The Environment for Entrepreneurship 103
for alliances that would strengthen both firms. Or the entrepreneur may be required to
position the new venture around powerful competitors to avoid head-to-head conflict.
A useful tool for competitor analysis is the resource-based grid in Figure 3.3. The grid
presents the six types of resources by attribute for each relevant competitor, and requires
the entrepreneur to assign a score for each dimension.^40 The entrepreneur’s own venture
is included in the analysis. In later chapters, we will also use a competitor grid to look
at strategies, products, and services.
The initial information derived from the competitor analysis will rank the com-
petitors on each type of resource, producing a grand ranking of all competitors. The next
step is to examine how the competitors use their resource bases to confront industry
forces. That is, how do the competitors’ strategies influence buyer power, supplier
power, threats of substitutes, entry barriers, and rivalry among firms? The competitors’
strategies are revealed by studying their deployment of resources.^41 This examination
enables the entrepreneur to answer the second question posed earlier in the chapter:
What is the best way to compete in the industry for the highest profitability? The an-
swer is: Look for ways to employ one’s resource base that reduce the forces threatening firm prof-
itability, and position one’s firm for leadership in that area.
SUMMARY
The business environment can be viewed as a stock of resources: financial, physical, tech-
nological, reputational, human, and organizational. The entrepreneur with an effective
strategy for acquiring resources can control some of these resources, with others being
controlled by competitors and potential competitors. No single entrepreneur can con-
trol all the resources. Larger forces are at work, and it is unlikely that the trends in the
macroenvironment will be influenced by any single firm.
The entrepreneur must understand the macroenvironment, for it establishes the polit-
ical, economic, technological, sociodemographic, and ecological rules under which the
new firm is created and must operate. The entrepreneur must be able to scan and mon-
itor the macroenvironment and to recognize the contingencies and constraints the
macroenvironment imposes. This analysis, however, is not enough for the firm’s success.
The entrepreneur must be able to forecast and assess development, using as a knowl-
edge resource the four attributes required for competitive advantage. Also required is the
ability to marshal the resources necessary to overcome the constraints or effectively deal
with the contingencies.
Understanding the elements and the processes of the competitive market enables us
to discover the forces that make an industry attractive to the entrepreneur. These forces
are the power of buyers, the power of suppliers, the threat of substitutes, the height of
the entry barriers, and the nature of the rivalry between competitors. When buyers and
suppliers are powerful, when good substitutes exist for the firm’s products, and when
entry barriers are low and rivalry is intense, the industry is not attractive because profits
are likely to be low.
However, the entrepreneur’s resource configuration occasionally enables entry into an
unattractive industry. If an entrepreneur can configure his or her resource base and
