Business Planning and International Diversification
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Questions and Answers

What are the potential risks of 'storming the castle' in entrepreneurship compared to traditional business planning?

The risks include a lack of direction and increased uncertainty, which can lead to poor decision-making and resource wastage, unlike traditional planning which aims to minimize these risks.

How does the context of a firm influence the effectiveness of business planning according to Brinckmann et al. (2010)?

The effectiveness of business planning is greater in firms at early stages and in low-uncertainty environments, while its effectiveness diminishes in high-uncertainty contexts.

What balance must small firms achieve according to Brinckmann et al. (2010) regarding business planning?

Small firms must balance structured business planning with the flexibility needed to adapt to unforeseen challenges.

Explain why the S-curve relationship between international diversification and firm performance includes an initial decline.

<p>The initial decline is attributed to learning and governance costs that firms incur as they broaden their international reach.</p> Signup and view all the answers

What are the key liabilities firms face when entering foreign markets?

<p>Firms face liabilities of foreignness, newness, and coordination costs, which increase operational risks and can negatively affect performance.</p> Signup and view all the answers

How do intangible assets influence the performance outcomes of international diversification?

<p>Intangible assets like brand equity and technological know-how help firms leverage diversification benefits and navigate foreign market challenges more effectively.</p> Signup and view all the answers

What is the significance of balancing planning and flexibility in the context of entrepreneurship?

<p>Balancing planning with flexibility allows entrepreneurs to respond promptly to market changes while still having a strategic direction.</p> Signup and view all the answers

In what way does the complexity of operations affect performance at high levels of international diversification?

<p>At high levels of diversification, complexity costs can outweigh the benefits, leading to degraded performance due to increased coordination challenges.</p> Signup and view all the answers

What differentiates the distribution of economic rents in strong versus weak appropriability regimes?

<p>In strong appropriability regimes, innovators retain most economic rents due to robust IP protections. In weak regimes, rents are influenced by access to complementary assets, capturing more value when assets are freely available.</p> Signup and view all the answers

Identify three factors that lead decision-makers to prefer Intellectual Property Rights over other appropriation mechanisms.

<p>Industry characteristics such as high R&amp;D costs, an intense competitor landscape, and the ease of imitation make IP protection more attractive. These factors ensure exclusivity and protection from replication.</p> Signup and view all the answers

Under what conditions are resources considered VRIN in the Resource-Based View, and what makes stakeholder relationships unique?

<p>Resources are VRIN when they are Valuable, Rare, Inimitable, and Non-substitutable. Stakeholder relationships are difficult to imitate due to trust, historical interaction, and embedded social capital.</p> Signup and view all the answers

What are two reasons firms might overlook the importance of treating stakeholders respectfully?

<p>A short-term focus on immediate profits leads managers to disregard long-term stakeholder relationships. Resource constraints can also prevent firms from investing in stakeholder initiatives.</p> Signup and view all the answers

How do stakeholder relationships contribute to a firm's sustainable competitive advantage?

<p>They enhance collaboration, improve reputation, and generate customer loyalty, which strengthen the market position and create barriers to entry for competitors.</p> Signup and view all the answers

What is the main concept of Scherer et al. (2015) regarding customer retention in self-service settings?

<p>The model emphasizes the interaction between service convenience, ease of use, and customer satisfaction, with customer expectations acting as mediators.</p> Signup and view all the answers

What factors act as moderators in the relationship between service proposition type and customer retention?

<p>Moderators include customer experience level, task complexity, and availability of alternative service options, all influencing perceived value of self-service.</p> Signup and view all the answers

Summarize the key conclusions drawn by Scherer et al. (2015) about self-service technologies.

<p>Self-service technologies can enhance retention by reducing effort and improving satisfaction, but may cause churn if perceived as impersonal or inefficient for complex tasks.</p> Signup and view all the answers

How does resource flexibility influence a firm's decision to pursue related versus unrelated diversification?

<p>Flexible resources are better suited for unrelated diversification, whereas specific resources are leveraged for related diversification due to potential synergies.</p> Signup and view all the answers

Why do firms with significant Intellectual Property prefer related over unrelated diversification?

<p>Patents and trademarks are often industry-specific and generate synergies in related fields, while unrelated diversification may dilute these advantages.</p> Signup and view all the answers

Flashcards

Appropriability Regimes

The strength of an innovator's ability to retain the economic benefits (rents) of an innovation.

VRIN Resources

Valuable, Rare, Inimitable, and Non-substitutable resources, a key to competitive advantage.

Stakeholder relationships

Connections with individuals, groups, and institutions that can impact a firm's success.

Self-service technologies

Technologies that allow customers to perform tasks without direct interaction with a service provider.

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Related Diversification

Expanding into related industries using existing resources & knowledge.

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Unrelated Diversification

Expanding into unrelated industries—different from the firm's core competencies

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Service Opportunity Matrix

A framework for identifying growth opportunities in services.

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Customer Retention

The ability to keep customers over the long term.

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Intellectual Property Rights (IP)

Legal rights granted to protect the intellectual creations and inventions of individuals or businesses.

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Resource Flexibility

The ability of a firm's resources to be adapted and employed in different applications.

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Storming the castle (Entrepreneurship)

A flexible approach to business, focusing on adapting to uncertainty rather than rigid planning.

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Traditional Business Planning

A structured approach involving detailed research, forecasting, and goal-setting to reduce business risks.

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Business Planning Effectiveness (Context)

Effective business planning is more likely in early-stage firms and situations with low uncertainty.

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High-Uncertainty Business Planning

Rigid plans are less effective in high-uncertainty environments; flexibility is critical.

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S-curve (International Diversification)

A performance pattern where international diversification initially declines, then improves, and eventually declines again at high levels of diversification.

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Liability of Foreignness

Challenges faced by firms entering foreign markets due to lack of local knowledge and cultural differences.

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Intangible Assets (International Diversification)

Brand equity, technological know-how, and organizational expertise that moderate the performance outcomes of international diversification.

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Business planning vs resource constraints in small firms

Business planning creates value even with limited resources, but its success depends on adapting to challenges.

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Study Notes

Business Planning and Performance (Brinckmann et al., 2010)

  • "Storming the castle" in entrepreneurship involves immediate action without formal planning, contrasting with traditional business planning's meticulous approach.
  • Business planning is effective for early-stage firms and low-uncertainty environments, with less evidence supporting its use in highly uncertain contexts.
  • Despite resource constraints, business planning enhances value creation in small firms. Optimal outcomes involve balancing structured planning with adaptability.

International Diversification and Performance (Lu & Beamish, 2004)

  • International diversification's performance follows an S-curve, initially declining due to transition costs, then improving, and finally receding due to increased complexity.
  • Entering foreign markets presents liabilities, including foreignness (lack of local knowledge), newness (lack of experience), and coordination problems, diminishing initial performance.
  • Intangible assets such as brand equity and expertise mitigate these liabilities and facilitate the benefits of diversification.

Innovation and Appropriability (James et al., 2013)

  • Innovation's economic value distribution depends on appropriability mechanisms: strong IP protection leads to innovator dominance, while weak protection yields more value for complementary asset owners.
  • Factors influencing IP preference include extensive R&D, market competition, and the ease of replicating innovations.

Stakeholder Growth Strategies

  • Resources are considered VRIN (Valuable, Rare, Inimitable, Non-substitutable) to support growth strategies. Complex stakeholder relationships are inimitable.
  • Reasons for firms not respecting stakeholders include short-term focus and resource constraints.
  • Stakeholder relationships build sustainable competitive advantage through enhanced collaboration, reputation, and loyalty.

Self-Service and Customer Retention (Scherer et al., 2015)

  • Customer retention in self-service settings depends on ease of use, service convenience, and satisfaction. Customer perceptions and value act as mediating factors.
  • Moderators (e.g., customer experience level, task complexity) influence relationships between service type and retention.
  • Self-service benefits retention when it eases effort and improves satisfaction; however, it can lead to loss if perceived as impersonal for complex tasks.
  • Resource flexibility favors unrelated diversification, while specific resources support related diversification.
  • Firms with extensive IP favor related diversification because it utilizes existing industry-specific assets.

Growth with Services (Sawhney et al., 2004)

  • The Service Opportunity Matrix categorizes growth opportunities by matching existing/new customer needs with existing/new service offerings.
  • Amazon's logistics services exemplify mitigating market risks by utilizing existing infrastructure and targeting confirmed customer needs before venturing into unproven areas.

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Description

Explore the nuances of business planning and international diversification as discussed by Brinckmann et al. and Lu & Beamish. This quiz examines the effectiveness of structured planning in entrepreneurship and the S-curve of performance in global markets. Test your knowledge on the impact of uncertainty and organizational challenges in these contexts.

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