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Entrepreneurial Strategy: Generating and Exploiting New Entries


One of the essential acts of entrepreneurship is new entry—entry based on a new product, a new market, and/or a new organization. Entrepreneurial strategies represent the set of decisions, actions, and reactions that first generate, and then exploit over time, a new entry in a way that maximizes the benefits of newness and minimizes its costs. The creation of resource bundles is the basis for new entry opportunities. A resource bundle is created from the entrepreneur's market knowledge, technological knowledge, and other resources. The new entry has the potential of being a source of sustained superior firm performance if the resource bundle underlying the new entry is valuable, rare, and difficult for others to imitate. Therefore, those wishing to generate an innovation need to look to the unique experiences and knowledge within themselves and their team.

Having created a new resource combination, the entrepreneur needs to determine whether it is in fact valuable, rare, and inimitable by assessing whether this new product and/or new market is sufficiently attractive to be worth exploiting and then acting on that decision. The decision to exploit or not to exploit the new entry opportunity depends on whether the entrepreneur has what she or he believes to be sufficient information to make a decision and on whether the window is still open for this new entry opportunity. The entrepreneur's determination of sufficient information depends on the stock of information and the entrepreneur's level of comfort in making such a decision without perfect information.

Successful new entry requires that the entrepreneur's firm have an advantage over competitors. Entrepreneurs often claim that their competitive advantage arises from being first to market. Being first can result in a number of advantages that can enhance performance, such as cost advantages, reduced competition, securing important sources of supply and distribution, obtaining a prime position in the market, and gaining expertise through early participation. But first movers do not always prosper, and in fact there are conditions that can push a first mover toward performance disadvantages, such as high instability of the environment surrounding the entry, a lack of ability among the management team to educate customers, and a lack of ability among the management team to erect barriers to entry and imitation to extend the firm's lead time.

A new entry involves considerable risk for the entrepreneur and his or her firm. This risk of downside loss is partly derived from the entrepreneur's uncertainties over market demand, technological development, and the actions of competitors. Strategies can be used to reduce some or all of these uncertainties and thereby reduce the risk of downside loss. Two such strategies are market scope and imitation. Scope is a choice by the entrepreneur about which customer groups to serve and how to serve them—for example, the choice between a narrow and a broad scope. Imitation involves copying the practices of other firms, whether those other firms are in the industry being entered or in related industries; for instance, "me too" and franchising are both imitation strategies.

Entrepreneurship also can involve the creation of a new organization. The creation of a new organization offers some challenges for entrepreneurs that are not faced by those who manage established firms. These challenges, referred to as liabilities of newness, reflect a new organization's higher costs of learning new tasks, increased conflict over newly created roles and responsibilities, and the lack of a well-developed informal communication network. However, new organizations also may have some assets of newness, the most important of which is an increased ability to learn new knowledge, which can provide an important strategic advantage over mature competitors, particularly in dynamic, changing environments.











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