MODULE: SPECIAL TOPICS IN STRATEGY
TEXT OUTLINE
STRATEGIES FOR ENTREPRENEURIAL VENTURES AND SMALL BUSINESSES
A. What Is an Entrepreneurial Venture and What Is a Small Business? (Table 1)
1. Entrepreneurial Venture
a) Characterized by innovative practices
b) Has profitability and growth as its goals
c) Seeks out new opportunities
d) Willingness to take risks
2. Small Business
a) Independently owned, operated and financed
b) Fewer than 500 employees
c) Doesn’t necessarily emphasize new or innovative practices
d) Has little impact on its industry
B. Why Are These Types of Organizations Important?
1. Job Creation
a) Accepted “wisdom” is that small businesses create more jobs
b) Research may suggest otherwise
c) Small firms tend to be more stable, despite the economic time
2. Number of New Start-ups
a) Small business and entrepreneurial ventures are often better able to
respond quickly to changes in the external environment than larger, less
flexible organizations
b) Many of the cost advantages that large organizations traditionally had
because of their size have been eroded and diminished by advances in
technology
3. Innovation
, Innovation is the process of creating, changing, experimenting, transforming
and revolutionizing.
a) One of the key distinguishing characteristics of entrepreneurial ventures
b) Entrepreneurial firms are an essential source of new and unique ideas that
might otherwise go untapped
(1) New entrepreneurial organizations generate 24 times more innovations
per R&D dollar spent than do Fortune 500 organizations
(2) Over 95% of new and “radical” product developments are from
entrepreneurial firms
(3) Small firms produce 13 to 14 times more patents per employee than
large patenting firms in a 2007 report
C. The Strategic Management Process in Entrepreneurial Ventures and Small
Businesses
1. Value of Planning
a) Strategy research on the value of general planning and on the value of pre-
start-up planning in particular in these types of organizations has shown
mixed results. Several studies have shown positive linkages between
planning and business performance. Others have not uncovered any such
relationship between planning and performance or have shown that the
relationship depends on the industry.
b) Entrepreneurship researchers suggest not spending a lot of time writing a
business plan without knowing whether you have actual customers.
c) Although preparing a start-up business plan may not be as critical as once
thought, strategic planning is.
2. The Overall Approach to the Strategic Planning Process
a) Less formality and rigidity to encourage crucial flexibility
b) More valuable in the “doing” the process than the outcome (i.e., the formal
plan)
c) Value in “doing” comes from analyzing the external and internal
environments: steps important in effective strategic planning.
Active Learning Hint
Have each student team of two to three students contact a local entrepreneur. Have each
team ask the selected entrepreneur to identify key challenges of running his/her business.
Ask if the entrepreneur wants his/her business to grow next year and by how much. What is
,the entrepreneur doing to promote growth or to prevent loss? Have teams report to the
class on their interviews including pictures of the business, its products or services and
quotes from the entrepreneur.
Teaching Notes: _______________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________
3. External and Internal Environmental Analysis
a) External:
(1) Influences performance, particularly in new entrepreneurial ventures
(2) Provides information for developing a sustainable competitive
advantage
(3) Informs about changes and trends in:
(a) Customer expectations
(b) Competitors and their actions
(c) Economic factors
(d) Technological advances
(e) Other marketplace features
(f) Potential opportunities and threats
b) Internal:
(1) Assesses the organization’s strengths and weaknesses
(2) Being totally objective is necessary
c) Boiled Frog Phenomenon—employees need to analyze both the external and
internal environments to detect subtle, but potentially damaging, changes in
their organization’s competitive advantage.
4. Strategy Choices
a) Functional strategies (Production, human resource management, financing,
etc.)
(1) The main difference in the functional strategies of small businesses and
entrepreneurial ventures and large businesses is the extent or range of
the possible strategies.
, b) Competitive strategy: limited to focus strategies (either low cost or
differentiation focus). Small businesses that mix efficiency (low cost) and
flexibility (differentiation) strategies significantly underperform those firms
that used one strategy or the other.
c) Corporate strategy: direction for the organization
(1) Most entrepreneurial ventures will choose to grow using the
concentration strategy because vertical integration, horizontal
integration, or diversification may not be financially or operationally
feasible.
d) Process of strategy choices boils down to strategic manager deciding:
(1) What business to be in
(2) What competitive advantages are needed to be successful in that
business
(3) What strategies are necessary to get there
(4) This encompasses the whole range of strategic activities
(a) From developing organizational resources, capabilities and core
competencies
(b) To building or exploiting a sustainable competitive advantage from
these
(c) To move the firm in the desired direction
5. Strategy Evaluation
Similar to what would be used in large organizations
a) Strategy evaluation might
(1) Measure performance by attainment of goals or objectives at the various
levels
(2) Include an assessment of certain performance trends and a comparison
of the organization to its competitors
b) Managers need to know whether the implemented strategy is working
6. Summary of the strategic management process for small businesses and
entrepreneurial ventures (Figure 1)
D. Specific Strategic Issues Facing Small Businesses and Entrepreneurial Ventures
1. Human Resource Management Issues
a) Employees are one of a company’s most valuable resources and competitive
advantages
TEXT OUTLINE
STRATEGIES FOR ENTREPRENEURIAL VENTURES AND SMALL BUSINESSES
A. What Is an Entrepreneurial Venture and What Is a Small Business? (Table 1)
1. Entrepreneurial Venture
a) Characterized by innovative practices
b) Has profitability and growth as its goals
c) Seeks out new opportunities
d) Willingness to take risks
2. Small Business
a) Independently owned, operated and financed
b) Fewer than 500 employees
c) Doesn’t necessarily emphasize new or innovative practices
d) Has little impact on its industry
B. Why Are These Types of Organizations Important?
1. Job Creation
a) Accepted “wisdom” is that small businesses create more jobs
b) Research may suggest otherwise
c) Small firms tend to be more stable, despite the economic time
2. Number of New Start-ups
a) Small business and entrepreneurial ventures are often better able to
respond quickly to changes in the external environment than larger, less
flexible organizations
b) Many of the cost advantages that large organizations traditionally had
because of their size have been eroded and diminished by advances in
technology
3. Innovation
, Innovation is the process of creating, changing, experimenting, transforming
and revolutionizing.
a) One of the key distinguishing characteristics of entrepreneurial ventures
b) Entrepreneurial firms are an essential source of new and unique ideas that
might otherwise go untapped
(1) New entrepreneurial organizations generate 24 times more innovations
per R&D dollar spent than do Fortune 500 organizations
(2) Over 95% of new and “radical” product developments are from
entrepreneurial firms
(3) Small firms produce 13 to 14 times more patents per employee than
large patenting firms in a 2007 report
C. The Strategic Management Process in Entrepreneurial Ventures and Small
Businesses
1. Value of Planning
a) Strategy research on the value of general planning and on the value of pre-
start-up planning in particular in these types of organizations has shown
mixed results. Several studies have shown positive linkages between
planning and business performance. Others have not uncovered any such
relationship between planning and performance or have shown that the
relationship depends on the industry.
b) Entrepreneurship researchers suggest not spending a lot of time writing a
business plan without knowing whether you have actual customers.
c) Although preparing a start-up business plan may not be as critical as once
thought, strategic planning is.
2. The Overall Approach to the Strategic Planning Process
a) Less formality and rigidity to encourage crucial flexibility
b) More valuable in the “doing” the process than the outcome (i.e., the formal
plan)
c) Value in “doing” comes from analyzing the external and internal
environments: steps important in effective strategic planning.
Active Learning Hint
Have each student team of two to three students contact a local entrepreneur. Have each
team ask the selected entrepreneur to identify key challenges of running his/her business.
Ask if the entrepreneur wants his/her business to grow next year and by how much. What is
,the entrepreneur doing to promote growth or to prevent loss? Have teams report to the
class on their interviews including pictures of the business, its products or services and
quotes from the entrepreneur.
Teaching Notes: _______________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________
3. External and Internal Environmental Analysis
a) External:
(1) Influences performance, particularly in new entrepreneurial ventures
(2) Provides information for developing a sustainable competitive
advantage
(3) Informs about changes and trends in:
(a) Customer expectations
(b) Competitors and their actions
(c) Economic factors
(d) Technological advances
(e) Other marketplace features
(f) Potential opportunities and threats
b) Internal:
(1) Assesses the organization’s strengths and weaknesses
(2) Being totally objective is necessary
c) Boiled Frog Phenomenon—employees need to analyze both the external and
internal environments to detect subtle, but potentially damaging, changes in
their organization’s competitive advantage.
4. Strategy Choices
a) Functional strategies (Production, human resource management, financing,
etc.)
(1) The main difference in the functional strategies of small businesses and
entrepreneurial ventures and large businesses is the extent or range of
the possible strategies.
, b) Competitive strategy: limited to focus strategies (either low cost or
differentiation focus). Small businesses that mix efficiency (low cost) and
flexibility (differentiation) strategies significantly underperform those firms
that used one strategy or the other.
c) Corporate strategy: direction for the organization
(1) Most entrepreneurial ventures will choose to grow using the
concentration strategy because vertical integration, horizontal
integration, or diversification may not be financially or operationally
feasible.
d) Process of strategy choices boils down to strategic manager deciding:
(1) What business to be in
(2) What competitive advantages are needed to be successful in that
business
(3) What strategies are necessary to get there
(4) This encompasses the whole range of strategic activities
(a) From developing organizational resources, capabilities and core
competencies
(b) To building or exploiting a sustainable competitive advantage from
these
(c) To move the firm in the desired direction
5. Strategy Evaluation
Similar to what would be used in large organizations
a) Strategy evaluation might
(1) Measure performance by attainment of goals or objectives at the various
levels
(2) Include an assessment of certain performance trends and a comparison
of the organization to its competitors
b) Managers need to know whether the implemented strategy is working
6. Summary of the strategic management process for small businesses and
entrepreneurial ventures (Figure 1)
D. Specific Strategic Issues Facing Small Businesses and Entrepreneurial Ventures
1. Human Resource Management Issues
a) Employees are one of a company’s most valuable resources and competitive
advantages
