Description
Strategic Entrepreneurship Entrepreneurial Opportunities, Competitive Advantage And Entrepreneurial Economies
Strategic Entrepreneurship: Entrepreneurial
Opportunities, Competitive Advantage and
Entrepreneurial Economies
Michael A. Hitt
Texas A&M University
Barcelona
July 2004
Importance of Entrepreneurial Activity
GEM Estimates that in 2003 472 Million
Entrepreneurs Started 305 Million New
Firms on a Global Basis
Entrepreneurial Actions by Established Firms
(e.g., Innovation)
New Business Creation
Importance of Entrepreneurial Activity
(Cont’d)
China
Job Creation
83 Million New Jobs Created Annually by
New Startup Firms
U.S.
10.5 Million New Jobs Created Annually
by New Startup Firms (Adjusted for
Population Size)
Importance of Entrepreneurial Activity
(Cont’d)
New Businesses Create Five New Jobs to Every One New Job
Created by Established Entrepreneurial Firms
Carl Schramm, President of the Kauffman Foundation (U.S.)
Argues that “New Firms Are the Engines of Innovation”
§ Entrepreneurship, Not Large Established Firms, Is
the Reason for Strong Economies
§ Building Entrepreneurial Economies
There is a Positive Relationship Between Total Entrepreneurial
Activity in a Country and Its Growth in GDP (GEM)
Firm Growth and Profitability
The Top Growth Companies “Have Made Themselves
Indispensable to Customers by Extending Inventive
New Services” (Business Week, 2003)
The Top Growth Companies Are Characterized as
“Nimble,” Making “Quick Turnarounds” and
Placing an “Emphasis on Innovation”
While Older Firms Have More Resources for Growth,
Younger Firms on Average Are More Profitable
The Most Successful Growth Firms Take Bold, Aggressive
Actions and Grow Organically (Innovation)
Strategic Entrepreneurship
Firms Create Value by Identifying Opportunities in the Market
(or a New Market) and Developing Competitive Advantages to
Exploit Them
Small and New Ventures Are Often Effective at Identifying
Opportunities but Less Effective at Gaining and Sustaining a
Competitive Advantage
Larger Established Firms Frequently Are Better at Developing a
Strategy to Gain a Competitive Advantage But Less Effective at
Identifying New Opportunities
Both New Ventures and Established Firms Must Practice
Strategic Entrepreneurship—Integrate Entrepreneurial and
Strategic Perspectives
Polaroid
Polaroid Was a Leader in Its Industry and Among the
Top 50 Firms in the U.S.
In 2001, Polaroid Filed for Bankruptcy
Polaroid’s Competitors Developed Digital Imaging
Technology and It Could Not Respond Rapidly Enough
Polaroid Didn’t Identify and Exploit New Opportunities
Priceline.com: Entrepreneurial Company
Company Was Founded in 1996 Using a “Reverse Auction”
System to Allow Customers to Name Their Own Price to
Buy Surplus Airline Seats
On Any Given Day, Major Airlines Had Flights With
Empty Seats—500,000—a Perishable Good
Ticket Sales Launched in 1998 and 10,000 Airline Tickets
Were Sold in First Six Weeks
Priceline.com: Entrepreneurial Company
(Cont’d)
Had $1.2 Billion in Revenue in 2000
In 1999, Its Stock Price Reached a High of
$162.00/Share. By the End of 2000, Its Stock Price
Was $1.06/Share
Competition—Travelocity.com; Microsoft Expedia;
SkyAuction.com; Hotwire; Orbitz.com
Strategic Entrepreneurial Actions
qDeveloping an Entrepreneurial Mindset
qManaging the Resource Portfolio
§ Bundling Resources
§ Leveraging Resources
qBuilding Entrepreneurial Networks
qEncouraging Creativity and Innovation
qEngaging in International Entrepreneurship
Entrepreneurial Mindset
ØPassionately Seek New Opportunities
ØPursue Opportunities and Act on Them
ØPursue Only the Best Opportunities—Be Selective
and Disciplined
Ø Emphasize Execution (Be Adaptive)
ØEngage the Energies of Everyone to Exploit the
Opportunity
Opportunities
Be Open to New Opportunities
üThink Outside the Box
Build an Entrepreneurial Climate
üWillingness to Reinvent the Business
Develop Portfolio of Opportunities
üMake the Portfolio Dynamic
Identifying Opportunities
In the Early 1990s, Many of the Movie Theaters in Mexico
City Were in Bad Physical Condition and Unprofitable
Three Harvard Classmates Perceived an Opportunity and
Founded Cinemex in 1994
They Developed a Business Plan and Obtained Venture
Capital From J.P. Morgan
With $22 Million in Capital, Cinemex Built Attractive
Theaters in Mexico City
Cinemex
Identifying Opportunities (Cont’d)
Forest Labs
Forest Labs Ranked #1 in Business Week’s2003 Top 50
Forest Labs Identified an Opportunity: Foreign Drugmakers
With Valuable Products but Without Access to the U.S.
Market
Forest Labs Licensed Promising Drugs From Midsized
Foreign Pharmaceuticals
After Licensing the Drug, Celexa (antidepressant), It
Negotiated a Strategic Alliance with Warner-Lambert
for Co-promotion (Sales $1.4 Billion)
Managing Resources
qIdentifying and Evaluating Current Resources
qChanging Resources
§ Deleting Resources
§ Adding New Resources
§ Developing Current Resources
qBundling Resources—Creating Capabilities
qLeveraging Capabilities
Managing Resources (Cont’d)
qTo Gain a Competitive Advantage, Resources/Capabilities
Must Have the Following Characteristics
§ Valuable
§ Rare
qTo Sustain a Competitive Advantage, Resources/
Capabilities Must Have the Following Additional
Characteristics
§ Difficult to Imitate
§ Nonsubstitutable
Successfully Managing Resources
Dell Has Overtaken and Is Beating Rivals with Its Effective
Indirect Sales and Service Quality (Capabilities)
While Industry Sales Fell by 9%, Dell’s Sales Grew by 14%
Dell is Moving into New Geographic Markets (e.g., China)
and Related Product Markets (e.g., Printers, Hand-held
Computers, Cash Registers)
Successfully Managing Resources
(Cont’d)
Telefonica
Expanded Operations into 14 Countries in Europe,
Latin America and North America
Its Market Capitalization is Larger than Its Peer
Telecommunications Firms in Europe
Innovative Companies
Samsung Completed a Rapid Turnaround with Efficient
Management of Resources and an Emphasis on Innovation
Samsung Has Become the Benchmark for Excellence in Making
and Marketing Things People Want to Own
Samsung has 16 Research Centers, 10 Distributed Across the
Globe. It Employs 19,700 Researchers, 34% of Its Employees
Cemex Has Expanded Internationally with Operations in Four
Continents
Emphasizes Continuous Innovation and Providing Novel, Client-
Focused Solutions Using Its Know-How and Know-Why
doc_303680460.pdf
Strategic Entrepreneurship Entrepreneurial Opportunities, Competitive Advantage And Entrepreneurial Economies
Strategic Entrepreneurship: Entrepreneurial
Opportunities, Competitive Advantage and
Entrepreneurial Economies
Michael A. Hitt
Texas A&M University
Barcelona
July 2004
Importance of Entrepreneurial Activity
GEM Estimates that in 2003 472 Million
Entrepreneurs Started 305 Million New
Firms on a Global Basis
Entrepreneurial Actions by Established Firms
(e.g., Innovation)
New Business Creation
Importance of Entrepreneurial Activity
(Cont’d)
China
Job Creation
83 Million New Jobs Created Annually by
New Startup Firms
U.S.
10.5 Million New Jobs Created Annually
by New Startup Firms (Adjusted for
Population Size)
Importance of Entrepreneurial Activity
(Cont’d)
New Businesses Create Five New Jobs to Every One New Job
Created by Established Entrepreneurial Firms
Carl Schramm, President of the Kauffman Foundation (U.S.)
Argues that “New Firms Are the Engines of Innovation”
§ Entrepreneurship, Not Large Established Firms, Is
the Reason for Strong Economies
§ Building Entrepreneurial Economies
There is a Positive Relationship Between Total Entrepreneurial
Activity in a Country and Its Growth in GDP (GEM)
Firm Growth and Profitability
The Top Growth Companies “Have Made Themselves
Indispensable to Customers by Extending Inventive
New Services” (Business Week, 2003)
The Top Growth Companies Are Characterized as
“Nimble,” Making “Quick Turnarounds” and
Placing an “Emphasis on Innovation”
While Older Firms Have More Resources for Growth,
Younger Firms on Average Are More Profitable
The Most Successful Growth Firms Take Bold, Aggressive
Actions and Grow Organically (Innovation)
Strategic Entrepreneurship
Firms Create Value by Identifying Opportunities in the Market
(or a New Market) and Developing Competitive Advantages to
Exploit Them
Small and New Ventures Are Often Effective at Identifying
Opportunities but Less Effective at Gaining and Sustaining a
Competitive Advantage
Larger Established Firms Frequently Are Better at Developing a
Strategy to Gain a Competitive Advantage But Less Effective at
Identifying New Opportunities
Both New Ventures and Established Firms Must Practice
Strategic Entrepreneurship—Integrate Entrepreneurial and
Strategic Perspectives
Polaroid
Polaroid Was a Leader in Its Industry and Among the
Top 50 Firms in the U.S.
In 2001, Polaroid Filed for Bankruptcy
Polaroid’s Competitors Developed Digital Imaging
Technology and It Could Not Respond Rapidly Enough
Polaroid Didn’t Identify and Exploit New Opportunities
Priceline.com: Entrepreneurial Company
Company Was Founded in 1996 Using a “Reverse Auction”
System to Allow Customers to Name Their Own Price to
Buy Surplus Airline Seats
On Any Given Day, Major Airlines Had Flights With
Empty Seats—500,000—a Perishable Good
Ticket Sales Launched in 1998 and 10,000 Airline Tickets
Were Sold in First Six Weeks
Priceline.com: Entrepreneurial Company
(Cont’d)
Had $1.2 Billion in Revenue in 2000
In 1999, Its Stock Price Reached a High of
$162.00/Share. By the End of 2000, Its Stock Price
Was $1.06/Share
Competition—Travelocity.com; Microsoft Expedia;
SkyAuction.com; Hotwire; Orbitz.com
Strategic Entrepreneurial Actions
qDeveloping an Entrepreneurial Mindset
qManaging the Resource Portfolio
§ Bundling Resources
§ Leveraging Resources
qBuilding Entrepreneurial Networks
qEncouraging Creativity and Innovation
qEngaging in International Entrepreneurship
Entrepreneurial Mindset
ØPassionately Seek New Opportunities
ØPursue Opportunities and Act on Them
ØPursue Only the Best Opportunities—Be Selective
and Disciplined
Ø Emphasize Execution (Be Adaptive)
ØEngage the Energies of Everyone to Exploit the
Opportunity
Opportunities
Be Open to New Opportunities
üThink Outside the Box
Build an Entrepreneurial Climate
üWillingness to Reinvent the Business
Develop Portfolio of Opportunities
üMake the Portfolio Dynamic
Identifying Opportunities
In the Early 1990s, Many of the Movie Theaters in Mexico
City Were in Bad Physical Condition and Unprofitable
Three Harvard Classmates Perceived an Opportunity and
Founded Cinemex in 1994
They Developed a Business Plan and Obtained Venture
Capital From J.P. Morgan
With $22 Million in Capital, Cinemex Built Attractive
Theaters in Mexico City
Cinemex
Identifying Opportunities (Cont’d)
Forest Labs
Forest Labs Ranked #1 in Business Week’s2003 Top 50
Forest Labs Identified an Opportunity: Foreign Drugmakers
With Valuable Products but Without Access to the U.S.
Market
Forest Labs Licensed Promising Drugs From Midsized
Foreign Pharmaceuticals
After Licensing the Drug, Celexa (antidepressant), It
Negotiated a Strategic Alliance with Warner-Lambert
for Co-promotion (Sales $1.4 Billion)
Managing Resources
qIdentifying and Evaluating Current Resources
qChanging Resources
§ Deleting Resources
§ Adding New Resources
§ Developing Current Resources
qBundling Resources—Creating Capabilities
qLeveraging Capabilities
Managing Resources (Cont’d)
qTo Gain a Competitive Advantage, Resources/Capabilities
Must Have the Following Characteristics
§ Valuable
§ Rare
qTo Sustain a Competitive Advantage, Resources/
Capabilities Must Have the Following Additional
Characteristics
§ Difficult to Imitate
§ Nonsubstitutable
Successfully Managing Resources
Dell Has Overtaken and Is Beating Rivals with Its Effective
Indirect Sales and Service Quality (Capabilities)
While Industry Sales Fell by 9%, Dell’s Sales Grew by 14%
Dell is Moving into New Geographic Markets (e.g., China)
and Related Product Markets (e.g., Printers, Hand-held
Computers, Cash Registers)
Successfully Managing Resources
(Cont’d)
Telefonica
Expanded Operations into 14 Countries in Europe,
Latin America and North America
Its Market Capitalization is Larger than Its Peer
Telecommunications Firms in Europe
Innovative Companies
Samsung Completed a Rapid Turnaround with Efficient
Management of Resources and an Emphasis on Innovation
Samsung Has Become the Benchmark for Excellence in Making
and Marketing Things People Want to Own
Samsung has 16 Research Centers, 10 Distributed Across the
Globe. It Employs 19,700 Researchers, 34% of Its Employees
Cemex Has Expanded Internationally with Operations in Four
Continents
Emphasizes Continuous Innovation and Providing Novel, Client-
Focused Solutions Using Its Know-How and Know-Why
doc_303680460.pdf