Lecture Entrepreneurship: Chapter 5 - Zacharakis, Bygrave, Corbett

UNDERSTANDI NG  YOUR 
BUSI NESS  MODEL  & 
DEVELOPI NG  STRATEGY
Chapt e r   5
Bygrave & Zacharakis, Entrepreneurship, New York: Wiley, 2014

©


Your first steps are to…
q

Select a business model

q

Determine a basic strategy category
§

Differentiation

§

Low cost

§

Niche

Bygrave & Zacharakis,
Entrepreneurship,

New York:
Wiley,
2014
Zacharakis,
Bygrave & Corbett,
Entrepreneurship,
New
York:
Wiley,
©
2017©

2


Create your business model

Bygrave & Zacharakis,
Entrepreneurship,
New York:
Wiley,
2014
Zacharakis,
Bygrave & Corbett,
Entrepreneurship,
New
York:
Wiley,
©
2017©

3


Amazon’s revenue & cost model 
requires high volume
12
10

2009
2010
2011
2014
Revenues just exceed
costs

2012

2013

Other
Revenue
Media
Electronics &
Merchandise

8
6

Cost of Sales

4

Operating
Expenses

2
0

Operating
Income
$1,129
$178

$1,406

$862

Bygrave & Zacharakis,
Entrepreneurship,
New York:
Wiley,
2014
Zacharakis,
Bygrave & Corbett,
Entrepreneurship,
New
York:
Wiley,
©
2017©

$676

$745

4


To Succeed as a First Mover,
Entrepreneurs Must…
ü

Be First (or very early) into the Market

ü

Quickly Capture a Large % of the Market

ü

Create Switching Costs

First movers rarely win and its an expensive strategy to
take
Bygrave & Zacharakis,
Entrepreneurship,
New York:
Wiley,
2014
Zacharakis,

Bygrave & Corbett,
Entrepreneurship,
New
York:
Wiley,
©
2017©

5


First Mover’s are Often Surpassed
Industry

First Mover

Current Leader

Social Networking

Friendster

Facebook

Video Games

Atari

Microsoft X Box

Web Browser

Mosaic

Google Chrome

Internet Search Engine

Excite

Google

Word Processing Software

WordStar

Microsoft Word

Personal Computer

Altair

Lenovo

Email

Juno

Google Gmail

Diet Soda

No-Cal

Diet Coke

Presentation Software

Harvard Graphics

Microsoft PowerPoint

Online Bookseller

Book Stacks Unlimited Amazon

ATM Machines

Docutel

Bygrave & Zacharakis,
Entrepreneurship,
New York:
Wiley,
2014
Zacharakis,
Bygrave & Corbett,
Entrepreneurship,
New
York:

Wiley,
©
2017©

Diebold

6


To win, your strategy must be to be 
one, or more, of these…

Bygrave & Zacharakis,
Entrepreneurship,
New York:
Wiley,
2014
Zacharakis,
Bygrave & Corbett,
Entrepreneurship,
New
York:
Wiley,
©
2017©

7


Your People are your Advantage

Founders need to create a culture and align the
employees they select with the values and structure of
the company
Bygrave & Zacharakis,
Entrepreneurship,
New York:
Wiley,
2014
Zacharakis,
Bygrave & Corbett,
Entrepreneurship,
New
York:
Wiley,
©
2017©

8


Develop your Entry Strategy
Benchmar
k
Devise Initial
Market Test
Create a
Platform
Bygrave & Zacharakis,
Entrepreneurship,

New York:
Wiley,
2014
Zacharakis,
Bygrave & Corbett,
Entrepreneurship,
New
York:
Wiley,
©
2017©

9


Benchmark your Competition: The 
JetBlue Example 

Bygrave & Zacharakis,
Entrepreneurship,
New York:
Wiley,
2014
Zacharakis,
Bygrave & Corbett,
Entrepreneurship,
New
York:
Wiley,
©

2017©

10


Growth Strategy

New ventures should focus on testing the market and refining the
business model; however, it is never too early to start thinking about
growth.
Bygrave & Zacharakis,
Entrepreneurship,
New York:
Wiley,
2014
Zacharakis,
Bygrave & Corbett,
Entrepreneurship,
New
York:
Wiley,
©
2017©

11


Franchising has 3 main benefits
q

Replicability
§

q

New sources of revenue
§

q

Established and proven methods
Royalties and fees from franchisees

New capital to fund growth
Franchising works best with service businesses that are easy
to replicate. Be sure to monitor franchisees to maintain brand
purity.

Bygrave & Zacharakis,
Entrepreneurship,
New York:
Wiley,
2014
Zacharakis,
Bygrave & Corbett,
Entrepreneurship,
New
York:
Wiley,
©

2017©

12


Top 10 US Franchisors Perform Well
#

Chain

Franchise Sales
(US Stores, Total
)

Franchise
(US Units)

Sales per
store
(US)

1

McDonald’s

$35.4 billion

12,836

$2,500,000

2

Starbucks

$12.7 billion

4,769

$2,660,000

3

Subway

$11.9 billion

27,205

$475,000

4

Burger King

$8.6 billion

7,090

$1,210,000

5

Wendy’s

$8.5 billion

4,895

$1,594,000

6

Taco Bell

$8.2 billion

4,995

$1,441,000

7

Dunkin Donuts

$7.22 billion

8,047

$911,000

8

Chick-Fil-A

$5.8 billion

1,837

$3,064,000

9

Pizza Hut

$5.5 billion

7,337

$843,000

10

Panera Bread

$4.5 billion

955

$2,500,000

Source: The 20 most successful Fast Food Chains in America, Business Insider,
August 8, 2015
Bygrave & Zacharakis,
Entrepreneurship,
New York:
Wiley,
2014
Zacharakis,
Bygrave & Corbett,
Entrepreneurship,
New
York:
Wiley,
©
2017©

13


Drive Growth with Product Mix
q

Tangential & Adjacent Products
§

What new products make sense with your
current offerings? Current customers?

q

Spread Existing Costs over Larger Product Base

q

Accelerate Revenue Faster than Increase in Costs

q

Leverage your Firm’s Experience
q Distribution
q Supplier

Channels

Relationships

q Customer

Relationships

Bygrave & Zacharakis,
Entrepreneurship,
New York:
Wiley,
2014
Zacharakis,
Bygrave & Corbett,
Entrepreneurship,
New

York:
Wiley,
©
2017©

14


Consider these 3 topics before 
expanding geographically:
q

q

q

Customers
§

Go where they are

§

Mimic proven success strategies

Vendors
§

Can you use the same vendors?

§

Any new costs? Leverage volume for better pricing

Distribution
§

Same channels?

Bygrave & Zacharakis,
Entrepreneurship,
New York:
Wiley,
2014
Zacharakis,
Bygrave & Corbett,
Entrepreneurship,
New
York:
Wiley,
©
2017©

15


There are 8 basic ways to
expanded internationally
Gradual
Global

Born
Global

Intermediating:
Networks & Alliances

Born Again
Global

Enabling
Processes

Direct:
Technology

Technology
Transfer

Technology
Licensing

Outsourcing

Exporting

Foreign
Direct
Investment

Franchising

Venture
Finance

M&A
Activities

Enacting
Processes

Bygrave & Zacharakis,
Entrepreneurship,
New York:
Wiley,
2014
Zacharakis,
Bygrave & Corbett,
Entrepreneurship,
New
York:
Wiley,
©
2017©

16


International expansion has risks
Means

Pros

Cons

Technology Transfer

- Reduces entry costs

- Risk of losing the technology

Technology
Licensing

- Creates revenue, conserves
resources, controls risk

- Doesn’t extend the brand

Outsourcing

- Cost-saving

- Managing partners

Exporting

- Cheap and easy

- Extra sales and transport costs

- Moral hazard; adverse
selection

Foreign Direct
Investment

- Physical presence
- Control of assets

-

Franchising

- Licenses an operational system

- Risk of damaging the brand

Venture Financing

- Enabling and enacting
mechanism

- Can lead to mergers and
acquisitions with foreign
companies

Mergers &
Acquisitions

- Established infrastructure

- Company can grow quickly

- Very expensive

Bygrave & Zacharakis,
Entrepreneurship,
New York:
Wiley,
2014
Zacharakis,
Bygrave & Corbett,
Entrepreneurship,
New
York:
Wiley,
©
2017©

Expensive

17


Recap
q

Determine revenue and cost structure

q

Choose a strategy

q

Create a culture

q

Seek and select people who fit culture and goals

q

Plan entry approach, including benchmarks

q

Plan growth drivers

Bygrave & Zacharakis,
Entrepreneurship,
New York:
Wiley,
2014
Zacharakis,
Bygrave & Corbett,
Entrepreneurship,
New
York:
Wiley,
©

2017©

18