1. Ch 14: Strategies For Growth And Managing Implications
Group 2

2. Growth Strategies: Where to Look For Growth Opportunities
Penetration Strategies
“A strategy to grow by encouraging existing customers to buy more of the firm current products”.
Marketing an effective tool
Market Development Strategies
“ Strategy to grow by selling the firm firm’s existing products to new groups of customers”.
New Geographical Market
New Demographic Market
New product Use

3. Conti….. Product Development strategies
“strategy to grow by developing and selling new products to people who are already purchasing the existing products of the firms”.

4. Conti… Diversification Strategies
“strategy to grow by selling new product to new market”.
Related Diversification
Diversification related to current business.
Types
Backward integration
“a step back into value added chain toward the raw material”.
Forward Integration
“a step forward in value added chain toward the customers”.
Horizontal integration
“occurs at the same level of the value added chain but involves a different, complementary, value added chain”.

5. Economic Implementation Of Growth
Pursuit and achievement of growth has an impact on:
Economy
Firm
Entrepreneur
Inc. magazine conducted survey on 500 fast growing ventures in 1984
Purpose of study= present condition of venture entering into growth phase

6. Conti….. Survey findings:
95 ventures closed down,135 ventures sold to new owners
Out of rest 233=48% were privately held and 6% had gone public
Conventional thinking in entrepreneurship= becoming a big requires you to go public & finance the growth

7. Conti…..
Research finding showed the same pattern of conventional thinking
Company’s gone public achieved larger growth than those that did not.
Business that had failed learnt from their attempt and ultimately succeed
Benefits of entrepreneurial endeavours= increased tax revenues, increased employment, reduction of trade deficit.
Poor performing economies= where entrepreneurial ventures do not fail.

8. Implications Of Growth For the Firm
Growing of business provides more power to influence firm performance

9. Managerial Pressures Pressures on Existing Financial Resources
Growth need cash
Firm’s own resources become stretched thin
More risks in company
Pressures on human resources
Growth is fueled by employees
Employee turnover
Negative impact on firm’s corporate cultures

10. Conti.. Pressure on management of employees Change in management style
Management decision making
Pressures on the entrepreneur’s time
Most precious but limited resources
Growth needs time
Cannot be created nor stored
Perishable

11. Overcoming Pressures on Existing financial Resources
Financial Control
Managing Cash Flow
Managing Inventory
Managing Fixed Assets
Managing Costs and Profits
Taxes
Record Keeping

12. Financial Control
Entrepreneurs will need knowledge of how to provide appropriate controls to ensures that goals are met in the first three years
Financial skills are required to manage the venture in these three years.
Cash flow, income statements and balance sheet are key financial areas that will need careful management and controls

13. Managing Cash Flow
Cash out flow may exceed cash inflow so try to have up to date assessment of cash positions
Example:
Preparing monthly cash flow statements and then comparing planed/budgeted amount with actual results

14. Conti….. Planned inflow of Cash to actual inflow
Did we earn more or less from the plan
Do we have enough funds to meet short term expense
Do we have enough funds to reinvest

15. Conti…. Liquidity surplus We earned more than expected
Liquidity crunch
We earned less than expected

16. Conti…. Planned outflow of cash to actual outflow
Are expenses more than our plan
Where did we spend more
Where did we save
What amount of payments have been made
What amounts are due

17. Conti……
Cash flow statements can be prepared daily, monthly, quarterly and yearly
For new and small ventures daily cash flow sheet is recommended
Example:
Restaurants, retail stores and service businesses

18. Benefits of daily cash flow sheet
Problems or errors can be caught on daily basis
Inform us of immediate cash needs
Efficiently manage assets and cost

19. Managing Inventory
Too much inventory and too little inventory can be disadvantage for sales
Computerized inventory control system allow the firm to maintain records of inventory on product by product basis
The reports from inventory management system are generated every two to four weeks in normal sales and weekly in heavy sales periods.

20. Cont.. The system improves the overall profitability of the firm.
Certain software are also present
LIFO, FIFO
Entrepreneur: which accounting method to be used?
Advantages of LIFO
Important for the entrepreneur to keep careful records of inventory

21. Cont..
EDI: Producers, wholesales and retailers can easily communicate with each other.
Help track the shipments internationally
ECR: Developed by grocery and pharmaceutical industries
SCM: Manage demand, distribution and marketing the inventory levels to meet consumer demands.

22. Managing Fixed Assets Involves long term commitment Large investment
leasing as an alternative
Advantages & disadvantages

23. Managing Costs and Profits
Establish cost standards
Comparing the actual cost with the budgeted amount.
Three possibilities of managing costs and profits
Before the time
On the time
After the time

24. Taxes Withholding tax Other kind of taxes
State and federal, unemployment, medical tax and other business taxes
End of the year returns

25. Record Keeping Software package
External services can be used to train employees
Easy to access
Entrepreneur is less dependent
Customers information

26. Overcoming Pressures on Existing Human Resource
Human resource for new venture
Professional employer organization
Portion of permanent and part time employees
Hiring the right person
Feedback with proposed solutions
How to maintain the cooperate culture

27. Overcoming Pressures on the Management Of Employees
Participative Style of management:
The managers involve others in decision making process.
Steps
complexity of growing businesses and managing change increases the information-processing demand on entrepreneur.
Highly qualified management and employees are an important resource of coming up with new ways to tackle current problems.
Participative decision making motivate employees towards implementation.
Employees enjoy making decisions an taking initiatives

28. Conti…. Establish Team Spirit We instead of Me
Communicate with Employees
Provide Feedback
Delegate Responsibility to others
Provide Continuous training for employees

29. Overcoming pressures on Entrepreneur's Time
“Process of improving individual productivity through more efficient use of time”.
Increased Productivity
Increased job satisfaction
Improved interpersonal relation
Reduced time anxiety and tension
Better health

30. Basic Principles of Time Management
Process by which the entrepreneur can become a time saver
Principle of Desire: Recognizing being a time waster, time as an important resource and need to change personal attitudes.
Principle of Effectiveness: Focusing on most important issue, when under pressure.
Principle of Analysis: How time is currently being allocated

31. Cont..
Principle of Teamwork: Recognizing small amount of time is under entrepreneur's control – most of his time is taken up by others.
Principle of Prioritized planning: Categorization of tasks by their degree of importance.
Principle of Reanalysis: Periodic review of one’s time management process.

32. Implications of Firm Growth to Entrepreneur
Growth introduces managerial challenges for entrepreneurs.
Example of Pearce Jones (Design Edge)
Example of Herb Kelleher (Southwest Airlines)
Entrepreneurs do not want to negotiate their control over firm

33. A Categorization of Entrepreneurs and their Firms Growth
Unused Potential
Actual Growth
High
Entrepreneur's ability to institute
professional management practices
Low
Little Potential
Constrained
Yes No
Entrepreneur’s Growth Aspirations