1. Chapter 5 Entrepreneurial strategy

2. Learning Outcomes On completion of this chapter you will be able to: Define and explain why strategic management is important to the entrepreneur Describe the steps in the strategic management process; Define and develop the mission statement of a venture; Discuss the analysis of the external environment of a venture; Discuss the analysis of the internal environment of a venture; Apply the TOWS-matrix as a tool for developing strategies for the venture; Explain how the best strategies could be identified; Explain how the entrepreneur could ensure the implementation of strategies; Discuss the importance of the allocation of resources to ensure the execution of strategies; and Discuss the evaluation of strategies and their implementation.

3. Importance of strategic management In drawing up a business plan, the entrepreneur must: Identify his/her product and type of business (mission statement); Identify market potential and main competitors (external analyses); Identify the management team and personnel (internal analyses); Identify the best location for the venture (strategy identification and implementation), Draw up financial, marketing, human resource and operational plans (policies and objectives); and Comment on the possibility for success (strategy evaluation).

4. Entrepreneurial strategic process STRATEGY FORMULATION Formulation of business mission Analyse external environment Analyse internal environment SWOT analyses Establish long-term goals Generate alternative strategies External factors Internal factors Strategic fit Risk Innovation Policies and annual objectives Allocation of resources Performance appraisal Continuous strategy evaluation and corrective action STRATEGY EVALUATION STRATEGY IMPLEMENTATION

5. Mission statement Should reflect the following: Customers. Products or services. Markets. Technology. Concern for survival, growth, and profitability. Philosophy. Self-concept. Concern for public image. Concern for employees.

6. External environment Social and cultural International and national economic Physical Technological Communications and infrastructure Administrative and institutional Legal and political Competitive

7. Internal environment Analysing strengths and weaknesses linked to: Management Finance Marketing & sales Production & purchasing Research & Development Information systems Personnel

8. SWOT analyses Strengths and Weaknesses Resulting from the internal analyses Opportunities and Threats From the external environmental analyses

9. Generating strategies Strength-opportunity strategies (SO) Internal strengths are used to address the external opportunities Weakness-opportunity strategies (WO) Improving the internal weaknesses by taking advantage of external opportunities, trends and events Strength-threat strategies (ST) Using the internal strengths of the venture to avoid the threats Weakness-threat strategies (WT) Defensive tactics aimed at reducing internal weaknesses and avoiding environmental threats

10. TOWS Matrix

11. Evaluation of strategies Internal & External factors To establish whether the strategies that have been developed will address the strengths, weaknesses, opportunities and threats that have been identified. It is also done to ensure that the initial analysis of the external and internal factors was extensive enough

12. Entrepreneurial Strategy Matrix High Low High Innovation/Low risk Move quickly Protect innovation by means of patents or copyright Implement financial control systems, contracts, etc to protect investments and costs High Innovation/High risk Reduce risk by implementing controls on operating cost and investment Protect innovation Consider outsourcing of high investment operations Consider joint venture opportunities Low Innovation/Low risk Implement with existing resources Accept limited financial gain Accept limited growth potential Low Innovation/High risk Increase innovation to create a competitive advantage Develop strategies to reduce risk Use business plan and objective analysis Minimise investment and investment costs Consider franchise options Abandonment? LowHigh RISK

13. Strategy implementation Development of policies and annual objectives Allocation of resources Performance measurement Continuous evaluation of strategies