27
Entrepreneurial Entrepreneurial Strategies Strategies

Entrepreneurial Strategies. Appropriate entrepreneurial strategies can be devised and implemented to fit the interface represented by the entrepreneur,

Embed Size (px)

Citation preview

Page 1: Entrepreneurial Strategies. Appropriate entrepreneurial strategies can be devised and implemented to fit the interface represented by the entrepreneur,

Entrepreneurial Entrepreneurial StrategiesStrategies

Page 2: Entrepreneurial Strategies. Appropriate entrepreneurial strategies can be devised and implemented to fit the interface represented by the entrepreneur,

Appropriate entrepreneurial strategies can Appropriate entrepreneurial strategies can be devised and implemented to fit the be devised and implemented to fit the interface represented by the entrepreneur, interface represented by the entrepreneur, organization, and environment. Different organization, and environment. Different entrepreneurial approaches are classified entrepreneurial approaches are classified according to the dimensions of sovereignty according to the dimensions of sovereignty (ownership) and the degree of control which (ownership) and the degree of control which the organization retains over the new the organization retains over the new operation. operation.

Page 3: Entrepreneurial Strategies. Appropriate entrepreneurial strategies can be devised and implemented to fit the interface represented by the entrepreneur,

The position along these dimensions is The position along these dimensions is certainly open to debate. In addition, specific certainly open to debate. In addition, specific examples of each type of approach potentially examples of each type of approach potentially differ substantially as well. However, the differ substantially as well. However, the matrix does provide a useful illustration of matrix does provide a useful illustration of how different ways forward can have varying how different ways forward can have varying impacts on the originating organization and impacts on the originating organization and its future. its future.

Page 4: Entrepreneurial Strategies. Appropriate entrepreneurial strategies can be devised and implemented to fit the interface represented by the entrepreneur,

Effective entrepreneurship may involve using Effective entrepreneurship may involve using more than one of these alternatives as the more than one of these alternatives as the business makes transitions throughout its business makes transitions throughout its lifecycle. Each represents a way by which lifecycle. Each represents a way by which organizations can deploy deliberate strategies organizations can deploy deliberate strategies to bring about entrepreneurial development. to bring about entrepreneurial development.

Page 5: Entrepreneurial Strategies. Appropriate entrepreneurial strategies can be devised and implemented to fit the interface represented by the entrepreneur,

Figure 8.7 Entrepreneurial Figure 8.7 Entrepreneurial strategiesstrategies

HighHigh

ControlControl

LowLow

LowLow

IntrapreneurshipIntrapreneurship

People take-overPeople take-over

Take-overTake-overJoint ventureJoint ventureFranchiseFranchise FranchiseeFranchisee

Strategic Alliance Spin off/buy outStrategic Alliance Spin off/buy outConsortiaConsortia ConfederationConfederation

SovereigntySovereignty

Page 6: Entrepreneurial Strategies. Appropriate entrepreneurial strategies can be devised and implemented to fit the interface represented by the entrepreneur,

FranchisingFranchisingFranchising is relevant to entrepreneurial strategy Franchising is relevant to entrepreneurial strategy from the perspectives of both franchisors and from the perspectives of both franchisors and franchisees. Franchising is a system of distribution franchisees. Franchising is a system of distribution in which semi-independent business owners in which semi-independent business owners (franchisees) pay fees and royalties to a parent (franchisees) pay fees and royalties to a parent companies (franchiser) in return for the right to companies (franchiser) in return for the right to become identified with its trademark, to sell its become identified with its trademark, to sell its products or services, and often to use its business products or services, and often to use its business format and system. Franchisees do not establish format and system. Franchisees do not establish their own autonomous businesses; instead, they their own autonomous businesses; instead, they buy a “success package” from the franchisers, buy a “success package” from the franchisers, who shows them how to use it. who shows them how to use it.

Page 7: Entrepreneurial Strategies. Appropriate entrepreneurial strategies can be devised and implemented to fit the interface represented by the entrepreneur,

Franchisees, unlike independent business Franchisees, unlike independent business owners, don’t have the freedom to change the owners, don’t have the freedom to change the way they run their businesses – for example, way they run their businesses – for example, shifting advertising strategies or adjusting shifting advertising strategies or adjusting product lines – but they do have a formula for product lines – but they do have a formula for success that the franchiser has worked out. success that the franchiser has worked out. Most franchisers are selling a successful Most franchisers are selling a successful business model. Many successful franchisers business model. Many successful franchisers claim that neglecting to follow the formula is claim that neglecting to follow the formula is one of the chief reasons that franchisees fail. one of the chief reasons that franchisees fail.

Page 8: Entrepreneurial Strategies. Appropriate entrepreneurial strategies can be devised and implemented to fit the interface represented by the entrepreneur,

The three types of franchising are trade name, The three types of franchising are trade name, product distribution, and pure. product distribution, and pure. Trade name franchisingTrade name franchising involves a franchisee involves a franchisee purchasing the right to become affiliated with purchasing the right to become affiliated with a franchiser’s trade name without distributing a franchiser’s trade name without distributing its products exclusively.its products exclusively.Product distribution franchisingProduct distribution franchising involves involves licensing a franchisee to sell products or licensing a franchisee to sell products or services under the franchiser’s brand name services under the franchiser’s brand name through a selective, limited distribution through a selective, limited distribution network. This system is commonly used to network. This system is commonly used to market automobiles, gasoline products, soft market automobiles, gasoline products, soft drinks, cosmetics, and other products. drinks, cosmetics, and other products.

Page 9: Entrepreneurial Strategies. Appropriate entrepreneurial strategies can be devised and implemented to fit the interface represented by the entrepreneur,

Pure franchisingPure franchising involves providing the involves providing the franchisee a complete business format, including franchisee a complete business format, including a license to for a trade name, the products or a license to for a trade name, the products or services to be sold, the physical plant, the methods services to be sold, the physical plant, the methods of operation, a marketing strategy plan, a quality of operation, a marketing strategy plan, a quality control process, a two-way communication control process, a two-way communication systems, and the necessary business services. Pure systems, and the necessary business services. Pure franchising is the most rapidly growing of all franchising is the most rapidly growing of all types of franchising and is common among fast-types of franchising and is common among fast-food restaurants, hotels, business service firms, food restaurants, hotels, business service firms, car rental agencies, educational institutions, car rental agencies, educational institutions, beauty aid retailers, and many others. beauty aid retailers, and many others.

Page 10: Entrepreneurial Strategies. Appropriate entrepreneurial strategies can be devised and implemented to fit the interface represented by the entrepreneur,

Franchises offer many benefits:Franchises offer many benefits: management management training and support; brand-name appeal; training and support; brand-name appeal; standardized quality of goods and services; standardized quality of goods and services; national advertising programs; financial national advertising programs; financial assistance; proven products and business assistance; proven products and business formats; centralized buying power; territorial formats; centralized buying power; territorial protection; and a greater chance of success.protection; and a greater chance of success.

Page 11: Entrepreneurial Strategies. Appropriate entrepreneurial strategies can be devised and implemented to fit the interface represented by the entrepreneur,

Franchising also suffers from certain Franchising also suffers from certain drawbacks:drawbacks: franchise fees and profit sharing; franchise fees and profit sharing; strict adherence to standardized operations; strict adherence to standardized operations; restrictions on purchasing; limited product restrictions on purchasing; limited product lines; unsatisfactory training programs; lines; unsatisfactory training programs; market saturation; and less freedom. market saturation; and less freedom.

Page 12: Entrepreneurial Strategies. Appropriate entrepreneurial strategies can be devised and implemented to fit the interface represented by the entrepreneur,

Business and people Business and people take-overstake-overs

Business take-overs are a common occurrence Business take-overs are a common occurrence within hospitality, leisure and tourism within hospitality, leisure and tourism industries. They provide opportunity for industries. They provide opportunity for established organizations to move into new established organizations to move into new business areas. At the same time, business areas. At the same time, entrepreneurial individuals who have built up entrepreneurial individuals who have built up businesses can sell out, capitalize on their businesses can sell out, capitalize on their success, and generate considerable wealth. success, and generate considerable wealth.

Page 13: Entrepreneurial Strategies. Appropriate entrepreneurial strategies can be devised and implemented to fit the interface represented by the entrepreneur,

Motivations for take-overs are many. Not all Motivations for take-overs are many. Not all are entrepreneurial, in the sense that they do are entrepreneurial, in the sense that they do not involve the acquisition of something new not involve the acquisition of something new and different for the acquiring organization. and different for the acquiring organization. Nevertheless, business take-overs do provide Nevertheless, business take-overs do provide valuable opportunity to keep pace with a valuable opportunity to keep pace with a rapidly changing industry. In this respect rapidly changing industry. In this respect they can be said to be entrepreneurial, they can be said to be entrepreneurial, whether or not acquisition of new business whether or not acquisition of new business areas or new expertise involvedareas or new expertise involved.

Page 14: Entrepreneurial Strategies. Appropriate entrepreneurial strategies can be devised and implemented to fit the interface represented by the entrepreneur,

Change is endemic within the hospitality, Change is endemic within the hospitality, leisure, and tourism industries and established leisure, and tourism industries and established organizations constantly need to anticipate organizations constantly need to anticipate and respond to it. One of the themes of the late and respond to it. One of the themes of the late 1990s is the increasing emergence and 1990s is the increasing emergence and importance of brands. Business take-overs are importance of brands. Business take-overs are certainly a means of expanding the brand certainly a means of expanding the brand portfolio, and perhaps also acquiring new portfolio, and perhaps also acquiring new expertise on route. expertise on route. In other instances, a take-over presents In other instances, a take-over presents opportunity for moving into a new business opportunity for moving into a new business area. area.

Page 15: Entrepreneurial Strategies. Appropriate entrepreneurial strategies can be devised and implemented to fit the interface represented by the entrepreneur,

The organization’s core competencies and the The organization’s core competencies and the need to have a critical mass of these to bring need to have a critical mass of these to bring about success of a new venture are referred. about success of a new venture are referred. This applies whether the venture is developed This applies whether the venture is developed in-house or is a new acquisition. In each in-house or is a new acquisition. In each instance, the new business will both prosper instance, the new business will both prosper and integrate to a greater extent if it fits in and integrate to a greater extent if it fits in with the organization’s existing capabilities. with the organization’s existing capabilities. The new business should build on existing The new business should build on existing corporate strengths and contribute towards corporate strengths and contribute towards the achievement of the company’s strategic the achievement of the company’s strategic intent.intent.

Page 16: Entrepreneurial Strategies. Appropriate entrepreneurial strategies can be devised and implemented to fit the interface represented by the entrepreneur,

The hospitality, tourism, and leisure industries The hospitality, tourism, and leisure industries are both asset and employee-intensive. are both asset and employee-intensive. Sometimes, it is the expertise resting in people Sometimes, it is the expertise resting in people that is being sought, rather than physical that is being sought, rather than physical assets. In situations where a company has assets. In situations where a company has identifies a need for specific expertise to move identifies a need for specific expertise to move the business forward, it may consider that its the business forward, it may consider that its existing human resource capability is nor existing human resource capability is nor adequate. In this situation, it could make more adequate. In this situation, it could make more sense to hire the people with expertise than to sense to hire the people with expertise than to buy the businesses in which they are currently buy the businesses in which they are currently based. based.

Page 17: Entrepreneurial Strategies. Appropriate entrepreneurial strategies can be devised and implemented to fit the interface represented by the entrepreneur,

People take-overs might be considered to have People take-overs might be considered to have advantages over business take-overs, in that it advantages over business take-overs, in that it is seemingly easier to integrate individuals is seemingly easier to integrate individuals than entire organizations. However, than entire organizations. However, entrepreneurial individuals need freedom to entrepreneurial individuals need freedom to operate in terms of organizational structure operate in terms of organizational structure and culture. If this is not forthcoming then and culture. If this is not forthcoming then buying in expertise may not be effective. buying in expertise may not be effective. Entrepreneurial individuals often find it Entrepreneurial individuals often find it difficult to operate within the confines of large difficult to operate within the confines of large organizations anyway. organizations anyway.

Page 18: Entrepreneurial Strategies. Appropriate entrepreneurial strategies can be devised and implemented to fit the interface represented by the entrepreneur,

Spin offs/buy outsSpin offs/buy outsSpin offs and buy outs are mirror images of Spin offs and buy outs are mirror images of acquisitions. Here, rather than creating added acquisitions. Here, rather than creating added value for shareholders and owners through value for shareholders and owners through acquisitions in new areas of business, the acquisitions in new areas of business, the decision is taken to focus on fewer business decision is taken to focus on fewer business areas instead. Alternatively, an organization areas instead. Alternatively, an organization may consider that the opportunity cost of may consider that the opportunity cost of continuing in a particular business area is too continuing in a particular business area is too great in terms of alternatives which are being great in terms of alternatives which are being foregone. It may not just be a question of foregone. It may not just be a question of capital scarcity. capital scarcity.

Page 19: Entrepreneurial Strategies. Appropriate entrepreneurial strategies can be devised and implemented to fit the interface represented by the entrepreneur,

There is also the issue of management There is also the issue of management competencies and capabilities. Being spread competencies and capabilities. Being spread across too many business areas means that across too many business areas means that attention can be diverted from the major attention can be diverted from the major areas of opportunity. Whatever the areas of opportunity. Whatever the motivation, a decision is taken to spin off motivation, a decision is taken to spin off company assets. company assets.

Page 20: Entrepreneurial Strategies. Appropriate entrepreneurial strategies can be devised and implemented to fit the interface represented by the entrepreneur,

Strategic alliances and joint Strategic alliances and joint venturesventures

Strategic alliances and joint ventures occur Strategic alliances and joint ventures occur when business organizations come together for when business organizations come together for a common purpose. They may or may not a common purpose. They may or may not form a new organization. The fact is that they form a new organization. The fact is that they have arrived at the conclusion that they can have arrived at the conclusion that they can achieve more through collaboration than achieve more through collaboration than through their separate individual efforts. through their separate individual efforts.

Page 21: Entrepreneurial Strategies. Appropriate entrepreneurial strategies can be devised and implemented to fit the interface represented by the entrepreneur,

Such alliances represent entrepreneurial Such alliances represent entrepreneurial activity since they involve each part of the activity since they involve each part of the alliance in looking beyond their existing scope alliance in looking beyond their existing scope of activities and accepting that some form of of activities and accepting that some form of relationship with other business is needed, if relationship with other business is needed, if they are to progress. This is therefore an they are to progress. This is therefore an innovatory response to a perceived business innovatory response to a perceived business problem or opportunity. problem or opportunity.

Page 22: Entrepreneurial Strategies. Appropriate entrepreneurial strategies can be devised and implemented to fit the interface represented by the entrepreneur,

In a fast-changing, global scene in which In a fast-changing, global scene in which information technology (IT) plays an information technology (IT) plays an increasingly important role, a proliferation of increasingly important role, a proliferation of IT-motivated business alliances bringing IT-motivated business alliances bringing about value for both businesses and about value for both businesses and customers is seen. The widely recognized customers is seen. The widely recognized power of electronic access and distribution power of electronic access and distribution systems is forcing companies to enter into systems is forcing companies to enter into strategic alliances to harness the power of IT. strategic alliances to harness the power of IT.

Page 23: Entrepreneurial Strategies. Appropriate entrepreneurial strategies can be devised and implemented to fit the interface represented by the entrepreneur,

As specialist focused businesses become As specialist focused businesses become increasingly global in their scope of operations, increasingly global in their scope of operations, they move into new markets. Initially such they move into new markets. Initially such moves have been shown to be most effective moves have been shown to be most effective when the overseas market has a similar culture when the overseas market has a similar culture to that of the host country. However, with to that of the host country. However, with globalization, hospitality, tourism and leisure globalization, hospitality, tourism and leisure companies are increasingly involved in setting companies are increasingly involved in setting up operations in different cultural contexts. up operations in different cultural contexts.

Page 24: Entrepreneurial Strategies. Appropriate entrepreneurial strategies can be devised and implemented to fit the interface represented by the entrepreneur,

This provides further incentive for setting up This provides further incentive for setting up joint ventures with partners who understand joint ventures with partners who understand local operating conditions. Such ventures also local operating conditions. Such ventures also provide opportunity for sharing required provide opportunity for sharing required capital contribution and associated risks. capital contribution and associated risks.

Page 25: Entrepreneurial Strategies. Appropriate entrepreneurial strategies can be devised and implemented to fit the interface represented by the entrepreneur,

ConsortiaConsortia

Consortia are a form of strategic alliance Consortia are a form of strategic alliance which has special importance in the hotel which has special importance in the hotel industry. The fragmented nature of industry industry. The fragmented nature of industry means that many individual businesses do not means that many individual businesses do not have the financial clout to take advantage of have the financial clout to take advantage of opportunities. They may choose to join with opportunities. They may choose to join with other hotels in a consortium, in order to pool other hotels in a consortium, in order to pool resources and benefit from economies of scale. resources and benefit from economies of scale.

Page 26: Entrepreneurial Strategies. Appropriate entrepreneurial strategies can be devised and implemented to fit the interface represented by the entrepreneur,

Such consortia need not necessarily be Such consortia need not necessarily be entrepreneurial in nature or behavior. It can entrepreneurial in nature or behavior. It can be argued that the individual organizations be argued that the individual organizations joining consortia are certainly being joining consortia are certainly being entrepreneurial. They recognize that their entrepreneurial. They recognize that their membership will offer value for them in membership will offer value for them in acquiring access to services, resources, and acquiring access to services, resources, and distribution systems that they are incapable of distribution systems that they are incapable of accessing independently. Consortia can either accessing independently. Consortia can either be a co-operative venture, established for be a co-operative venture, established for mutual benefit, or a commercial initiative mutual benefit, or a commercial initiative which is created for the profit of the founder. which is created for the profit of the founder.

Page 27: Entrepreneurial Strategies. Appropriate entrepreneurial strategies can be devised and implemented to fit the interface represented by the entrepreneur,

ConfederationsConfederations

Furthest away from the organization in terms Furthest away from the organization in terms of sovereignty and control is the confederation of sovereignty and control is the confederation relationship. In this relationship, the initiating relationship. In this relationship, the initiating organization has neither ownership interest organization has neither ownership interest nor direct control over new developments. nor direct control over new developments. Owing to the very nature of the relationships, Owing to the very nature of the relationships, such collaborations will often be based around such collaborations will often be based around issues of common interest, rather than issues of common interest, rather than economic gain. economic gain.