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Textbook Reference: Entrepreneurship, 8th editi onby 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 STRATEGIES1. Penetration Strategies. Grow by encouraging
existing customers to buy more of
the firms 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 firms 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 buysyour 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 finishedgoods wholesaler. It becomes its own buyer.
Horizontal integration is a value added chain that involves
different butcomplementary products. (Ex. Produce washing machines
you may also
manufacture detergent)
ECONOMIC IMPLICATIONS OF GROWTH FOR THE FIRM1. 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 Entrepreneurs 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.
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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 apersonnel company.
Decide which part of the workforce should be permanent and what
jobs can be donepart time or under contract.
Fire incompetent employees. They cost you more than you know and
create a seriesof 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 TimeTime Management
1. Recognize that you need to change personal attitudes and
habits regarding theallocation 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 Firms Growth
