Entrepreneurship Preparing for and Attaining Growth: Strategies for Building Lasting Success

11-2 Why New Ventures Seek Growth Economies of scale –Growth lower costs per unit –Variable costs (add up to sale) –Fixed costs (example: Workers) Market leadership –Benefit of being number one in an industry/market (market leader: can attract good employees, easier to deal with suppliers) High profitability –Scalable business model Profits increases as the volume of sales increases Example biotech companies

11-3 Size and Survival Financial resources to absorb unexpected shocks –Increased size attained through growth provides new ventures with greater financial resources that assist companies in surviving errors. Influence and power –Provides employment and economic growth, special treatments by the government

11-4 Gazelles Term to describe rapid growth New ventures that grow rapidly 80% annual growth in sales over at least a three-year period

11-5 Limits on Growth Managerial capacity is stretched –Time and energy of the top management –Too many demand for time, leads to stress. Challenged to manage an expanded range and number of products or services –Monitor the quality of products –Monitor price changes by competitors Growth comes at a significant cost Rapid growth is not for everyone especially those who cannot devote full time to their ventures

11-6 Survey shows that only 5% companies achieve this level of growth. Why ?? Why certain companies able to attain high growth and not others? Annual growth of sales durationstatus 80% at least 3 year period High growth 20%-40% 5 years or moreHigh growth

11-7 Characteristics of High-Growth Ventures Characteristics of the founders Attributes of the company Business practices Human resource practices

11-8 Founder Characteristics Passion –Love what they are doing Tenacity –tabah Growth vision –Know where they want to go –State this in company vision statement Challenging goals –Specific goal in sales Self-efficacy –Percaya kepada kebolehan sendiri New resource skill (pandai cari peluang)

11-9 Company Characteristics Value rapid growth –Stronger commitment to growth –Stated in mission statement and messages to stakeholders Form relationships(partnerships,JV, networks) with other companies –Reduce costs –Move to market more quickly –Gain knowledge Plan for growth –Specific goal –Develop strategies to achieve the goals

11-10 Business Practices Create unique value for customers –provide something customers can’t get elsewhere –How? Superior products Innovation Meeting customers’ needs

11-11 Human Resource Practices Maximise motivation and commitment –Hire selectively –Offer meaningful incentives –Profit sharing plans –Bonuses –Stock option plans

11-12 Strategies for growth “To get somewhere, you have to know where you want to go” Destinasi --  large and consistent increase in sales and revenues. Bagaimana nak sampai ke destinasi: sesuatu yang kompleks. Perlu strategi (perancangan dan taktik yg spesifik).

strategi yang digunakan: –Strategi dalaman –Strategi luaran

11-14 Internal Strategies for Encouraging Growth New product development –Ability to change in response to external conditions/environments.  dynamic capabilities Large companies: Guidelines –Focus on the market they know –Listen to your customers, they’ll tell you what you need to know. –Develop new products that are related to the ones the company already offers –Price the products right –Maintain quality

11-15 Improve existing products or services –The key is: listen to your customers Expand market penetration or move into new markets –More advertising, more company sales force Go global –Become part of the world economy –Geographical expansion –Personal contact –Internet –Local partners; legal issues, consider local cultures Adopt innovative business practices

11-16 External Strategies for Encouraging Growth Mergers and acquisitions Licensing intellectual property Strategic alliances Joint ventures

11-17 Mergers and Acquisitions Merger—two independent companies become one, often with the same name Acquisition—one company purchases another

11-18 Licensing Technology licensing—granting the right to use knowledge contained in a utility patent (patent for a specific kind of product) Merchandise and character licensing—granting the right to use a recognized trademark or brand

11-19 Strategic Alliances and Joint Ventures Strategic alliance—partnership between two or more companies formed to attain a specific goal –Technological alliance Cooperation in R&D –Marketing alliance Between company with well developed distribution system with another that has a new product to sell. Joint venture—new business entity created by two or more companies

11-20 Rapid growth New product development Improving existing products or services Expanding market Penetration-seeking new markets Going global Adoption of innovative Business practices INTERNAL STRATEGIES Merger and aquisition Licensing Strategic alliances And Join Ventures EXTERNAL STRATEGIES

11-21 Terima kasih