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Entrepreneurial Strategy – Fundamentals of Entrepreneurship | Management Notes

Entrepreneurial Strategy

Entrepreneurial strategy is a process where the entrepreneurs interpret, explore, and evaluate their ideas, plans, and policies in a systematic manner in order to achieve their aimed goals. Before entering the into market, entrepreneurs should make a strategy. This strategy contributes to the entrepreneur to gain competitive advantage for their sustainability in the market. Entrepreneurs Strategy involves the exploration of ideas, set of decisions, action, and reaction for exploitation of the opportunity; which contributes to minimize costs and maximize the benefits. There are three key stages for the entrepreneurial strategy. They are: (Poudyal & Pradhan, 2020)

  1. Generation of a new entry opportunity
  2. Exploitation of a new entry opportunity
  3. Feedback of loop from the culmination of a new entry generation and exploitation.


Corporate entrepreneurial strategy should be thought as

  1. Profit Oriented.
  2. Vision Oriented.
  3. Risk Oriented.
  4. Resource Oriented.

Ans: b) Vision Oriented

The basic entrepreneurial strategy is to 

  1. make the most profit, with the least amount of risk.
  2. make the least profit, with the least amount of risk.
  3. make the least profit, with the most amount of risk.
  4. Make the most profit, with the most amount of risk.

Ans:  a) make the most profit, with the least amount of risk.

Which of the following is not a key stage of the entrepreneurial strategy? 

  1. Generation of new entry strategy
  2. Exploitation of new entry strategy
  3. A feedback loop from the new strategy
  4. Applying unethical strategies to be competitive

Ans: d) Applying unethical strategies to be competitive

Entrepreneurial Strategy Matrix

Entrepreneurial Strategy Matrix

The entrepreneurial strategies are an aid of decision making for the entrepreneurs at different degree of risk and innovation. In the above figure of entrepreneurial matrix, innovation and risk are main measurement variables. This matrix is very useful for the analysis of new venture creation. Here, innovation means creating new product and services whereas risk refers to the probability of financial and other major loss. In the figure, four quadrants can be seen i.e. in first quadrant high innovation/ low risk, high innovation/high risk, low innovation/low risk, and low innovation/high risk. These quadrants represent the four profiles for analyzing the new venture (Lima, Polo, & Matos, 2010).

The first quadrant shows high innovation/low risk situation. In this situation, the venture carries little risk with little investment and focuses mostly on research activities and developmental activities. Similarly, the second quadrant shows the situation of high innovation and high risk. In this situation, venture carries high investment with high research and development to be competitive in the market. The third situation of low risk and low innovation represent the venture carries both low investment and risk; and in this situation some ventures fail as well. The fourth situation of low innovation and high risk represents the small ventures business where there is low requirement of innovation.

New Entry

New entry means offering or introducing the new product and services to the targeted consumer in an established or new market. When the entrepreneurs generate new ideas through the innovation that can add value to its company along with the targeted market then; they make new entry of their product and services in the market. New entry can also be known as the combination of human creativity, innovation, and other resources in the product or services.

In order to make the new entry in the market many entrepreneurs involve in the research activity for the generation of new idea, concept, knowledge and technology for introducing the innovative and unique product for the customers. New entry contributes for the survival and growth of the business in the competitive market. But introduction of the new product also create challenges for the entrepreneurs to make the customer familiar with their product and services, provide detail information of product, and risk of loss and not meeting the target.


The primary force encouraging the entry of new firms into a purely competitive industry is 

a) economic profits earned by the firms already in the industry.
b) personal satisfaction from the work.
c) creation of value in the business.
d) Enhancement of business.
Ans: a) economic profits earned by the firms already in the industry.

In which of the following industry structures is the entry of new firms the most difficult? 

a) Oligopoly
b) Pure Competition
c) Pure Monopoly
d) Monopolistic Competition
Ans: c) Pure Monopoly

How does the entry of new coffeehouses affect the profits of existing coffeehouses?

a) Entry will not affect the profits of existing coffeehouses.
b) Entry will increase the profits of existing coffeehouses by shifting the market demand curve for coffee to the right.
c) Entry will increase the profits of existing coffeehouses by shifting each of their individual demand curves to the right.
d) Entry will decrease the profits of existing coffeehouses by shifting each of their individual demand curves to the left and making the demand curves more elastic.
Ans: d)

When new firms have an incentive to enter a competitive price-taker, their entry will 

a) increase the price of the product.
b) drive down profits of existing firms in the market.
c) shift the market supply curve to the left.
d) increase demand for the product.
Ans: b) drive down profits of existing firms in the market.

Generation of New Entry Opportunity

In order to enter the market with the new products, entrepreneurs should generate new entry opportunity by utilizing the resources and knowledge they acquire; along with proper analysis of the market situation. While generating the new entry opportunity, entrepreneur must aim of creating value in the society. Some of the elements that must be taken while generating new market opportunity are as follows:

Generation of New Entry Opportunity

i. Resources as a source of competitive advantages:

Resources are most for generating new entry opportunity in the market. Resources can be capital, human, machine material, etc. Efficient utilization of resources in the production process helps to gain competitive advantage. The nature of the resource should be valuable, rare and imitable, for the better performance of the organization.
a) Valuable: Resources are considered as valuable when it enables the firm to pursue opportunities and create value to the customers through its product and services.
b) Rare: The product which is unique in itself and is possessed by only few competitors is considered as rare. When the product is innovative and unique in nature, it cannot be created by all.
c) Inimitable: It is difficult to imitate the product and service which is unique and costly to produce. Such products protected by patent right registration. In order to make the product inimitable proper research work should be done.

ii. Creating Resource Bundle:

Creating the resource bundle which is valuable, rare, and inimitable is the important element of generating new opportunity. The sources of resource bundle are the collective mind and experience of the entrepreneurs, managers, and employees. The main source of creating the resource bundle are; entrepreneurs market knowledge and technology knowledge.
a) Market Knowledge: It refers to the possession of entrepreneur’s knowledge towards the information technology, their skills and ideas that can provide insight to its market and customers. The knowledge of market will help the entrepreneur to know about the expectations of people towards the product and their existing problem.
b) Technology Knowledge: The knowledge of technology is focused towards creating new knowledge to the entrepreneurs in order to introduce unique and innovative product in the market. The use of robots in restaurant, use of automated machine, are the result of technical knowledge used by entrepreneur.

iii. Assessing the attractiveness:

Entrepreneur should be able to asses attractiveness of new product or service in the market. The information of the new entry and the entrepreneur’s willingness to take decision without proper information is dependent with assessing the attractiveness level. The assessment new entry attractiveness is affected by prior knowledge and information search, window opportunity and comfort with decision making.
a) Prior knowledge and information search: An entrepreneur must have prior knowledge and information of the market in order create comfort level in its decision making. This will help them for the assessment of attractiveness in a particular opportunity.
b) Window of opportunity: This refers to the time when entrepreneur finds a favorable environment to enter in a market with a new product. It is mostly related with the analysis of competitors. Analyzing the information of the market and competitors will help them to know about the unfavorable situation in more clear way.
c) Comfort with decision making: Comfort of the entrepreneur with decision making under uncertainty is the major factor that affects assessment of new entry attractiveness. Sometimes it may create the situation of error of commission and omission. At the time of such situation, they should use their knowledge and information for decision making.
iv. Decision to exploit or not the new entry: This is the final stage of generating new entry opportunity of decision making. The availability of sufficient information and window opportunity plays the role in taking the decision to exploit or no the entry for the entrepreneur. In any situation, entrepreneurs should focus on creating reputation, build customer loyalty, creating market demand, through its ethical activities.

Entry Strategy for New Entry Exploitation

There must be competitive advantage over the competitors for the successful new entry exploitation in the market. Most of the entrepreneurs believe that they are the first one to introduce the new product and services in the market. The introduction of the new product will help to improve the performance in the market. There are the factors that influence the decision to enter the present market and for the delay entry. Some of the advantages of first mover are as follows:i. It develops the cost advantage by producing the large-scale production to fulfill the market demand.
ii. It ensured to be in the better position to satisfy the customers.
iii. It secures the important channels by selecting and developing the strong relationship with suppliers and distributors.
iv. It gains the expertise through participation.
v. It has the less competitive rivalry.

Similarly, the first-mover disadvantages are:

i. Sometime entrepreneurs should face the problem of customers uncertainty.
ii. Entrepreneurs may face difficulty in protecting the product uniqueness.
iii. Building the customer loyalty towards new product is another challenge.
iv. Technological uncertainties may also create obstruction in the business activities.

Risk Reduction Strategy for New Entry Exploitation

There is no business without risk. That’s why, entrepreneurs should take necessary measures to develop strategy to reduce level of risk associated with new entry exploitation. Basically, there are two strategies to reduce the risk and uncertainties are as follow:

Risk Reduction Strategy for New Entry Exploitation

Fig: Risk Reduction Strategy for New Entry Exploitation (Poudyal & Pradhan, 2020)

i. Market Scope Strategies:

This scope focus on making choice by the entrepreneur to make decision on which customer to serve and how to serve them in the best way. This strategy includes:

a) Narrow-Scope Strategy: This strategy focuses on producing customized product, high level of craftmanship and localized business operation. It also offers the small range of product to small number of customers in order to satisfy their needs. This helps to reduce the level of risk as it can concentrate the resources in limited market focusing its targeted customers.

b) Broad Scope Strategy: It offers the range of products at different market segments considering the portfolio approach for dealing with the uncertainties. From this, the entrepreneurs can understand the whole market by determining the product profitability and the loss. In this way, this strategy reduces the risk associated with uncertainties over customers preferences.

ii. Imitation Strategy:

It is another strategy on minimizing the risk associated with the loss of new entry. This strategy involves the copying the practices of other firms having similar nature of business. Most of the entrepreneur finds easy to imitate the practice of successful business rather than going through the long and expensive process of systematic research. This strategy includes:

a) Franchising: It is the process of imitating proven formula for the new entry from a franchiser (Poudyal & Pradhan, 2020). It helps to minimize risk through the contract between the new entry firm and franchiser by allowing to use brand image and value of the product or serve. MC Donalds, KFC, Hotel Radisson, are the examples of franchising.
b) Me-too Strategy: This strategy involves copying from the existed product through minor modification and development. Most imitator does it to grab the business opportunity by introducing the modified products. Production of same ice cream with different brand is the example of me-too strategy.


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Introduction to Entrepreneurship – Definition, Nature, Development and Process | Fundamentals of Entrepreneurship


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