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Chapter 8

Chapter 8. Corporate Strategy and Entrepreneurship. The Changing Landscape. The contemporary business environment can be characterized in terms of: increasing risk decreased ability to forecast fluid firm and industry boundaries new rules of the game

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Chapter 8

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  1. Chapter 8 Corporate Strategy and Entrepreneurship

  2. The Changing Landscape The contemporary business environment can be characterized in terms of: • increasing risk • decreased ability to forecast • fluid firm and industry boundaries • new rules of the game • new structural forms that not only allow for change but also help create it.

  3. The Changing Landscape Strategic Inflection Points • An inflection point occurs when the old strategic picture dissolves and gives way to the new, allowing the adaptive and proactive business to ascend to new heights • How can organizations know when the time is right to make changes?

  4. Strategic Management &Corporate Strategy Strategic Management • In essence, strategic management is the formulation of long-range plans for the effective management of external opportunities and threats in light of a company’s internal strengths and weaknesses • Involves a continuous search for competitive advantages

  5. What is Strategy? • Mintzberg (1987) 5 Ps of Strategy • Strategy as a Plan—a consciously intended course of action • Strategy as a Ploy—a specific maneuver to outwit competitors or opponents • Strategy as a Pattern—a consistent patterned stream of actions • Strategy as a Position—a means of locating the organization within a competitive environment • Strategy as a Perspective—a cognitive state-of-mind held by organizational decision-makers

  6. Dominant Logic Fitting the Competitive Landscape? Dominant Logicrefers to the way in which managers conceptualize the business and make critical resource allocation decisions The dominant logic that is optimal for the firm in today’s environment may well be inappropriate for the environment that will exist five years hence

  7. Dominant Logic Fitting the Competitive Landscape? One means of creating a dynamic dominant logic is to make entrepreneurship the basis upon which the organization is conceptualized and resources are allocated As dominant logic, entrepreneurship promotes strategic agility, flexibility, creativity, and continuous innovation throughout the firm

  8. Integrating Entrepreneurship with Strategy The integration of entrepreneurship with strategy has two aspects: • Entrepreneurial Strategy • Application of creativity and entrepreneurial thinking to the development of a core strategy for the firm • Strategy for Entrepreneurship • The need to develop a strategy for the entrepreneurial activities of the firm

  9. Entrepreneurial Strategy Ireland, Covin, and Kuratko (2009) define an entrepreneurial strategy as “a vision-directed, organization-wide reliance on entrepreneurial behavior that purposefully and continuously rejuvenates the organization and shapes the scope of its operations through the recognition and exploitation of entrepreneurial opportunity.”

  10. Model 5 CV BS CV CV CV CV BS BS BS BS Developing a Corporate Strategy that is Entrepreneurial Observed Configurations of the Corporate Venturing-Business Strategy Relationship Model 1 Model 4 Model 2 Model 3 CV = Corporate Venturing BS = Business Strategy

  11. Developing a Corporate Strategy that is Entrepreneurial Where does the firm want to be in the entrepreneurial grid? To what extent is the entrepreneurial emphasis in the company that of growing new business and starting new ventures outside the mainstream of the firm vs. transforming the existing enterprise and its internal operations into a more entrepreneurial environment?

  12. Developing a Corporate Strategy that is Entrepreneurial In what areas does the firm want to be an innovation leader vs. an innovation follower vis-a-vis the industry? In what areas of the firm is management looking for higher vs. lower levels of entrepreneurial activity?

  13. Developing a Corporate Strategy that is Entrepreneurial What is the relative importance over the next three years of product vs. service vs. process innovation? To what extent is innovation expected to come from senior management, middle management, or first-level management?

  14. Managing Innovation Strategically: A Portfolio Approach Management attempts to draw a balance across five metrics: High risk, high-return projects against lower-risk, lower return projects Discontinuous or dynamically continuous innovations against continuous innovations and imitations Projects with shorter development cycles and payoffs against ones with longer-term outcomes Products/services intended for markets the firm currently serves against ones for markets that are new to the firm Projects utilizing new and emerging technologies against those relying on technologies with which the firm is familiar

  15. A Portfolio Approach to Innovation Firm’s Knowledge Pertaining to the New Products’/Service’s Targeted Market Firm’s Knowledge Pertaining to the New Products’/Service’s Core Technology

  16. Technology, Entrepreneurship, and Strategy Technology represents both an opportunity and threat for entrepreneurial activity Technology has shortened product life cycles, leading to smaller windows of opportunity in which innovation can occur. This has forced entrepreneurs to have an exit strategy even as the innovation is in the development stages.

  17. Technology, Entrepreneurship, and Strategy Technology allows firms to achieve sustainable competitive advantages if management determine: How the firm will use technology to position its products/services in the marketplace How the firm will use technology to enhance its internal processes

  18. Two Types of Technological Innovations Sustaining Technologies – maintains a rate of improvement, giving customers more or better in the attributes, cannot get much better • Speed, quality, size Disruptive Technologies – introduces a different sets of attributes than ones customers historically value • Introduction of microwave oven • Creates new markets or new applications

  19. Two forces that motivate innovation Technology-push – employees within the firm (usually technically qualified engineers or scientists) see a technical possibility and strive to capitalize on it. These individuals see a new way in which a technology might be applied. Market-pull – innovations start with the customer and are typically driven by marketing people. Customers are often the source of the new idea.

  20. Key Strategic Concepts: Entrepreneurship as the Driver Strategic Positioning • …is concerned with how the firm wants to be perceived in the marketplace • Entrepreneurial strategy is all about positioning. It is a process of perceiving new positions that attract customers from established ones or draw new customers into the market • Effective strategic positioning is critical for competitive advantage

  21. Key Strategic Concepts: Entrepreneurship as the Driver Strategic Flexibility and Adaptation • Strategic flexibility involves a willingness to rethink continuously and make adjustments to the firm’s strategies, action plans, and resource allocations and to the company structure, culture, and managerial systems

  22. Key Strategic Concepts: Entrepreneurship as the Driver The following 5 factors contribute to building strategic leadership: • A unique set of dynamic core competencies • Creative approaches to human capital • Effective incorporation of new and emerging technologies • Strategic alliances and a global market presence • Company structures that are flattened and cultures that stress learning and accountability for innovation

  23. Build Dynamic Core Competencies • Focus and Develop Human Capital • Contingency workers and outsourcing • Developing employee skills Strategic Flexibility Exercise Strategic Leadership • Effectively use New Technologies • Manufacturing technologies • Information technologies Competitive Advantage • Engage in Valuable Strategies • Exploit global markets • Use cooperative strategies • Develop New Organization Structures and Culture • Horizontal organization • Learning and innovative culture • Manage as a bundle of assets

  24. Key Strategic Concepts: Entrepreneurship as the Driver Strategic Leverage • Leveraging refers to doing more with less • Corporate entrepreneurs and entrepreneurial companies are brilliant “leveragers” of resources • “Getting to the future first is more a function of resourcefulness than resources”

  25. Key Strategic Concepts: Entrepreneurship as the Driver Resource leveraging has a number of dimensions: • Stretching resources much further than others have done in the past • Getting uses out of resources that others are unable to realize • Using other people’s/firm’s resources to accomplish the entrepreneur’s own purpose

  26. Key Strategic Concepts: Entrepreneurship as the Driver • Complementing one resource with another to create higher combined value • Using certain resources to obtain other resources

  27. Fatal Flaws in ENT Strategy Thinking Flaw 1: Misunderstanding industry attractiveness Flaw 2: No real competitive advantage Flaw 3: Pursuing an unsustainable competitive position Flaw 4: Compromising strategy for growth Flaw 5: Failure to explicitly communicate strategy internally

  28. Conclusion: Combining the Strategic Concepts Developing an entrepreneurial vision Increasing the perception of opportunity Institutionalizing change Instilling the desire to be innovative Investing in people’s ideas Sharing risks and rewards with employees Recognizing the critical importance of failure

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