Importance of Entrepreneurial Strategies - Term Paper Example

? Entrepreneurial Strategy Entrepreneurial Strategy Entrepreneurship is a way of finding creative profitable solutions to problems.Enterprenuer strategy is a guideline that provides guidelines so that business can plan its future and avoid misfortunes. Conditions in the international industry demand that established firms implement entrepreneurial strategies (Mc Grath & MacMillan, 2000). As a path to success.Enterpreneurial strategies suggest ways to rejuvenate existing organizations and create innovation. According to Amit, Brigham and Markman “entrepreneurial strategies let people to be innovative, creative and responsible for decisions they make” (Meyer & Heppard, 2000).As a result of pursuing entrepreneurial strategies, companies put themselves in a situation to frequently and systematically recognize and exploit entrepreneurial opportunities.Enterpreneurial strategy involves a persistent, managerially sanctioned pattern of innovation related activities and resource allocations that compose a component of the company’s inclusive corporate strategy (Russell, page 640). This thesis will dwell majorly on entrepreneurial strategy concerning its importance/significance, opportunity recognition; .Current theories on economic literature explain strategy adoption according to forces of the competitive environment. Importance of Entrepreneurial Strategies Designing of business plan An entrepreneurial company develops innovations slowly.Explotation tends to force out exploration and the company hits a performance crisis. Small companies have to balance exploration and exploitation. At some point in small companies at the start of the lifecycle design and innovation capability gets relegated in order to bring in the profits from the idea on which the firm was founded. Successfully spotting change factors, assessing their significance, reacting and adapting creates long term values. This can only be achieved by having a entrepreneurial strategy. Innovation The global environment moves faster all the time, innovation and its partner change are requirements for survival and success. Innovation often the foundation of creations is vital for any company to compete effectively in the twenty first century. Building on the importance of entrepreneurial action, Smith and DiGregorio explain that the fundamental nature of entrepreneurialship is newness, new resources, new clients, new markets, new combination of existing resources and clients. They put forward that equilibrating actions are based on both existing and related resources that modify existing knowledge about markets. In dissimilarity disequilibrating consequences are based on both existing but unrelated resources that are incompatible with existing mental methods. Execution of corporate entrepreneurship strategies is important and can play a major role in the success of efforts to produce innovation in companies. The development of a new proposal requires the recombination of existing knowledge and its extensions (Bettis & Hitt, 1995). Creating new businesses requires new knowledge which is necessary because new businesses are based on technologies that differ from currently employed companies. These new businesses function in new markets, making it a necessity for the company to develop knowledge of how to use new technology and compete effectively in the new market. Their work explains the inertia that sometimes occurs with larger successful companies. Many companies are using alliances and networks to acquire knowledge that is critical for innovation and implementation. Entrepreneurial Resources Entrepreneurs and entrepreneurial companies identify and exploit opportunities that competitors have not discovered or underexploited. An appropriate location of resources is needed to identify entrepreneurial opportunities with the utmost potential returns and to be used as a disciplined approach to exploit them (McGrath & MacMillan, 2000).The entrepreneurial strategy is linked to wealth creation and maintain a competitive advantage through which entrepreneurial opportunities can be identified and exploited. Companies must have access to diverse and distinctive resources that can not be accessed and duplicated by their competitors. To identify entrepreneurial opportunities it is important for the entrepreneurial to be alert and also on the resources. A major problem of large resources in the firms is that they may become less motivated to develop or search for new resources. Alternatively entrepreneurial companies do so and create new resources or obtain and combine existing resources to invent and innovate. The entrepreneurial resources are significant in the creation of innovation and development of alliances and networks. Alliances and Networks This is major form of companies to attain the resources and capabilities necessary to compete successfully in markets and therefore wealth creation. Strategic networks may be more important for entrepreneurial companies because of the need for resources so as to compete successfully against other entrepreneurial and established companies. Alliances and networks provide access to information, resources, technology and markets. The establishment of new independent ventures are depend either on the network ties of the entrepreneur or entrepreneurial firms in the case of ventures by superior companies. Networks are sources of entrepreneurial opportunities; some of the important resources to create and operate new ventures are obtained by network ties. Strategic alliances and networks have become a popular means of entering international markets. Entrepreneurial companies have been entering international markets in record numbers frequently through international alliances. International Entrepreneurship During the twenty first century the global economic landscape has been undergoing substantial changes. The escalating globalization has produced and produces a number of outcomes some that are unprecedented. There is abundant global competition in most economically developed markets. Internationalization has accelerated in smaller and newer companies. International markets show case new entrepreneurial opportunities. Set of organizational actors play a major role in terms of wealth creation in all firms also independent new ventures. A critical indicator of performance in new ventures is growth. The strategic leadership which contributes to growth and creation of wealth (Cornwall & Perlman, 1990). The above points are the roles or significance that entrepreneurial strategies play in a company to enable them to be unique and stable. After knowing the importance a firm should also know entrepreneurial strategy opportunity recognition. This helps in the establishment of the firms. Opportunity Recognition They are three major components in opportunity recognition process. The first component is the founding entrepreneur whom decides to form a company to pursue the entrepreneurial technology venture. The second component is the company built and how collective the firm’s knowledge and impact of the venture and finally the third is technology, how this technology develops and evolves due to interaction with the entrepreneurs and know how of the company (Cornwall & Perlman, 1990). Entrepreneurs need to develop a perception of self confidence in their entrepreneurial abilities before they are willing to start a business; self efficacy plays an important role. Technology provides the competitive advantage. In entrepreneurial firm’s technology, innovation may manifest in many forms. Technology is diversifying that effective opportunity recognition involves embracing technology diversification and new or existing market opportunities and evolving technology with market or customer needs. Financial and Government Resources of Entrepreneural Strategy According to Osborne and Gaebler expresses that the governments that are tall, slow, over centralized and preoccupied with the regulations are unable to do their jobs properly. Public agencies were designed to protect the public from the politicians who achieve too much power or misuse public’s money. In order to bring about difficulty in stealing public’s money, it was made impossible to manage public’s cash. Osborne and Gaebler recommended the entrepreneurial government which could compete with profit businesse, non profit and other units of government (Cornwall & Perlman, 1990). The following are the ten principles of reinvention: catalytic government the government that believes in navigation rather than rowing. Community owned government: this is when the government believes in the empowerment of communities to solve the problems rather than delivering services. Competitive government: this government injects the competition into service delivery rather than monopolies. Mission driven government: it transforms the rule driven organization, it is drive by missions instead of rules. Result oriented government: it is oriented by funding outcomes and not inputs. Customer driven government: it is concerned with the needs of the customers. Enterprising government: it believes in earning money than spending. Anticipatory government: it invests in prevention of problems than curing crisis. Decentralized government: it moves from hierarchy to participation, and teamwork and finally market oriented government brings change through the market. The government solves the problems by influencing the market forces than creating public programs Entrepreneurial finance focuses on financial management with entrepreneurial firms. There are both harsh and subtle differences both in theory and practice between entrepreneurial finance as practiced in very potential small companies and corporate or administrative finance, which normally occurs in great publicly traded companies.Comapnies need to focus on key aspects of financial management which are as follows: Cash Flow and Cash are major aspects in entrepreneurial finance. Accumulation based accounting, earnings per share, creative and aggressive use of the tax codes and rules of the Securities and Exchange Commission are not (Bettis & Hitt, 1995). Time and timing, Financing alternatives for the financial health of a venture are more sensitive to or defenseless to the time dimension. In entrepreneurial vetures, critical financing leads have a shorter and more compressed time period, a more rapidly changing optimum timing and are subject to wider more unpredictable swings from lows to highs and back. Capital Markets, all underlying characteristics and assumptions that dominate popular financial theories and models such as the capital asset pricing model. They do not apply, also at the point of a public offering for a small company. An entrepreneur should consider these three major aspects while carrying out financial management. Competitive Dynamics in Entrepreneurial Strategy Competitive dynamics is the intense rivalry involving actions and responses, among similar competitors competing for the same customers in a marketplace. Model of competitive dynamics new competitive action, threat analysis, motivation and capability to respond, types of competitive action and likelihood of competitive reaction the cycles keeps on rotating. Companies launch new competitive actions because of the following to improve market position, capitalize on growing demand, expand production capacity, provide an innovative result and obtain first mover advantages. Threat Analysis Threat analysis is an upcoming field dealing with economics, global trade, globalization, nationalism, religion and the state. The main purpose of global threat analysis is to use both quantitative and qualitative data in equal measure to understand and predict the nature of a specific threat to the business (Cornwall & Perlman, 1990). The entrepreneur should do the following: identification of the threat that is which assets need to be protected and qualities of those assets which need protecting, identifying known and plausible vulnerabilities in that asset in systems which directly interact with it. The known vulnerabilities are eliminated easily using software patches while unknown vulnerabilities by definition must be considered in general. Strategy Actions Strategy is defined as a plan of action designed to achieve a particular goal. The following are various strategy actions used by entrepreneurs: Market Strategies This is as the result of a thorough market analysis. A market analysis forces the entrepreneur to become familiar with all aspects of the market to make the target market can be defined and the company can be positioned in order to acquire its share of sales. A market analysis also enables the entrepreneur to establish pricing, distribution and promotional strategies that will enable the company to become profitable within the competitive environments. A marketing strategy serves as the foundation of a marketing plan. A marketing plan consists of a set of specific actions required to successfully implement a marketing strategy. A good marketing strategy should integrate an organization’s marketing goals, policies and action strategy into a cohesive whole. Marketing strategies are dynamic and interactive (Cornwall & Perlman, 1990). Integration Strategies It allows a firm to gain control over distributors, suppliers and competitors. They are three types forward, backward and horizontal. Strategic Management Strategic management is a field that deals with the major intended and emergent initiatives taken by general managers, involving utilization resources, to enhance the performance of firms in their external environments (Bettis & Hitt, 1995). It entails specific organization’s mission, vision and objectives, developing of policies, plans, in terms of projects and programs, which are planned to achieve this. Strategic management is an ongoing process that evaluates and controls the companies which it is involved, competitors, goals and strategies. In conclusion it should be noted that entrepreneur plays important roles in designing business plan, innovation.Entrepreneurial strategy helps the company to grow and win more market hence increasing their customers. This shows that it is vital in the development of company. References: McGrath, R.G. & MacMillan, I.C. (2000). The entrepreneurial mindset: Strategies for continuously creating opportunity in an age of uncertainty. Boston: Harvard Business School Press. Meyer, G.D. & Heppard, K.A. (2000). Entrepreneurship as strategy. Thousand Oaks, CA: Sage Publications. Cornwall, J. & Perlman, B. (1990). Organizational entrepreneurship. Homewood, IL: Irwin. Amit, R. and Schoemaker, P. J. H. (1993). “Strategic assets and organizational rent”. Strategic Management Journal, 14: 33–46. Bettis, R. A. and Hitt, M. A. (1995). “The new competitive landscape.” Strategic Management Journal, 16(special issue): 7–20. Lane, P. J. and Lubatkin, M. (1998). “Relative absorptive capacity and interorganizational learning.” Strategic Management Journal, 19: 461–77. Read More