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Three Strategies for Managing Growth Erin, Giang, Jason, Mike, Scott BA 569 -- Fall 2007.

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Presentation on theme: "Three Strategies for Managing Growth Erin, Giang, Jason, Mike, Scott BA 569 -- Fall 2007."— Presentation transcript:

1 Three Strategies for Managing Growth Erin, Giang, Jason, Mike, Scott BA 569 -- Fall 2007

2 Agenda The Three Strategies: Scaling -- Giang Scaling -- Giang Duplication -- Mike Duplication -- Mike Granulation -- Scott Granulation -- Scott Combining -- Erin Combining -- Erin

3 Scaling: Doing more of what you are good at

4 What does it start with? - A coherent vision about concrete product, technology and customer segment - A brief, clear and understandable vision that reflects company’s commitment growth

5 Is it the right the strategy? Potentially large market Potentially large market Unique product Unique product Wide distribution system at low cost Wide distribution system at low cost

6 How to do it? Invest aggressively Invest aggressively Specialize and Standardize Specialize and Standardize Hire the right mix Hire the right mix Adapt the structures Adapt the structures Find ways to learn from customers early Find ways to learn from customers early Video: Creating a Great Strategy: Business Week Video: Creating a Great Strategy: Business Week Business Week Business Week

7 Duplication “Repeating The Business Model In New Regions” When you discover what works in one region do the same thing in the next! Duplication starts with a coherent vision of products, technologies and customer segments plus goals for geographic expansion EX: IKEA “Swedish Design skills and stores that could communicate an appealing lifestyle to young people everywhere”

8 Balance standardization and adaptation “Package the companies entrepreneurial know-how for new geographic areas” Balance Standardization -Keeping processes and organizational details close to the way they are done in the original location Adaptation -Changing the organization and processes to address the needs of the local region -Changing the organization and processes to address the needs of the local region Standardized Staffing, Training, and remuneration plans -Company can rotate employees instead of having to hire and train new people when sales work in one locale increases -Company can rotate employees instead of having to hire and train new people when sales work in one locale increases

9 Is Duplication The Right Strategy! - The business requires physical presence and the company can repeat its business model in new geographic markets EX: For businesses that sell items that the customer wants to see and touch! -There is a need for local distribution -A company would shift from a scaling strategy to a duplication strategy when distribution channels are underdeveloped -The company can Adapt Its Experiences in product development, manufacturing and marketing approaches fairly easily -New trends from foreign markets can lead to better target marketing

10 Duplicate key parts of the infrastructure! Duplicate key parts of the infrastructure! A company needs to externalize or transfer key elements of the infrastructureA company needs to externalize or transfer key elements of the infrastructure EX: Ikea's European Expansion -European expansion group, “Knowledge Marines” Buy Land Construct Outlets Buy Land Construct Outlets Design Sore Decor Hire Employees Design Sore Decor Hire Employees -Two months before opening First Year Group would take charge Training People, Arranging The Store Openings Training People, Arranging The Store Openings Setting Up Operations Establishing local organization to run the operations Setting Up Operations Establishing local organization to run the operations Duplicate Entrepreneurial knowledge -Site locations -Logo -Site locations -Logo -Store design’s and layouts -Standardized and documented products -Store design’s and layouts -Standardized and documented products -Catalog Format -Personnel selection and training -Catalog Format -Personnel selection and training

11 Be aware Of The Limitations Of Duplication strategies! Customer tastes and employee backgrounds are too diverse for one set of processes and programs to fit all situations Customer tastes and employee backgrounds are too diverse for one set of processes and programs to fit all situations When Ikea expanded to the US there many subtle differences in tastes and shopping, When Ikea expanded to the US there many subtle differences in tastes and shopping, European sheets did not fit American beds European sheets did not fit American beds A company must be able to learn quickly, fixing procedures and products that don’t work and make the people who created them aware of the new requirements A company must be able to learn quickly, fixing procedures and products that don’t work and make the people who created them aware of the new requirements Senior management must have the openness and flexibility necessary for modifying a formula that was a winner back home Senior management must have the openness and flexibility necessary for modifying a formula that was a winner back home Especially true for young high-growth companies expanding abroad in highly competitive market Especially true for young high-growth companies expanding abroad in highly competitive market

12 Duplication Challenges! For a company to utilize duplication they need to learn information on each market they are entering into Local market conditions Local market conditions Mass manufacturing Mass manufacturing Mass Marketing Mass Marketing Competitors in each market with their own strengths and weaknesses Competitors in each market with their own strengths and weaknesses Currency risks Currency risks Regulatory differences Regulatory differences The best way to handle logistics The best way to handle logistics

13 Granulation Strategy: gran·ule [gran-yool] gran·ule [gran-yool] n. a tiny grain or celln. a tiny grain or cell gran·u·la·tion [gran-yuh-ley- shuhn] gran·u·la·tion [gran-yuh-ley- shuhn] n. A business strategy focusing on growing select cells within a companyn. A business strategy focusing on growing select cells within a company

14 Granulation: SAP 1972 - Founded in Germany in 1972, 1972 - Founded in Germany in 1972, releases R/1releases R/1 1992 - SAP Scales up 1992 - SAP Scales up Launches R/3, becomes global software juggernautLaunches R/3, becomes global software juggernaut 1996 - SAP Duplicates 1996 - SAP Duplicates Reorganizes into industry business unitsReorganizes into industry business units 1999 – SAP Granulates 1999 – SAP Granulates -Began focusing on Web interfaces 2003 - Launched NetWeaver 2003 - Launched NetWeaver

15 Is Granulation the Right Strategy for You? Has your company: Has your company: Exhausted growth through Scaling & Duplicating?Exhausted growth through Scaling & Duplicating? Identified a new technology that could be substituted for your own product?Identified a new technology that could be substituted for your own product? Matured sufficiently to handle Granulation?Matured sufficiently to handle Granulation?

16 Granulation : Evaluate & Monitor Obtain external knowledge Obtain external knowledge Focus on your new industry Focus on your new industry

17 Granulation: Learn from Customers, Partners, & Competitors Strategic Alliances Strategic Alliances Share the knowledgeShare the knowledge Acquire smaller companies Acquire smaller companies Buy the knowledgeBuy the knowledge

18 Granulation: Key Takeaway: Key Takeaway: Know the industry you’re entering.Know the industry you’re entering. http://www.youtube.com/watch?v=MeOk x0q1qFs http://www.youtube.com/watch?v=MeOk x0q1qFs

19 The Original Strategies Scaling: A company expands their business product development, new product lines, increasing distribution channels, to name a few. Scaling: A company expands their business product development, new product lines, increasing distribution channels, to name a few. Duplication: Using the company’s vision to expand geographically. Duplication: Using the company’s vision to expand geographically. Granulation: Aggressively growing select areas of the company. Granulation: Aggressively growing select areas of the company.

20 Combining the Strategies A company must select the growth strategy of best fit. A company must select the growth strategy of best fit. The scaling strategy is the easiest strategy to implement. The scaling strategy is the easiest strategy to implement. The company expands upon its core competencies, with the company’s original vision in mind.The company expands upon its core competencies, with the company’s original vision in mind. The duplication strategy is more complex because companies must expand and adapt to a new geographical market. The duplication strategy is more complex because companies must expand and adapt to a new geographical market. Granulation is the most difficult strategy Granulation is the most difficult strategy Involves studying competitors, new markets and opportunitiesInvolves studying competitors, new markets and opportunities

21 Combining the Strategies Some companies apply all three growth strategies at once. Some companies apply all three growth strategies at once. These are large companies that have different parts of their business in different stages of growthThese are large companies that have different parts of their business in different stages of growth A company may first try scaling until it reaches its upper limits to begin duplication and then eventually pursue granulation. A company may first try scaling until it reaches its upper limits to begin duplication and then eventually pursue granulation. Example: DisneyExample: Disney Scaled by expanding product lines from original Mickey Mouse cartoon to other movie ventures, themed amusement parks, etc. Scaled by expanding product lines from original Mickey Mouse cartoon to other movie ventures, themed amusement parks, etc. Duplicated by introducing amusement parks overseas i.e.: Disneyland Paris Duplicated by introducing amusement parks overseas i.e.: Disneyland Paris Pursued granulation by growth of their television business sector (ABC) Pursued granulation by growth of their television business sector (ABC)

22 Combining the Strategies Some successful companies implement all three growth strategies at once Some successful companies implement all three growth strategies at once Example: SAPExample: SAP First attempted scaling when they developed the R/1, then R/2, and eventually the R/3, a program that helped companies integrate resource planning across functions and customer- suppliers. First attempted scaling when they developed the R/1, then R/2, and eventually the R/3, a program that helped companies integrate resource planning across functions and customer- suppliers. Realized they had over engineered the R/3 and decided to introduce AcceleratedSAP. Used the duplication process based on their knowledge of software systems. Realized they had over engineered the R/3 and decided to introduce AcceleratedSAP. Used the duplication process based on their knowledge of software systems. SAP uses granulation by sharing entrepreneurial knowledge in new business areas for new markets. SAP uses granulation by sharing entrepreneurial knowledge in new business areas for new markets. SAP SAP SAP


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