scope
-Narrow offers small product range to small number of customer groups
-Broad offers wider approach and offers a range of products
Name a disadvantage of narrow scope
Vulnerable to the risk that market demand does not materialize or change overtime
What is an advantage of broad market scope
Reduces major risk of uncertainty over customer preferences
What is imitation strategy
Use other companies and imitate their business model
Name some advantages of imitation strategies
-easier than conducting a systematic and expensive search
-can help develop skills necessary for industry success
-organizational legitmacy
-reduces R&D costs
-less customer uncertainty
Is a franchise a type of imitation strat?
Yes, get the proven formula from the franchisor
What is managing newness strat
idea behind being able to manage being new
What are some pitfalls to newness
-learning new tasks costs time and money
-a structure takes time to establish
What are some advantages of newness
-entrepreneur can benefit from the asset of newness
-start with a clean slate
when do new ventures have strategi competitive advantages over mature competitors
In dynamic and changing environments
