“Question 1
In its first three years of operation Idealab recruited entrepreneurs to its incubators. The entrepreneurs had business experience rather than internet experience. An incubator is a company that offers business prospects that assist in the establishment of other businesses. This is achieved through office accounting and legal assistance. In turn the incubator is compensated by receiving an ownership interest from the company. When the company grows to a point where it can support itself it detaches from the incubator company and lists its share on the stock market. The incubator company reinvests its money in another entrepreneurial company. Entrepreneurs benefit from this relationship through the help of business basics like setting networking activities and high speed internet access. Incubation is the first process to apply when developing the entrepreneurial company. Later the incubator company helps with marketing assistance and the entrepreneurial benefits in setting accounting and financial management services. Idealab provides entrepreneurial companies by means of accessing bank loans and funds using the Idealab resources as collateral. Idealab linked the entrepreneurial companies to higher education resources where they learnt how to manage their business before launching into the stock market. These incubator services help entrepreneurs learn how to run their business with guidance from the incubator company. This is achieved through comprehensive business training programs. The training programs help in minimizing most of the risk that new businesses encounter in their first year of incorporation. Therefore the new companies follow the guidelines provided by the incubator company which has a lot of resources and experience. Entrepreneurial companies benefit from the mentorship programs which incorporate advisory boards and a link to strategic partners who help to form management teams. They set up new technology commercialization assistance in the office space provided by the incubator company (Schneider 511).
Question 2.
Through its founder Gross Idealab devised a new strategy that would surpass the companys initial purpose as an incubator company. The strategy was to combine business with the existing incubator companies in order to compete with Amazon.com. Idealab created a strategic error by fast venturing and this proved suicidal to the operations of the company. The management failed to plan well and this resulted in a worse execution of strategy. As a result the company did not raise enough funds for this exercise. A sudden change of strategy and purpose for the company needed venture sponsors who understood the market characteristics and experience. Idealab ventured in an already competitive market with key players like Amazon.com. This business move was a high risk and Idealab got into it by targeting to compete with already established companies like Amazon.com. Idealab and its incubator company partners failed to raise enough funds and derive good business strategies that would help in establishing the company. It failed to understand its competitor by undermining established Amazon.com. The company almost collapsed and a big loss was realized. This was coupled with a lot of capital constraints (Schneider 512).
Question 3.
In 2003 Gross decided to devote Idealab company resources to develop internally generated ideas as a focus for internal growth from its operations. This was a well thought strategy that would help Idealab to relaunch into the market after most of its capital sponsors withdrew their capital which almost led to the collapse of Idealab. The company withdrew its purpose to provide incubator service to new established companies. However it chose to remain with its initial number of online businesses. The move helped Idealab to focus most of its funds to internally generated ideas. This was a smart move that has led to a resurgence of the capital value of the company to around $800 million. The company has succeeded in establishing itself better and stronger through internal growth with less outsourcing. This has reduced the expenses of the company significantly. The management established a growth plan that would see the company succeed in the second wave of electronic commerce as reflected by the company capital value of about $800 million. The growth strategy also resulted in firing of more than two third of its employees. This is a move that led to reduction in company expenses through wages and salary payments (Schneider 522).”

  

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