Entrepreneurship 2
Transcript of Entrepreneurship 2
MODULE 4MODULE 4
MANAGING, GROWING AND MANAGING, GROWING AND ENDING THE VENTUREENDING THE VENTURE
ENTREPRENEURIAL STRATEGY: ENTREPRENEURIAL STRATEGY: GENERATING AND EXPLOITING GENERATING AND EXPLOITING
NEW ENTRIESNEW ENTRIES
NEW ENTRYNEW ENTRY
Offering a new product to an Offering a new product to an established or new market, offering established or new market, offering an established product to a new an established product to a new market or creating a new market or creating a new organizationorganization
GENERATION OF A NEW ENTRY GENERATION OF A NEW ENTRY OPPORTUNITYOPPORTUNITY
Resources as a source of Resources as a source of competitive advantagecompetitive advantage
Creating a resource bundle that is Creating a resource bundle that is valuable, rare and inimitablevaluable, rare and inimitable
1.1. Market knowledgeMarket knowledge
2.2. Technological KnowledgeTechnological Knowledge
ASSESSING THE ASSESSING THE ATTRACTIVENESS OF A NEW ATTRACTIVENESS OF A NEW
ENTRY OPPORTUNITYENTRY OPPORTUNITY Information on a New EntryInformation on a New Entry
Prior Knowledge and Information Prior Knowledge and Information SearchSearch
window of opportunitywindow of opportunityComfort with Making a Decision Comfort with Making a Decision
under Uncertaintyunder Uncertainty
error of commissionerror of commission
error of omissionerror of omission
ENTRY STRATEGY FOR NEW ENTRY STRATEGY FOR NEW ENTRY EXPLOITATIONENTRY EXPLOITATION
First movers develop a cost advantageFirst movers develop a cost advantageFirst movers face less competitive First movers face less competitive
rivalryrivalryFirst movers can secure important First movers can secure important
channelschannelsFirst movers are better positioned to First movers are better positioned to
satisfy customersatisfy customerFirsts movers gain expertise through Firsts movers gain expertise through
participationparticipation
Environmental instability and Environmental instability and First mover (Dis)advantageFirst mover (Dis)advantage
Key success factorKey success factorDemand uncertaintyDemand uncertaintyTechnological UncertaintyTechnological UncertaintyAdaptationAdaptation
Customers Uncertainty and First Mover Customers Uncertainty and First Mover (Dis)Advantage(Dis)Advantage
Lead time and First mover Lead time and First mover (Dis)Advantage(Dis)Advantage
1.1. Building customer loyaltiesBuilding customer loyalties
2.2. Build switching costsBuild switching costs
3.3. Protecting product uniquenessProtecting product uniqueness
4.4. Securing access to important sources of Securing access to important sources of supply and distributionsupply and distribution
RISK REDUCTION STRATEGIES RISK REDUCTION STRATEGIES FOR NEW ENTRY EXPLOITATIONFOR NEW ENTRY EXPLOITATION
Probability and magnitude of Probability and magnitude of downside lossdownside loss
Strategy to reduce risk Strategy to reduce risk 1.1. Market scope strategyMarket scope strategy
2.2. imitation strategyimitation strategy
3.3. Managing newnessManaging newness
Market scope strategyMarket scope strategy
A choice about which customer group A choice about which customer group to serveto serve
Narrow scope strategyNarrow scope strategyBroad scope strategy Broad scope strategy
Imitation strategyImitation strategy
Why do it?Why do it?Franchising Franchising ““me-too strategy”: copying products me-too strategy”: copying products
that already exist and attempting to that already exist and attempting to build an advantage through minor build an advantage through minor variationsvariations
Managing NewnessManaging Newness
Learning new taskLearning new taskNew role assignmentNew role assignmentFormal and informal communicationFormal and informal communication
STRATEGIES FOR GROWTH STRATEGIES FOR GROWTH AND MANAGING THE AND MANAGING THE
IMPLICATIONS OF GROWTHIMPLICATIONS OF GROWTH
GROWTH STRATEGYGROWTH STRATEGY
PENETRATION PENETRATION STRATEGYSTRATEGY
PRODUCT PRODUCT DEVELOPMENT DEVELOPMENT STRATEGYSTRATEGY
MARKET MARKET DEVELOPMENT DEVELOPMENT STRATEGYSTRATEGY
DIVERSIFICATIONDIVERSIFICATION
EXISTING
NEW
EXISTING NEW
PRODUCT
MARKET
ECONOMIC IMPLICATION OF ECONOMIC IMPLICATION OF GROWTHGROWTH
IMPLICATION OF GROWTH FOR IMPLICATION OF GROWTH FOR THE FIRM THE FIRM
Pressures on Existing Financial Pressures on Existing Financial ResourcesResources
Pressure on Human ResourcePressure on Human ResourcePressure on the management of the Pressure on the management of the
employeeemployeePressures on the Entrepreneur’s Pressures on the Entrepreneur’s
TimeTime
OVERCOMING PRESSURES ON OVERCOMING PRESSURES ON EXISTING FINANCIAL EXISTING FINANCIAL
RESOURCESRESOURCESFINANCIAL CONTROLFINANCIAL CONTROL
Managing cash flowManaging cash flow
Managing inventoryManaging inventory
Managing fixed assetsManaging fixed assets
Managing costs and profitsManaging costs and profits
TaxesTaxes
Record keepingRecord keeping
OVERCOMING PRESSURES ON OVERCOMING PRESSURES ON EXISTING HUMAN RESOURCESEXISTING HUMAN RESOURCES
OVERCOMING PRESSURES ON OVERCOMING PRESSURES ON THE MANAGEMENT OF THE MANAGEMENT OF
EMPLOYEESEMPLOYEESEstablish a Team spiritEstablish a Team spiritCommunicate with employeesProvide Communicate with employeesProvide
feedbackfeedbackDelegate some responsibility to Delegate some responsibility to
othersothersProvide continuous training for Provide continuous training for
employeesemployees
OVERCOMING PRESSURES ON OVERCOMING PRESSURES ON ENTREPRENEURS TIMEENTREPRENEURS TIME
Increased ProductivityIncreased Productivity Increased Job SatisfactionIncreased Job Satisfaction Improved interpersonal RelationshipsImproved interpersonal RelationshipsReduce time anxiety and TensionReduce time anxiety and TensionBetter healthBetter health
Basic Principles of time Basic Principles of time ManagementManagement
Principle of DesirePrinciple of DesirePrinciple of effectivenessPrinciple of effectivenessPrinciple of AnalysisPrinciple of AnalysisPrinciple of TeamworkPrinciple of TeamworkPrinciple of prioritized PlanningPrinciple of prioritized PlanningPrinciple of ReanalysisPrinciple of Reanalysis
IMPLICATIONS OF FIRM GROWTH IMPLICATIONS OF FIRM GROWTH TO THE ENTREPRENEURTO THE ENTREPRENEUR
A categorization of entrepreneurs A categorization of entrepreneurs and their firms growthand their firms growth
Annual growth of the firmAnnual growth of the firm
Unused potential for the growthUnused potential for the growth
Constrained growthConstrained growth
little potential for firms growthlittle potential for firms growth
GOING PUBLICGOING PUBLIC
ADVANTAGES OF GOING ADVANTAGES OF GOING PUBLICPUBLIC
Ability to obtain equity capitalAbility to obtain equity capitalEnhanced ability to borrowEnhanced ability to borrowEnhanced ability to raise equityEnhanced ability to raise equityLiquidity and valuationLiquidity and valuationPrestigePrestigePersonal wealthPersonal wealth
DISADVANTAGEDISADVANTAGE
Increased Risk Of LiabilityIncreased Risk Of LiabilityExpenseExpenseRegulation of corporate governance Regulation of corporate governance
policies and procedurespolicies and proceduresDisclosure of informationDisclosure of informationPressures to maintain growth patternPressures to maintain growth patternLoss of controlLoss of control
THE ALTERNATIVES TO GOING THE ALTERNATIVES TO GOING PUBLICPUBLIC
Private placement: institutional Private placement: institutional investor, investment companies, investor, investment companies, insurance companies and pension firminsurance companies and pension firm1.1. Restrictive covenant: statement Restrictive covenant: statement
indicating the things that cannot be done indicating the things that cannot be done without approval without approval
2.2. Liquidation covenant: the right of an Liquidation covenant: the right of an investor to sell the interest in the investor to sell the interest in the companycompany
Bank loans: Bank loans: Collaterals like some tangible assetsCollaterals like some tangible assets
TIMING OF GOING PUBLIC AND TIMING OF GOING PUBLIC AND UNDRWRITER SELECTION UNDRWRITER SELECTION
TimingTiming1.1. Is the company large enoughIs the company large enough
2.2. What is amount of the company’s What is amount of the company’s earnings and how strong is its financial earnings and how strong is its financial performanceperformance
3.3. Are the market conditions favorable for Are the market conditions favorable for IPOIPO
4.4. How urgently the money neededHow urgently the money needed
5.5. What are the needs and desires of the What are the needs and desires of the presents ownerspresents owners
UNDERWRITER SELECTIONUNDERWRITER SELECTION
Managing underwriter : lead financial Managing underwriter : lead financial firm in selling stocks to the public firm in selling stocks to the public
Underwriting syndicate : group of Underwriting syndicate : group of firms involved in selling stock to the firms involved in selling stock to the pub;licpub;lic
REGISTRATION STATEMENT AND REGISTRATION STATEMENT AND TIMETABLETIMETABLE
Full and fair disclosureFull and fair disclosureProspectusProspectusRegistration statementRegistration statementForm S-1Form S-1
The ProspectusThe ProspectusPart IIPart IIProcedureProcedure
Red herringRed herring
Comment letterComment letter
Pricing amendmentPricing amendment
LEGAL ISSUES AND BLUE-SKY LEGAL ISSUES AND BLUE-SKY QUALIFICATIONSQUALIFICATIONS
Quiet period : 90 day period in going Quiet period : 90 day period in going public when no new company public when no new company information can be released information can be released
Blue sky Qualifications : laws of each Blue sky Qualifications : laws of each state regulating public state regulating public
AFTER GOING PUBLICAFTER GOING PUBLIC
Aftermarket supportAftermarket support
Relationship with the Financial Relationship with the Financial communitycommunity
Reporting requirementsReporting requirements
ENDING THE VENTUREENDING THE VENTURE
BANKRUPTCY- AN OVERVIEWBANKRUPTCY- AN OVERVIEW
Business face a weak economyBusiness face a weak economy
Increased competitionIncreased competition
Rising cost of doing businessRising cost of doing business
Lessons learned from Lessons learned from bankruptcybankruptcy
Should focus only on known marketsShould focus only on known markets It protect from creditors not from It protect from creditors not from
competitorscompetitorsWorrying about the future of their Worrying about the future of their
employeesemployees It needs to shared with employees It needs to shared with employees
and everybody else involvedand everybody else involved
CHAPTER 11 - CHAPTER 11 - REORGANIZATIONREORGANIZATION
Surviving bankruptcySurviving bankruptcy
Prepackaged bankruptcyPrepackaged bankruptcy
CHAPTER 13-EXTENDED TIEM CHAPTER 13-EXTENDED TIEM PAYMENT PLANSPAYMENT PLANS
CHAPTER 7-LIQUIDATION CHAPTER 7-LIQUIDATION
Voluntary bankruptcyVoluntary bankruptcy
Involuntary bankruptcyInvoluntary bankruptcy
KEEPING THE VENTURE KEEPING THE VENTURE GOINGGOING
Avoid excess optimism when Avoid excess optimism when business appears to be successfulbusiness appears to be successful
Always prepare good marketing Always prepare good marketing plans with clear objectivesplans with clear objectives
Make good cash projections and Make good cash projections and avoid capitalizationavoid capitalization
Keep abreast of the marketplaceKeep abreast of the marketplace Identify stress points that can put the Identify stress points that can put the
business in jeopardybusiness in jeopardy
WARNING SIGNS OF WARNING SIGNS OF BANKRUPTCYBANKRUPTCY
Management of finances becomes Management of finances becomes lax, so that no can explain, how lax, so that no can explain, how money is being spentmoney is being spent
Directors cannot document or Directors cannot document or explain major transactionexplain major transaction
Customer are given large discounts Customer are given large discounts to enhance payments because of to enhance payments because of poor cash flowpoor cash flow
Contracts are accepted below Contracts are accepted below standard amount s to generate netstandard amount s to generate net
Bank requests subordination of its Bank requests subordination of its loansloans
Key personnel leave the companyKey personnel leave the companyMaterials to meet orders are lacking Materials to meet orders are lacking Payroll taxes are not paidPayroll taxes are not paidSuppliers demand payment in cashSuppliers demand payment in cashCustomers complaints regarding Customers complaints regarding
service and product quality increaseservice and product quality increase
THE REALITY OF FAILURETHE REALITY OF FAILURE
The entrepreneur should consult with The entrepreneur should consult with his or her familyhis or her family
The entrepreneur should seek The entrepreneur should seek outside assistance from outside assistance from professionals, friends and business professionals, friends and business associatesassociates
It is important to not try to hang on It is important to not try to hang on to a venture that will continually to a venture that will continually drain resouces if the end is inevitabledrain resouces if the end is inevitable
EXIT STRATEGYEXIT STRATEGY
SUCCESS OF BUSINESSSUCCESS OF BUSINESS
Transfer to family membersTransfer to family members
Transfer to non family membersTransfer to non family members
HARVESTING STRATEGYHARVESTING STRATEGY
Direct SaleDirect SaleEmployee stock option planEmployee stock option planManagement buyoutManagement buyout