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starting up the venture, launching, growing, and ending. بدء المشروع ، إطلاق ، النمو ، وتنتهي.

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hussein gibreel

This document discusses various strategies for growing a business and managing that growth, including: - Penetration strategies of selling more to existing customers - Market development strategies of selling to new customer groups - Product development strategies of creating new products for existing customers - Diversification strategies of entering new markets with new products It also covers accessing external resources for growth through joint ventures, acquisitions, mergers, leveraged buyouts, franchising, and negotiating for more resources. Finally, it discusses exit strategies for ending the venture such as succession, sale, merger, liquidation, and bankruptcy.

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FROM FUNDING THE VENTURE TO LAUNCHING, GROWING, AND ENDING THE NEW VENTURE Hussein Gibreel Musa
13. STRATEGIES FOR GROWTH AND MANAGING THE IMPLICATIONS OF GROWTH GROWTH STRATEGIES: WHERE TO LOOK FOR GROWTH OPPORTUNITIES • In this chapter, we provide a model that offers suggestions on where to look for growth opportunities in which the firm may already have a basis for a sustainable competitive advantage. • Then we investigate the implications of that growth for an economy, for the firm, and for the entrepreneur, as well as the possible need to negotiate for resources from external sources to sustain firm growth.
Existing Market New Existing New Product Penetration strategies Product development strategies Market development strategies Diversification strategies Growth Strategies Based upon Knowledge of Product and/or Market This figure are represent Different combinations of different levels of types of knowledge
Penetration strategies focuses on the firm’s existing product in its existing market. The entrepreneur attempts to penetrate this product or market further by encouraging existing customers to buy more of the firm’s current products. For example, UMY Students” “OLIVE chicken”. This growth strategy does not involve anything new for the firm and relies on taking market share from competitors and/or expanding the size of the existing market.
Market Development Strategies Growth also can occur through market development strategies. Market development strategies involve selling the firm’s existing products to new groups of customers. New groups of customers can be categorized in terms of geographic or demographics and/or on the basis of new product use. New Geographical Market New Demographic Market New Product Use
Product Development Strategies Product development strategies for growth involve developing and selling new products to people who are already purchasing the firm’s existing products. Experience with a particular customer group is a source of knowledge on the problems customers have with existing technology and ways in which customers can be better served. This knowledge is an important resource in coming up with a new product.
Diversification Strategies Diversification strategies involve selling a new product to a new market Raw mateValue-added chain for product 1rials producerBackward integration Raw materials wholesalerBackward integration Manufacturer Finished goods wholesalerBackwardBBackward integrationbaackwardBackward integration integration integration Retailer Customer Raw materials producer Raw materials wholesaler Manufacturer Finished goods wholesaler Retailer Customer Raw materials producer Raw materials wholesaler Manufacturer Finished goods wholesaler Retailer Customer Raw materials producer Raw materials wholesaler Manufacturer Finished goods wholesaler Retailer Customer Backward integration Value-added chain for product 1 Value-added chain for product 2 Horizontal Forward integration Example of a Value-Added Chain and Types of Related Diversification
IMPLICATIONS OF GROWTH FOR THE FIRM Because growth makes a firm bigger, the firm begins to benefit from the advantages of size. For example, higher volume increases production efficiency, makes the firm more attractive to suppliers.....etc). But as the firm grows, it changes. These changes introduce a number of managerial challenges. These challenges arise from the following pressures. Pressures on the Management of Employees Pressures on the Entrepreneur’s Time Pressures on Existing Financial Resources Pressures on Human Resources
A Categorization of Entrepreneurs and Their Firms’ Growth categorizes entrepreneurs in terms of two dimensions: The first dimension represents an entrepreneur’s abilities to successfully make the transition to more professional management practices, and the second dimension represents an entrepreneur’s growth aspirations. High Entrepreneur's ability to institute professional management Practices Low No Yes Entrepreneur's growth aspirations Unused potential Actual growth Little potential Constrained
14. ACCESSING RESOURCES FOR GROWTH FROM EXTERNAL SOURCES JOINT VENTURES joint ventures can involve a wide variety of partners that include universities, not-for-profit organizations, businesses, and the public sector. A joint venture is a separate entity that involves a partnership between two or more active participants. Sometimes called strategic alliances.
Factors in Joint Venture Success 1. The accurate assessment of the parties involved to best manage the new entity in light of the ensuing relationships. The joint venture will be more effective if the managers can work well together. 2. The degree of symmetry between the partners. This symmetry goes beyond chemistry to objectives and resource capabilities. 3. The expectations of the results of the joint venture must be reasonable. 4. The timing must be right. With environments constantly changing, industrial conditions being modified, and markets evolving, a particular joint venture could be a success one year and a failure the next.
ACQUISITIONS An acquisition is the purchase of an entire company, or part of a company; by definition, the company is completely absorbed and no longer exists independently. Advantages of an Acquisition 1. Established business. If the firm has been profitable, the entrepreneur need only continue its current strategy. 2. Location. New customers are already familiar with the location. 3. Established marketing structure 4. Cost. The actual cost of acquiring a business can be lower than other methods of expansion. 5. Existing employees. The employees of an existing business can be an important asset 6. More opportunity to be creative.
Disadvantages of an Acquisition Marginal success record. Overconfiden ce in ability. Key employee loss. Overvaluation.
Synergy The concept that “the whole is greater than the sum of its parts” Structuring the Deal Once the entrepreneur has identified a good candidate for acquisition, an appropriate deal must be structured. Many techniques are available for acquiring a firm, each having a distinct set of advantages to both the buyer and the seller. The deal structure involves the parties, the assets, the payment form, and the timing of the payment.
MERGERS A merger or a transaction involving two, or possibly more, companies in which only one company survives is another method of expanding a venture. Acquisitions are so similar to mergers that at times the two terms are used interchangeably. LEVERAGED BUYOUTS A leveraged buyout (LBO) occurs when an entrepreneur (or any employee group) uses borrowed funds to purchase an existing venture for cash. Most LBOs occur because the entrepreneur purchasing the venture believes that he or she could run the company more efficiently than the current owners.
franchising Franchising is “an arrangement whereby the manufacturer or sole distributor of a trademarked product or service gives exclusive rights of local distribution to independent retailers in return for their payment of royalties and conformance to standardized operating procedures.
OVERCOMING CONSTRAINTS BY NEGOTIATING FOR MORE RESOURCES There are two primary tasks for an entrepreneur negotiating with another party for access to an external growth mechanism. distribution task integration task
15. SUCCESSION PLANNING AND STRATEGIES FOR HARVESTING AND ENDING THE VENTURE EXIT STRATEGY Every entrepreneur who starts a new venture should think about an exit strategy. A number of possible exit strategies will be discussed in the following paragraphs. succession by a family member or a nonfamily member merger with another company liquidation of the company private sale of stock sale of the company to employees or to an external source
BANKRUPTCY—AN OVERVIEW Failure is not uncommon in many new ventures, especially in light of the poor global economic environment, the wars in Iraq and Afghanistan, and the continued battle against terrorism. According to the Small Business Administration, about half of all new start-ups fail in their first years. Surviving Bankruptcy The most obvious way to survive bankruptcy is to avoid it altogether. However, since bankruptcy is becoming such a common occurrence, it may be helpful for the entrepreneur to have a plan should he or she find it necessary to declare bankruptcy.
THE REALITY OF FAILURE Unfortunately, failure does happen, but it isn’t necessarily the end. Many entrepreneurs are able to successfully turn failure into success. It is one of the important historical characteristics of entrepreneurs that we have continually identified throughout this text. Since failure can happen, there are also some important considerations First and foremost, the entrepreneur should consult with his or her family. As difficult as it is for the entrepreneur to deal with bankruptcy. Second, the entrepreneur should seek outside assistance from professionals, friends, and business associate
starting up the venture, launching, growing, and ending. بدء المشروع ، إطلاق ، النمو ، وتنتهي.

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starting up the venture, launching, growing, and ending. بدء المشروع ، إطلاق ، النمو ، وتنتهي.

  • 1. FROM FUNDING THE VENTURE TO LAUNCHING, GROWING, AND ENDING THE NEW VENTURE Hussein Gibreel Musa
  • 2. 13. STRATEGIES FOR GROWTH AND MANAGING THE IMPLICATIONS OF GROWTH GROWTH STRATEGIES: WHERE TO LOOK FOR GROWTH OPPORTUNITIES • In this chapter, we provide a model that offers suggestions on where to look for growth opportunities in which the firm may already have a basis for a sustainable competitive advantage. • Then we investigate the implications of that growth for an economy, for the firm, and for the entrepreneur, as well as the possible need to negotiate for resources from external sources to sustain firm growth.
  • 3. Existing Market New Existing New Product Penetration strategies Product development strategies Market development strategies Diversification strategies Growth Strategies Based upon Knowledge of Product and/or Market This figure are represent Different combinations of different levels of types of knowledge
  • 4. Penetration strategies focuses on the firm’s existing product in its existing market. The entrepreneur attempts to penetrate this product or market further by encouraging existing customers to buy more of the firm’s current products. For example, UMY Students” “OLIVE chicken”. This growth strategy does not involve anything new for the firm and relies on taking market share from competitors and/or expanding the size of the existing market.
  • 5. Market Development Strategies Growth also can occur through market development strategies. Market development strategies involve selling the firm’s existing products to new groups of customers. New groups of customers can be categorized in terms of geographic or demographics and/or on the basis of new product use. New Geographical Market New Demographic Market New Product Use
  • 6. Product Development Strategies Product development strategies for growth involve developing and selling new products to people who are already purchasing the firm’s existing products. Experience with a particular customer group is a source of knowledge on the problems customers have with existing technology and ways in which customers can be better served. This knowledge is an important resource in coming up with a new product.
  • 7. Diversification Strategies Diversification strategies involve selling a new product to a new market Raw mateValue-added chain for product 1rials producerBackward integration Raw materials wholesalerBackward integration Manufacturer Finished goods wholesalerBackwardBBackward integrationbaackwardBackward integration integration integration Retailer Customer Raw materials producer Raw materials wholesaler Manufacturer Finished goods wholesaler Retailer Customer Raw materials producer Raw materials wholesaler Manufacturer Finished goods wholesaler Retailer Customer Raw materials producer Raw materials wholesaler Manufacturer Finished goods wholesaler Retailer Customer Backward integration Value-added chain for product 1 Value-added chain for product 2 Horizontal Forward integration Example of a Value-Added Chain and Types of Related Diversification
  • 8. IMPLICATIONS OF GROWTH FOR THE FIRM Because growth makes a firm bigger, the firm begins to benefit from the advantages of size. For example, higher volume increases production efficiency, makes the firm more attractive to suppliers.....etc). But as the firm grows, it changes. These changes introduce a number of managerial challenges. These challenges arise from the following pressures. Pressures on the Management of Employees Pressures on the Entrepreneur’s Time Pressures on Existing Financial Resources Pressures on Human Resources
  • 9. A Categorization of Entrepreneurs and Their Firms’ Growth categorizes entrepreneurs in terms of two dimensions: The first dimension represents an entrepreneur’s abilities to successfully make the transition to more professional management practices, and the second dimension represents an entrepreneur’s growth aspirations. High Entrepreneur's ability to institute professional management Practices Low No Yes Entrepreneur's growth aspirations Unused potential Actual growth Little potential Constrained
  • 10. 14. ACCESSING RESOURCES FOR GROWTH FROM EXTERNAL SOURCES JOINT VENTURES joint ventures can involve a wide variety of partners that include universities, not-for-profit organizations, businesses, and the public sector. A joint venture is a separate entity that involves a partnership between two or more active participants. Sometimes called strategic alliances.
  • 11. Factors in Joint Venture Success 1. The accurate assessment of the parties involved to best manage the new entity in light of the ensuing relationships. The joint venture will be more effective if the managers can work well together. 2. The degree of symmetry between the partners. This symmetry goes beyond chemistry to objectives and resource capabilities. 3. The expectations of the results of the joint venture must be reasonable. 4. The timing must be right. With environments constantly changing, industrial conditions being modified, and markets evolving, a particular joint venture could be a success one year and a failure the next.
  • 12. ACQUISITIONS An acquisition is the purchase of an entire company, or part of a company; by definition, the company is completely absorbed and no longer exists independently. Advantages of an Acquisition 1. Established business. If the firm has been profitable, the entrepreneur need only continue its current strategy. 2. Location. New customers are already familiar with the location. 3. Established marketing structure 4. Cost. The actual cost of acquiring a business can be lower than other methods of expansion. 5. Existing employees. The employees of an existing business can be an important asset 6. More opportunity to be creative.
  • 13. Disadvantages of an Acquisition Marginal success record. Overconfiden ce in ability. Key employee loss. Overvaluation.
  • 14. Synergy The concept that “the whole is greater than the sum of its parts” Structuring the Deal Once the entrepreneur has identified a good candidate for acquisition, an appropriate deal must be structured. Many techniques are available for acquiring a firm, each having a distinct set of advantages to both the buyer and the seller. The deal structure involves the parties, the assets, the payment form, and the timing of the payment.
  • 15. MERGERS A merger or a transaction involving two, or possibly more, companies in which only one company survives is another method of expanding a venture. Acquisitions are so similar to mergers that at times the two terms are used interchangeably. LEVERAGED BUYOUTS A leveraged buyout (LBO) occurs when an entrepreneur (or any employee group) uses borrowed funds to purchase an existing venture for cash. Most LBOs occur because the entrepreneur purchasing the venture believes that he or she could run the company more efficiently than the current owners.
  • 16. franchising Franchising is “an arrangement whereby the manufacturer or sole distributor of a trademarked product or service gives exclusive rights of local distribution to independent retailers in return for their payment of royalties and conformance to standardized operating procedures.
  • 17. OVERCOMING CONSTRAINTS BY NEGOTIATING FOR MORE RESOURCES There are two primary tasks for an entrepreneur negotiating with another party for access to an external growth mechanism. distribution task integration task
  • 18. 15. SUCCESSION PLANNING AND STRATEGIES FOR HARVESTING AND ENDING THE VENTURE EXIT STRATEGY Every entrepreneur who starts a new venture should think about an exit strategy. A number of possible exit strategies will be discussed in the following paragraphs. succession by a family member or a nonfamily member merger with another company liquidation of the company private sale of stock sale of the company to employees or to an external source
  • 19. BANKRUPTCY—AN OVERVIEW Failure is not uncommon in many new ventures, especially in light of the poor global economic environment, the wars in Iraq and Afghanistan, and the continued battle against terrorism. According to the Small Business Administration, about half of all new start-ups fail in their first years. Surviving Bankruptcy The most obvious way to survive bankruptcy is to avoid it altogether. However, since bankruptcy is becoming such a common occurrence, it may be helpful for the entrepreneur to have a plan should he or she find it necessary to declare bankruptcy.
  • 20. THE REALITY OF FAILURE Unfortunately, failure does happen, but it isn’t necessarily the end. Many entrepreneurs are able to successfully turn failure into success. It is one of the important historical characteristics of entrepreneurs that we have continually identified throughout this text. Since failure can happen, there are also some important considerations First and foremost, the entrepreneur should consult with his or her family. As difficult as it is for the entrepreneur to deal with bankruptcy. Second, the entrepreneur should seek outside assistance from professionals, friends, and business associate

Editor's Notes

  1. Constrained