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Lecture 2

Access to Class Material

http://girtab.ucc.ie/CHeavin

Porter’s Competitive Forces Model

Figure 3-10

In Porter’s competitive forces model, the strategic position of the firm and its strategies are determined not only by competition with its traditional direct competitors but also by four forces in the industry’s environment: new market entrants, substitute products, customers, and suppliers.

• Traditional competitors• New market entrants • Substitute products and services• Customers • Suppliers

• Low-cost leadership• produce products and services at a lower price than competitors while

enhancing quality and level of service• Examples: Wal-Mart, Dell

• Product differentiation• Enable new products or services, greatly change customer convenience and

experience• Examples: Google, Land’s End, Apple iPhone

• Focus on market niche• Use information systems to enable a focused strategy on a single market

niche; specialize• Example: Hilton Hotels

• Strengthen customer and supplier intimacy• Use information systems to develop strong ties and loyalty with customers

and suppliers; increase switching costs• Example: Chrysler, Amazon

Data Display Case

Critical Success Factors (CSFs) Attributes of the entrepreneur/founder Flexibility of the organisation Ability to establish, coordinate, control and manage

international operations Compete on cost and provide customisation Develop and maintain core competencies

http://www.irishexaminer.com/business/kfgbcwkfeymh/rss2/

Value Innovation: The Cornerstone of Blue Ocean Strategy

Costs

Buyer Value

Value Innovation

The Simultaneous Pursuit of Differentiation and Low Cost

Red Ocean Versus Blue Ocean Strategy

Red Ocean Strategy Blue Ocean Strategy

Compete in Existing Market Space Create uncontested market space

Beat the Competition Make the competition irrelevant

Exploit Existing Demand Create and capture new demand

Make the value-cost trade off Break the value-cost trade off

Align the whole system of firm’s activities with its strategic choice of differentiation or low cost

Align the whole system of a firm’s activities in pursuit of differentiation and low cost

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The mission, personal aspirations and risk propensity of entrepreneurs Each successful entrepreneur brings to their venture an important set

of elements that drives their entrepreneurial dream:A mission that determines what kind of business to build of

what kinds of market to serve;

A set of personal aspirations that guides the level of achievement to be sought;

Some level of risk propensity that indicates what sort of risks are to be taken and what sort of risks are to be taken and what sort of sacrifices are to be made in pursuit of the dream.

What drives your entrepreneurial dream?

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Entrepreneurship is a very personal game. Successful entrepreneurship requires a clear vision about what you as an entrepreneur want out of the effort.

Without a clear mission, your entrepreneurial efforts will be fragmented, lacking in purpose and direction.

You simply cannot aspire to greatness without tolerating some level of risk.

You cannot aspire to greatness without a willingness to share ownership and control, since successful entrepreneurship is, most often, a team sport.

What drives your entrepreneurial dream?

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MissionWhile for many investors the mission is simply to make money, for entrepreneurs a burning desire to make money is not enough on its own.

Personal aspirationThere are three questions every aspiring entrepreneur should ask: How big do I want this business to become? What role do I want in this venture: do I want to do, to manage or to lead? For how long do I want to remain involved with it?

If you want to build a great enterprise, you have to have the courage to dream great dreams!

Risk propensityMost successful entrepreneurs do not regard themselves as risk-takers. Managers of risk, yes.“investors want to see that you are willing to rick your capital, just as they are risking theirs”

What drives your entrepreneurial dream?

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Entrepreneurs can succeed in difficult industries, but they must be able to: Identify the CSF specific to their particular industry; Assemble a team that can execute on these factors.

Identifying the Critical Success Factors(CSF)

Knowledge of the CSFs for any industry resides in the experience of those who have learned – often the hard way - which things absolutely must be done right.

Can you and your team execute?

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In most mature manufacturing industries there are three broad strategic approaches:

1. Operational excellence: providing customers with reliable products or services at competitive prices and delivered with minimal difficulty or inconvenience. Such a strategy seeks to lead the industry in price and convenience.

Minimise costs in every regards; Optimise business processes for extreme efficiency and effectiveness.

2. Customer intimacy: segmenting and targeting markets precisely and then tailoring offerings to match exactly the demands of those niches’. This strategy is focused on individualised service to each customer, based on an intimate understanding of what that customer needs.

Gather detailed information about each customer so that they may be assigned to a micro-segment in which the offering is tailored carefully so that segment’s needs. Sometimes, the segmentation is so precise that offerings are tailored to market segments of one.

Can you and your team execute?

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3. Product Leadership: offering customers’ leading-edge products and services that consistently enhance the customer’s use or applications of the product, thereby making rivals’ goods obsolete’. Product leadership companies seek to provide a continuing flow of state-of-the-art products or services to remain at the cutting edge.

Creativity, to recognise and embrace ideas that may originate outside the company

Optimise business processes for speed, in order to bring these creative ideas to market quickly

Relentlessly pursue new solutions that may obsolete those that the company has just introduced. If anyone is to render the product leader’s technology obsolete, then the product leader prefers to do so itself.

Can you and your team execute?

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Investors want to know that the lead entrepreneur has identified and understands the CSFs in the industry they purpose to enter, as well as the market and competitive environment they will encounter. A credible understanding of the seven domains can provide the evidence here. That’s step one.

Step 2, the crucial one, is that the lead entrepreneur has then assembled a team that can demonstrate in past deeds, not word – that its players taken together can execute. Execute on each and every one of the CSFs that the venture’s industry and strategy therein will require.

Investors want to know…

Data Display SWOT

Strengths • Kevin Neville• Technology • Relationships with customer• Customisation Model • Support from Enterprise Ireland• Employee Loyalty

Weaknesses• Succession Planning• Location • High Labour Cost • Website• No presence in emerging

markets• Centralised Decision Making • Transport Cost• Size vs Competitors

Opportunities • Expanding their market in cheap

labour areas• Changing their leader injects new

ideas • Updating technology through R &D• Acquisition of new talent due to

globalisation

Threats • Competitors• Quicker and cheaper offered by

other countries