Some thoughts on the entrepreneur...

Does this, a week ago mentioned, individual “entrepreneur” actually operate in an uncertain and unpredictable environment?

First, his institutional setting is fairly stable and predictable. The illegal status of selling home-made DVDs of the latest films and TV-series is not likely to change in the near future. Second, he has clearly carefully chosen a market niche where at least the nation-wide established players are not likely move. Also the choice of market place clearly indicates that the entrepreneur is aware of his market niche and the risk involved. At the same time he is able to contact his potential customers, i.e. the not-so-well-off people who have to probably work a couple of jobs and don’t have the time or money to subscribe to these other vendors, and, if it comes to it, he has a good possibility to the melt into the crowd and so avoid the default risk. (Having visited “The Greatest City in America”, it is rather obvious to me that this entrepreneur does not cooperate with the local law enforcement.) Nevertheless, consider the situation from the five forces framework of Michael Porter (1980) it seems that he might have secured a position for competitive advantage.

Also, operating in such a market niche this individual clearly has the capability to endure and take more risk than the average entrepreneur. However, again based on personal observations in the city of Baltimore, it is rather unlikely that he would be the only one having this capability. Also, as mentioned, it is fairly easy to get yourself copies of the latest TV-series and distribute them via DVDs. As such, these would not qualify as resources that are valuable, rare or inimitable (cf. Barney 1991). This raises the question why don’t we witness more competitors enter this market niche? One answer might be that he operates as part of a network of vendors who have cartelized and divided the market: one has the subway another operates for example in public parks. However, it has been shown that colluding is difficult in cases where market entry is easy. More likely, this entrepreneur has developed a unique set of capabilities and resources that are required in this type of competitive environment. These capabilities are hard to copy, not because they are necessarily inimitable, but because developing them takes time and requires tacit knowledge and learning processes. In other words, it may be possible that this individual holds a dynamic capability to renew and change his capabilities according to requirements of the situation (Teece et al. 1997). A capability that gives him an advantage over potential entrants, by enabling him to explore as well as exploit the environment and its resources (Zollo & Winter 2002).

References

Barney, J. 1991. Firm resources and sustained competitive advantage. Journal of Management, 17(1): 99-120.
Porter, M. E. 1980. Competitive Strategy: Techniques for analyzing industries and competitors. The Free Press: New York.
Teece, D. J., Pisano, G., & Shuen, A. 1997. Dynamic capabilities and strategic management. Strategic Management Journal, 18(7): 509-533.
Zollo, M., & Winter, S. G. 2002. Deliberate learning and the evolution of dynamic capabilities. Organization Science, 13(3, Knowledge, Knowing, and Organizations): 339-351.