Strategic Management for Early Stage Entrepreneurs

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Strategic Management
for
Early Stage Entrepreneurs
Ahmed Nagy, MBA

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Dr. Jeffrey R.
CornwallDr. Norman
M.
Scarborough

External & Internal Environments
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• Developing a strategy for success!
• Don’t just respond to the chaos in the environment, create the
disruptions that revolutionize the industry, and, in the process,
create a competitive edge
• Apple Computer
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• The world economy is shifting from financial to
intellectual capital
• Knowledge is no longer just a factor of production, it is
the critical factor of production
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Knowledge management: the practice of gathering, organizing,
and disseminating the collective wisdom and experience of a
company’s employees for the purpose of strengthening its
competitive position
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Intellectual capital: comprised of
1.Human capital
2.Structural capital
3.Customer capital
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Vertebral Column of Strategic
Management

Building a
Competitive Advantage
Competitive advantage: the aggregation of factors that sets a
company apart from its competitors and gives it a unique position in
the market
•The key to business success is to build a unique competitive
advantage that creates value for customers, is sustainable, and is
difficult to duplicate
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Building a
• To define competitive advantage, entrepreneurs should consider:
• The products they sell
• The services they provide
• The pricing they offer
• The way they sell
• The values to which they are committed
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Building a
Core competencies: unique set of skills, knowledge, or abilities
that a company develops in key areas such as superior quality,
customer service, innovation, team-building, flexibility,
responsiveness, and others that allow it to vault past competitors
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Building a
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Building a Sustainable Competitive Advantage

Building a
• Use core competencies to define a compelling value
proposition: the value that the combination of goods and
services that a business delivers to customers to create a
sustainable competitive edge
• Product or service leadership
• Customer intimacy
• Operation excellence
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The Strategic Management Process
• Strategic management is a continuous process
1. Develop a vision and translate it into a mission statement
2. Assess strengths and weaknesses
3. Scan environment for opportunities and threats
4. Identify key success factors
5. Analyze competition
6. Create goals and objectives
7. Formulate strategies
8. Translate plans into actions
9. Establish accurate controls
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• Step 1: Develop a Clear Vision and Translate It into a Meaningful
Mission Statement
• Vision
• An expression of what an entrepreneur stands for and believes in and the values on which
they build their business
• Answers the question: “What kind of business do we want to be”
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• A clearly defined vision:
• Provides direction
• Determines decisions
• Motivates people
• Allows a company to persevere in the face of adversity
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• Mission
• Answers the question "What business am I in?”
• Makes clear to everyone “why we are here” and “where we are going”
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• Elements of a mission statement
• The purpose of the company
• The business we are in
• The values of the company
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• Assess strengths and weaknesses
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• Step 2: Assess the Company’s Strengths and Weaknesses
• Strengths: positive internal factors that contribute to accomplishing
the mission, goals, and objectives
• Weaknesses: negative internal factors that inhibit the company’s
ability to accomplish its mission, goals, and objectives
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Identifying Company’s Strengths and Weaknesses

• Scan environment for opportunities and threats
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External Macro-environment analysis
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External Macro-environment analysis
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• Step 3: Scan the Environment for Opportunities and Threats Facing the
Business
• Opportunities: positive external options the company can exploit to accomplish its mission,
goals, and objectives
• Threats: negative external forces that inhibit the company’s ability to
accomplish its mission, goals, and objectives
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Identifying Opportunities and Threats

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Identifying and Managing Major Threats

• Identify key success factors
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• Step 4: Identify the Key Factors for Success in the Business
• Key success factors: factors that influence a company’s ability to
compete successfully in an industry
• Determine a company’s ability to compete in the marketplace
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Strategic Capabilities & Competitive
Advantage
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Identifying Key Success Factors

• Analyze competition
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• Step 5: Analyze the Competition
• Tracking competition helps companies:
• Avoid surprises from existing competitors’ new strategies and tactics
• Identify potential new competitors
• Anticipate rivals’ next strategic moves
• Improve reaction time to competitors’ actions
• Improve their ability to differentiate their companies’ products and services from those of
competitors
• Refine their companies’ competitive edge
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External Micro-environment
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Small Business Success Index

• Competitor Analysis
• Direct competitors
• Offer the same products and services
• Customers often compare prices, features, and deals among these competitors when they shop
• Significant competitors
• Offer some of the same or similar products or services
• Product or service lines overlap but not completely
• Indirect competitors
• Offer same or similar products in only a small number of areas
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Competitive profile matrix: allows entrepreneurs to
evaluate their companies against major competitors on
the key success factors for their market segments
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Sample Competitive Profile Matrix (CPM)

• Create goals and objectives
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• Step 6: Create Company Goals and Objectives
• Goals: broad, long-range attributes to be accomplished; general and abstract
• “BHAGS”
• Objectives: are specific targets of performance
• Specific
• Measurable
• Assignable
• Realistic (yet challenging)
• Timely
• Written down
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What Makes an Effective BHAG?

• Formulate strategies
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• Step 7: Formulate Strategic Options and Select the Appropriate
Strategies
• Strategy: a “road map” that guides a company through a turbulent
environment as it seeks to fulfill its mission, goals, and objectives
• Mission, goals, and objectives = ends
• Strategy = means
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• Three strategic options:
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Strategy?
Cost leadershipCost leadership
DifferentiationDifferentiation
FocusFocus

GE/Mckinsey Portfolio Analysis
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• Cost leadership strategy: to be the low-cost producer in the industry
or market segment
• Advantages:
• Reaching buyers who buy on the basis of price
• Power to set the industry’s price floor
• Works well when:
• Buyers are sensitive to price changes
• Competing firms sell the same commodity products
• A company can benefit from economies of scale
• Disadvantages:
• Purchase decisions are driven by price not loyalty
• Can underestimate costs
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• Differentiation strategy: company seeks to build customer loyalty by
positioning its goods or services in a unique or different fashion
• Idea is to be better than the competition at something customers value
• Key to success:
• Build basis for differentiation on a distinctive competence, something that a small
company is uniquely good at doing in comparison to its competitors
• Create perceived value for the customer
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• Focus strategy: company selects one or more customer segments in a
market, identifies customers’ special needs, wants, or interests, and
then targets them with a product or service designed specifically for
them
• Strategy builds on differences among market segments
• Rather than try to serve the total market, the company focuses on
serving a niche (or several niches) within that market
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• Translate plans into actions
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• Step 8: Implement the strategy
• Create projects by defining:
• Purpose
• Scope
• Contribution
• Resource requirements
• Timing
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8. Translate plans into actions
• Establish accurate controls
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• Step 9: Establish Accurate Controls
• Controlling the strategy
• Entrepreneur must:
• Identify and track key performance indicators
• Take corrective action if necessary
• Balanced scorecard: a set of measurements unique to a company that includes both
financial and operational measures
• Gives managers a quick yet comprehensive picture of
a company’s overall performance
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The Balanced Scorecard

• Five Perspectives:
1. Customer: How do customers see us?
2. Internal Business: At what must we excel?
3. Innovation and Learning: Can we continue to improve and create value?
4. Financial: How do we look to shareholders?
5. Corporate Citizenship: What must we do to meet our social responsibility to
society as a whole, the environment, the community, and other
stakeholders?
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Balanced Score Cards
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Balance scorecard's four perspectives. Adapted from Robert S. Kaplan and
David P. Norton, “Using the Balanced Scorecard as a Strategic Management
System,” Harvard Business Review (January-February 1996): 76.

Strategic Management for Early Stage Entrepreneurs

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