MGMT 411: ENTREPRENEURSHIP &
NEW VENTURE DEVELOPMENT
March 7, 2017
Entrepreneurial Strategy
SECTION I - TEAMS
TEAM
TEAM 1
TEAM 2
TEAM 3
TEAM 4
TEAM 5
TEAM 6
TEAM 7
TEAM 8
TEAM 9
TEAM 10
TEAM 11
TEAM MEMBERS
Duhan Kurt, Önem Özbizerdik, Gürol Aşar, Eda
Keskin, Elif Büşra Aslanlay, Furkan Akdoğan
Merve Akdağ, Deniz Özen, Gizem Çölek, Emre
Korkmaz, Aybars Balci, Melike
Meltem Tumer, Sila Bilgin, Ece Cakici, Pinar Celik ,
Celik Ozcelik
Cansu Mumcu, Kübra Akbalık, Can Burak
Gencoglu, Omer Bingol, Rana Uludag, Ilgin Yildiz
Alp Günaydın, Başak Karslıgil, Batuhan Erek,
Çiğdem Bulut, Ceren Yıldırım, Beyza Yuksel
Kutay Demireren, Eda Gürbüz, Efe Ekren, Fetican
Durakbaşı, Deniz Şen
Emel Orman, Gulcin Saracoglu, Fulin Ugras, Isil
Nalcabasmaz, Cagil Tulin, Tulay Selcuk
Baris Selcen, Zeynep Cetinkaya, Pelin Pulcu,
Gurbuz Catalkaya, Alperen Birim
Basak Dogruyusever, Gizay Ekmen, Serra Ozkok,
Ersin Seckin, Arda Birincioglu, Irem Bas
Sezgi Şengör, Selina Başaran, Berk Dolu, Serra
Serdaroğlu, Elif Koçak, Kemal Arda Gürdal
Kaan Baransel, Canberk Aslan, Mert Can Ozcan,
Cansu Sayan
PRESENTATION
QUALITY - VOTING
IDEA QUALITY - VOTING
Assignment Scores
6
12
10.0
19
8
10.0
12
6
10.0
2
9.0
9
5
9.5
7
5
9.0
2
6
9.5
5
8
9.5
5
7
9.0
1
9.0
6
9.5
1
An analysis of EP exercise results – Section I
Presentation
Quality
High
IV
III
I
II
6.0
Low
Low
6.0
High
Idea Quality
The correlation between Idea Score and Presentation Score is 0.43.
An Introduction to Strategy Formulation
The Alaskan Gold Mine
The Alaskan Gold Mine
Option
#1
(wait 3-4
weeks)
#2
(over top)
#3
(valley)
#4
(wait 3 days)
Possible
Min Time Max Time
Gain
Personal
Risk
The Alaskan Gold Mine
Option
Possible
Min Time Max Time
Gain
#1
(wait 3-4
weeks)
#2
(over top)
7 days
10 days
#3
(valley)
14 days
21 days
#4
(wait 3 days)
10-13 days 17-24 days
to top
to valley
Personal
Risk
The Alaskan Gold Mine
Option
Possible
Min Time Max Time
Gain
#1
(wait 3-4
weeks)
#2
(over top)
7 days
10 days
#3
(valley)
14 days
21 days
#4
(wait 3 days)
10-13 days 17-24 days
to top
to valley
Personal
Risk
No $$$s
None
For sure
$$$s
Maybe
$$$s
Life
$$$, if no
storm,
Lose, if storm
None, if no
storm:
none, if storm
None
CONCEPTUAL OVERVIEW
The Environment “Threats & Opportunities”
GOAL
Management’s values &
attitude toward risk
STRATEGY
Organization’s resources
and capabilities “Strengths & Weaknesses”
Strategy: Link between the firm and its environment
The Fundamental Question of Strategy
• Why some firms are more successful than others?
• Strategy is about winning=how to outperform rivals.
Strategy: is the overall plan for deploying
resources to establish a favorable position.
Answers two questions:
Where to compete? Decide on markets to enter
How to compete? Create competitive advantage
in each market.
GOALS
• What key financial metrics do startups focus on?
• Should startups use the financial metrics of established
firms?
GOALS
• What are key financial metrics for startups?
– Growth Option Value (Vgop)
V = Vcap + Vgop (Myers, 1977)
V = Firm value
Vcap = Firm value derived from the cash generated
by assets in place.
Vgop = Firm value derived from future growth
opportunities. (R&D investment level, Marketing
expenditure level, Traffic to your website,
conversion rates, Size of user base…..)
Established Turkish Firms Growth Option Value
Table 1. Top Turkish Firms with respect to their growth option value
Firm Name
Industry
Firm Value
Growth
Option Value
Growth
Rank Option Rate
Rank
Turkcell
Telecom
13306.86
7709.62
1
0.58
31
Coca-Cola
Beverages
7124.33
5590.28
3
0.78
22
Anadolu Efes
Beverages
8287.20
5487.34
4
0.66
28
BSH
White Goods
3158.00
3158.00
5
1.00
6
Ford Otomotiv
Automotive
4690.07
2929.91
6
0.62
30
Arcelik
White Goods
6157.31
2344.43
7
0.38
38
Ülker
Food & Beverages 3038.16
2317.27
8
0.76
24
Turk Telekom
Telecom
14662.24
2252.27
9
0.15
43
TOFAS
Automotive
4240.00
1949.87
10
0.46
32
GOALS (cont’d)
• What are key financial metrics for startups?
– Cash Burn Rate:
How fast you burn your cash?
In how many months will you run out of cash?
SWOT Analysis
Characteristics of Good Strategies
Guiding Policy
How are we
going to solve
these
problems?
Diagnosis
What is the
problem?
Coherent
Actions
What actions
are we going to
take?
The Alaskan Gold Mine - Part II
•
Assume you chose the valley pass (#3). Five days later you are halfway
there. But, you may have pushed too hard as you sprained your ankle.
Fortunately, you run into Pat, and old friend on a trapping expedition. Pat
could get you to the claims office and offers to take you. If you were
healthy, you could get there easily in 7 days, but you cannot make it alone
without a few days rest, and even then it could take 10 days or more,
depending on how your ankle holds up. Traveling together, you might make
it in 10 to 14 days. If you tell Pat about the gold and make a deal, Pat alone
could get there in 8 to 10 days.
•
Your are not sure whether Pat can exercise the option and file the claim
correctly, because Pat is not bright, tends to drink in excess, and is not the
single-minded hustler that you are. Pat is a simple, decent person who likes
trapping but would, you suspect, both need and desire financial
independence. You think you could trust Pat if you offer to split 50-50,
because Pat would need your expertise to capitalize on the discovery.
•
What is your decision? Go it alone__ Go with Pat__ Send Pat__
CONCEPTUAL OVERVIEW
The Environment “Threats & Opportunities”
GOAL
Implementation Levers:
Management’s values &
attitude toward risk
Organization’s resources
and capabilities “Strengths & Weaknesses”
STRATEGY
Organization structure
Systems and processes
People and rewards
Strategic Leadership:
Lever and resource
allocation decisions
Develop support among
stakeholders
Performance
WSJ Article – Digg Admits Missteps
• What are some of the fundamental issues of strategy
raised in this article?
• Out of the reasons for the failure, which reason do
you think was the most damaging?
Strategy in High-Tech Markets:
1. What factors determine the extent to which
innovators capture value from their
innovation?
2. How to enter the market?
3. When to enter the market?
The Development of Technology: From
Knowledge Generation to Diffusion
IMITATION
Supply side
Basic
Knowledge
Invention
Innovation
Diffusion
Demand side
ADOPTION
The Development of Technology: From
Knowledge Generation to Diffusion
Appropriation (Capture) of Value: Who gets the
benefits from Innovation?
Customers
Suppliers
Innovator
Imitators and
other
“followers”
The Profitability of an Innovation
What factors determine the extent to which innovators
capture the value of their innovation?
The Profitability of an Innovation Depends On
1. Legal protection (the regime of appropriability)
2. Tacitness and complexity of the technology:
How easily imitable the technology is?
3. Lead time: How fast is it imitable?
4. Complementary resources: Who owns them?
How specialized are these resources?
Legal Protection of Intellectual Property
• Patents
• Copyrights
• Trademarks
• Trade Secrets
—exclusive rights to a new product,
process, substance or design.
—exclusive rights to artistic, dramatic,
and musical works.
— exclusive rights to words, symbols
or other marks to distinguish goods
and services; trademarks are
registered with the Patent Office.
— protection of chemical formulae,
recipes, and industrial processes.
Tacitness & Complexity of Innovation
Codifiable Knowledge: Knowledge that can be
written down. Tacit knowledge cannot be written
down which makes it difficult to imitate.
Complexity vs. Simplicity: Complex innovations are
harder to imitate.
Lead Time
• If rivals can imitate—time lag is the major
advantage of the innovator.
• But maintaining lead-time advantage requires
continuous innovation
• Lead time is reinforced by learning effects
Complementary Resources
Manufacturing Distribution
Finance
Core
technological
know-how
Service
Complementary
technologies
Marketing
Other
The bargaining power of the owners of complementary
resources depends upon whether complementary resources
are generic or specialized.
How to Enter the Market?
Alternative Strategies for Exploiting Innovation
Licensing
Outsourcing
certain
functions
Strategic
Alliances
Joint Ventures
Internal
Commercialization
Risk &
Return
Competing
Resources
Examples
13
Market Entry Timing
First Movers Are Not Always Winners
When to Enter the Market?
First (Early) or Second (Late) Mover
First (Early) Mover Advantages and
Disadvantages
Advantages
1. Above-average
returns until other
competitors respond
effectively
2. Start down the
learning curve earlier
3. Opportunity to gain
customer loyalty
4. Opportunity to set
standards
Disadvantages
1. Demand uncertainty
2. Costs of educating
customers
2. High development costs
3. Risk of adopting a losing
standard (Beta/VHS)
Second (Late) Mover Advantages &
Disadvantages


A second mover is a firm that responds to a first mover’s competitive
action often through imitation or a move designed to counter the
effects of the initial action.
Advantages of second movers





Reduction in demand uncertainty
Market research to improve satisfying customer needs
Learn from the first mover’s successes and shortcomings
Gaining time for R&D to develop a superior product
Disadvantages of second movers


Loss of opportunity to establish brand loyalty
If significant learning curve through moving first, then giving up
competitive advantage