Textbook Reference: Entrepreneurship, 8th edition by R.H. Hisrich, M.P. Peters and D.A. Shepherd, Mc Graw Hill Irwin, Copyright 2010. Chapter 13: Strategies for Growth & Managing the Implications of Growth GROWTH STRATEGIES 1. Penetration Strategies. Grow by encouraging existing customers to buy more of the firm’s current products. ▪ Marketing can be effective in encouraging more frequent purchases. ▪ This does not involve anything new and takes market share away from competitors. ▪ This strategy attempts to better exploit its original entry. 2. Market Development Strategies. Selling the firm’s existing products to new groups of customer. ▪ New Geographical Market. Same segments in different locations. ▪ New Demographic Market. Search for a different segment (different consumers) of the market. ▪ New Product Use. You might find that people use your product in a different way than the intended use. 3. Product Development Strategies. Sell new products to a group that already buys your current products. 4. Diversification Strategies. Sell anew product to a new market. ▪ Backward integration a step back in which a manufacturer also becomes a raw materials wholesaler. ▪ Forward integration steps forward meaning that the firm also becomes a finished goods wholesaler. It becomes its own buyer. ▪ Horizontal integration is a value added chain that involves different but complementary products. (Ex. Produce washing machines you may also manufacture detergent) ECONOMIC IMPLICATIONS OF GROWTH FOR THE FIRM 1. Pressures on Existing Financial Resources. ▪ Growth has a large appetite for cash. ▪ Resources highly stretched leave a company vulnerable to bankruptcy. 2. Pressures on Human Resources. Growth is fueled by employees. ▪ Current employees could be stretched thin and stress could damage attitudes. ▪ Hiring many people quickly will dilute the corporate culture. 3. Pressures on the Management of Employees. ▪ Growth tends to make managers change their styles. ▪ They change the way they deal with employees. ▪ The entrepreneur will have to consider some management changes. 4. Pressures on the Entrepreneur’s Time. ▪ “If only I had more time!’ is a common refrain in growth situations. ▪ Time is the most precious resource but it is very limited. ▪ You may be diverted from other activities and can cause problems.
OVERCOMING PRESSURES Financial Control ▪ Managing Cash Flow ▪ Managing Inventory. ▪ Managing Fixed Assets. ▪ Managing Costs and profits. ▪ Taxes. ▪ Record Keeping. Human Resources ▪ Generally do not have the luxury of a Human resources Department. Subcontract a personnel company. ▪ Decide which part of the workforce should be permanent and what jobs can be done part time or under contract. ▪ Fire incompetent employees. They cost you more than you know and create a series of problems. ▪ Maintain the corporate culture despite the influx of new employees. ▪ The entrepreneur must be the walking role model of the culture giving employees a clear vision of the acceptable culture. Management of Employees ▪ Involve employees and mid level managers in the decision making process. ▪ Establish a team Spirit believing that we are all in this together. ▪ Communicate with employees because it builds trust and diminishes fear. ◦ Provide feedback channels. ◦ Delegate some responsibility to others. ◦ Provide continuous training for employees. Entrepreneurs’ Time Time Management 1. Recognize that you need to change personal attitudes and habits regarding the allocation of time. 2. Be effective and focus only on the most important issues. 3. Understand where time is spent and where it is being inefficiently invested. 4. Acknowledge that most time is taken up others. So use this time to build team concepts. 5. Categorize tasks by their degree of importance and then allocate time accordingly. 6. Periodically review you process. 7. Maintain good health habits. Will provide the strength you will need to administer a growing new venture. A Categorization of Entrepreneurs and Their Firm’s Growth
