Entrepreneurship

Entrepreneurship

• 1.
  HAILEY COLLEGE OFCOMMERCE 1
• 2.
  STRATEGIC MANAGENENT ANDTHE ENTREPENEUR LEARNING OBJECTIVES  Importance of strategic management to a small business  Competitive advantage  Strategic management process  Formulate strategic options  Establish accurate controls. HAILEY COLLEGE OF COMMERCE 2
• 3.
  Importance of strategicmanagement to a small business A small business has a choice of two goals: Increase profits but stay small, or grow into a larger business. You can devote time and effort creating a strategic plan that will help you achieve the goal you want, but the way you implement it is what makes the strategy work. • Strategic management: The process of developing a game plan to guide a company as it strives to accomplish its vision, mission , goals , and objectives and to keep it from straying off course. • Intellectual capital: Today, a company’s intellectual capital is sources of its competitive advantage in the marketplace. Intellectual capital is comprised of three components:  Human capital: The skills, abilities of a company’s workforce.  Structural capital: The accumulated knowledge and experience that a company possesses.  Customer capital: The established customer base , positive reputation, ongoing relationship and goodwill a company build up over time with its customers. 3
• 4.
  BUILDING A COMPETITIVEADVANTAGE The key to business success is to develop a unique competitive advantage.  COMPETITIVE ADVANTAGE: The aggregation of factors that sets a small business apart from its competitors and gives it a unique potion in the market superior to its competition.  Core competencies: A unique set of lasting capabilities that a company develops in key operational areas that allows it to vault past competitors. In developing a strategic management procedure for a small business , an entrepreneur should:  Use short planning horizon.  Be informal and not overly structured.  Encourage the participation of employees.  Maintain flexibility  Focus on strategic thinking. 4
• 5.
  VISION & OPPERTUNITIES MISSION STRENGHTS & & THREATS WEAKNESSES IDENTIFY KEY FACTORS OF SUCCESS ANALYZE THE COMPETITION CREATE GOALS AND OBJECTIVES FORMULATE STRATEGIES TRANSLATE STRATEGIES INTO ACTION PLANS ESTABLISH ACCURATE CONTROLS 5
• 6.
  VISION: The faculty or state of being able to see. Or imagine Vision is based on entrepreneur’s values. A clearly defined vision helps a company in three way:  Vision provides direction  Vision determines decision  Vision motivates people MISSION STATEMENT: A mission statement – an enduring declaration of a company’s purpose that addresses the first question of any business venture: what business are we in? Elements of mission statements: o What are the basic beliefs and values of the organization? o What do we stand for? o Who are the company’s target? o What are our competitive advantages? o What is our sources? 6
• 7.
  STEP:2 ASSESS THE COMPANY’S STRENGTHS & WEAKNESSES  STRENGTHS: Strengths are positive internal factors that a company can use lo accomplish its mission, goals, and objectives. They might include special skills or knowledge, a positive public image, an experienced sales force, and many other factors.  WEAKNESSES: Weaknesses are negative internal factors that inhibit the accomplishment of a company's mission, goals, and objectives. Lack of capital, a shortage a skilled workers, and an inferior location arc examples of weaknesses. 7
• 8.
   OPPORTUNITIES: Opportunities are positive external options that a firm could exploit to accomplish its mission, goals, and objectives. When identifying opportunities, an entrepreneur must pay close attention to new potential markets. Are competitors overlooking a niche in the market?  THREATS: Threats are negative external forces that inhibit a company's ability to achieve its mission, goals, and objectives. FOR EXAPLE: New competitors entering the local market, a government mandate regulating a business activity, an economic recession, rising interest rates, techno logical advances making a company's product obsolete, and many others. 8
• 9.
  STEP:4 IDENTIFY THE KEYFACTORS FOR SUCCESS IN THE BUSINESS  Key success factors : Key success factors come in a variety of different patterns depending on the industry. Many of these sources of competitive advantages are based on cost factors such as manufacturing cost per unit, distribution cost per unit, or development cost per unit. For example, one restaurant owner identified the following key success factors: ■ Tight cost control (labor costs, 15 to 18 percent of sales and food costs, 35 to 40 percent s sales). ■ Trained, dependable, honest in-store managers. ■ Close monitoring of waste. ■ Careful site selection (the right location). ■ Maintenance of food quality. ■ Consistency. ■ Cleanliness. 9
• 10.
  When a recentsurvey asked small business owners to identify the greatest challenge they faced in the upcoming year . In another survey, CEOs across the globe said the World Wide Web and the trend toward e-commerce it is driving will make competition even more fierce in the future.  COMPETITOR ANALYSIS: Sizing up the competition gives a business owner a more realistic view of the market and her company's position in it. A competitive intelligence exercise enables entrepreneurs to update their knowledge of competitors by answering the following questions: ■ Who are your major competitors? Where are they located? (The Yellow Pages is a great place lo start.) ■ What distinctive competencies have they developed? ■ Their financial resources? Are new competitors entering the business? ■ How do they market their products and services? ■ What are their key strategies? ■ What are their strengths? What are their primary weaknesses? ■ What are their primary weaknesses? ■ Are new competitors entering the business? 10
• 11.
   Competitive profile matrix: profile matrix allows the owner to evaluate her firm against major competitors on the la success factors for that market segment.  Knowledge management: Knowledge management is 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. 11
• 12.
  STEP : 6 CREATE COMPANY GOALS AND OBJECTIVS  GOALS: Goals are the broad, long-range attributes that a business seeks to accomplish they tend to be general and sometimes even abstract. Goals are not intended lo be specific enough for a manager to act on but simply state the general level of accomplishment sought. Do you want to boost your market share? Does your cash balance need strengthening?  OBJECTIVES: Objectives are more specific targets of performance. Common objectives concern profitability, productivity, growth, efficiency, markets, financial resource physical facilities, organizational structure, employee welfare, and social responsibility. 12
• 13.
  Well written objectiveshave the following characteristics:  They are specific  They are measurable  They are assignable  They are realistic  They are timely  They are written down 13
• 14.
  By this pointin the strategic management process, the entrepreneur should have a clear picture of what her business does best and what its competitive advantages are. The next step is to evaluate strategic options and then prepare a game plan designed to achieve the business's objectives.  STRATEGY: A strategy is a road map of the actions an entrepreneur draws up to fulfill a company's mission, goals, and objectives.  THREE STRATEGIC OPTIONS: Three basic strategies remain. In his classic book, Competitive Strategy, Michael Porter defines these strategies:  Cost leadership  Differentiation  Focus 14
• 15.
   COST LEADERSHIP: A company pursuing a cost leadership strategy strives to be the lowest-cost producer relative to its competitors in the industry.  DIFFERENTIATION: A company following a differentiation strategy seeks to build customer loyalty by positioning its goods or services in a unique or different fashion.  FOCUS: A focus strategy recognizes that not all markets are homogeneous. In fact, in any given market, there are many different customer segments, each having different needs, wants, and characteristics. The principal idea of this strategy is to select one (or more) segment(s), identify customers' special needs, wants, and interests, and approach them with a good or service designed to excel in meeting these needs, wants, and interests. 15
• 16.
  No strategic planis complete until it is put into action. The small business manager must convert strategic plans into operating plans that guide the company on a daily basis and become a visible, active part of the business.  IMPLEMENT THE STRATEGY : To make the plan workable, the business owner should divide the plan into projects, carefully defining each one by the following:  Purpose: What is the project designed lo accomplish?  Scope: Which areas of the company will be involved in the project?  Contribution: How does the project relate lo other projects and to the overall strategic plan?  Resource requirements: What human and financial resources are needed to complete the project successfully?  Timing: Which schedules and deadlines will ensure project completion? 16
• 17.
   CONTROLLING THE STRATEGY: Planning without control has little operational value, and so a sound planning program requires a practical control process. The plans created in the strategic planning process become the standards against which actual performance is measured. It is important for everyone in the organization to understand-and to be involved in-the planning and controlling process.  BALANCED SCORECARDS: A set of measurements unique to a company that includes both financial and operational measures and gives managers a quick yet comprehensive picture of the company's total performance. 17
• 18.
  CONCLUSION The strategicplanning process does not end with the 10 Steps outlined here; it is an ongoing procedure that the small business owner must repeat. With each, round, he or she gains experience, and the steps become much easier. Such programs require excessive amounts of time to operate, and they generate a sea of paperwork. The small business manager needs neither. What does this strategic planning process lead to? It teaches the small business owner a degree of discipline that is important to business survival. It helps him in learning about his business, his competitors, and, most important, his customers. Although strategic planning cannot guarantee success, it does dramatically increase the small Linn's chances of survival it hostile business environment. 18
• 19.
  WRITTEN BY: HAFIZQAMAR FAROOQ MC12-079 19
• 20.
  20