The four stages of growth Model The four stages of growth Model include
Pre start up stage Start-up stage Early growth stage
Later growth stage
Pre start-Up stage The period during which entrepreneur plan the venture and do the preliminary work of obtaining resources and getting organized prior start- up. There are four activities common to all new ventures.
Business concept identified
Product-market research
Financial planning
Pre-startup implementation
Business concept identified Entrepreneur must conceptualize their business. This conceptualization occurs as natural extension of the creativity process in which new ideas are shaped shaped into vision. In this Entrepreneur defined his goal of new venture and what does the he want to achieve with this business. For example Steve Kirsh was MIT student working in the electronic lab .There are many damage mouse in the lab. He think about to sell designing a reliable electronic mouse to company. When he was turned down, he offered to license his product. Turned down again, he thought of manufacturing but realizing that he knew little about production, he decided to focus on designing and marketing mouse accessories.
Product-market research When the entrepreneur has determined that product or services are feasible and he might be capable, then next set of o f activities involves practical research.
Product search should include patent searches to uncover the existing products. If the search reveals a similar product in production, the proposed new venture ends there. If the product never worked in first place, the flaw might be discovered, encouraging the entrepreneur to design a successful one.
Market search Market research is any organized effort to gather information about markets or customers.Market search is process of answering such questions as these: Who will buy product and services? What they willing to pay? How can I attract to my business? Is this venture is a big success? Entrepreneur occasionally seek professional help from market researchers, university centers and experienced mentors. Unfortunately the Entrepreneur does not ask enough people enough questions. Successful entrepreneur will try to reach as many people as possible in symmetric manner before start investment. Market research is done by Secondary and Primary data collection.
Example Kisha Nichots want to start new venture shoe store. She decided to perform some Secondary data research and visited the local chamber of commerce web site. The site provides her with demographic on population for her city and country and industry forecasts for communities in her area. She also found information the book on the average income of retail shoe store owners in her state newspaper articles gave kasha psychographic d ata on people’s life in her state
Financial planning The third set of pre-start up activities relates to money. Early cash flow is usually acquired through combination of short term loan and family investment. As the venture evolves further, more cash is needed, and Entrepreneur has to attract capital through sophisticated loans and knowledgeable investors. Investor and lender want to see financial projections based on reasonable initial search and they require accurate documentation. They also require financial statement that show how the venture will perform during its first few year of business.
Pre start up implementation Pre start-up implementation is period that comes first from any attempt to generate sales. Entrepreneur must establish vendor relation with suppliers, establish business location, hire essential personal and arrange for initial promotion and set up administration system.
Example Any mobile company (Telenor, Mobilink, Zong) before launching his services, first they set location for their franchises and hire the personal for franchises e.g. some are technical, some are management side. They advertise for the initial promotion their services in that location.
START UP STAGE The start-up stage is initial period of business. For companies with the product or services to sell, it is first foray into revenue. The startup has no definite time frame. There are two benchmark considerations. 1. Entrepreneur wants to meet operating objective such as satisfy revenue and cost targets. 2. They want to position the venture for long term growth.
Marketing operating objective The risk is often ignored because most people automatically assume that a higher sale volume means higher profit .Unfortunately the only time this assumption is true is when an entrepreneur sell everything for cash and has unlimited supply supp ly of inventory. Meeting operating objective does not mean necessarily means making a profit. To the contrary most new venture operate at a loss for several years.
Example A retail bicycle shop may have been planned to generate 60% of gross revenue from bicycle sales. 30% from accessories and 10% from repairs. It may turn out that 60 % of total revenue from accessories and 30 % from bicycle and 10 % from repair. In this situation the shop owner will have idle inventory in bikes while accessory inventory depleted. Moreover unless the cost price differential is exactly the same for bicycle and accessories income projection will be seriously distorted.
Positioning of Enterprise Every successful business starts with a fixed business idea. Two considerations are important. 1. The business must survive in the short term. 2. The business must be positioned to achieve long term objective The Entrepreneur must take quick adjustment to survive. These may include simple decision such as adjusting inventory to eliminate slow moving items or complex decision such as restricting the company debt when cash flow becomes thin. From the long term perspective, the business concept must coincide with the realistic prospect for growth. This means that the enterprise must be positioned to take advantage of growth markets
Example Michal dell positioned PC limited to sell the small business and as stands alone system through a factory direct marketing process. He could have positioned his product for home use, education,
scientific, work or office network each with different distribution system. Sun microsystem for example sells mainly to organization with engineering application
EARLY GROWTH STAGE Once the venture is positioned, successful entrepreneur will experience a stage of early growth. This is a period of intense monitoring and growth can occur at different rates along continuum. co ntinuum. At the low end of continuum, Entrepreneur finds that they compete in slow growth market. As a result they can achieve immediate success by b y attracting clients. Between these extreme a majority entrepreneur finds a ‘comfort’ zone of expansion. Their venture may have growth potential but founder restrains expansion to coincide with personal objective
Example Jim strange founder of spokes Etc...Quickly succeeded in his first bicycle store and within year he opened another store. Both are successful with the annual growth 20% in 1989 strange was urged to open a chain of franchise but he refused, preferring instead to own and control his own shops.
LATER GROWTH STAGE If the enterprise proves successful in early growth stage. It can find itself in competition with the larger companies .This is the later growth stage when the rate of growth may be slower and industry has attracted competitors. Companies reaching this stage often ‘go public’ with the stock exchange.
Example Jim Jaegar founder of Cincinnati microwave Inc. the company that makes the guide radar detector reached a sales plateau in 1984. The market was still strong for radar detector but competition required infusion of new product. He developed a complementary product called the passport and sales surged. Jaegar found himself heading $77 million with hundreds of employees. This growth required a transformation in the company to restructure its equity capital and to establish a professional management team.
Refrences:
http://en.wikipedia.org/wiki/Market_research www.wikiopedia.com Book by CYNTE GREENE
