MGMT473: Ch. 17: Planning for Growth
Why might an entrepreneur restrain growth?
They are in it long-term and are not just trying to harvest the business
What does "born global" mean?
a company generates at least 25% of its sales in the first three years from the international marketplace and that derives a competitive advantage from outsourcing and selling in several companies
LICENSING
a way to grow a company without investing large amounts of capital in plant, equipment, and employees; a grant to someone else to use the company's intellectual property and exploit it in the marketplace by manufacturing, distributing, or using it to create a new product
Horizontal integration
buying up competitors or starting competing businesses
Define strategic innovation
creating a unique and substantial competitive advantage by doing things differently for a different purpose; it is NOT doing the same things better than existing competitors
Modular or network strategies:
focusing on core competency and letting others do the rest; company is the hub in the center of the wheel and suppliers and distributors make up the spokes
Vertical integration
moving backward or forward within the distributio channel
FRANCHISING
the franchiser sells the franchisee the right to do business under a particular name, the right to a product, process, or service, training and assistance in setting up the business, and outgoing marketing and quality control support
GROWING WITHIN THE CURRENT MARKET
1) Market penetration - use more effective strategies 2) marketing development - broader geographic area 3) product development
STAGES OF GROWTH IN A STARTUP
1) Startup-concerns capital, customers, distribution 2) Initial/Early-concerns cash flow and marketing 3) Rapid/High growth-concerns resources, capital, and management 4) Stable-concerns innovation, maintaining success; High tech companies tend to be an exception
GROWING WITHIN THE INDUSTRY
1) Vertical integration 2) Horizontal integration 3) modular or network strategies
3 TYPES OF FRANCHISES
1) dealerships 2) services franchises 3) product franchises the most popular type of franchise is one that offers a product, brand name, and an operating model
High-growth companies stand out from the crowd because they display distinct characteristics:
1) early leaders in a niche market 2) better at what they do 3) leaner in their operations 4) unique in what they offer
4 LEADERSHIP TENDENCIES THAT CAN BE PROBLEMS AS A BUSINESS GROWS
1) loyalty to the original founding team 2) task orientation-focus 3) single-mindedness of vision-discipline 4) working in isolation
Why are new concepts generally not attractive to established companies?
1) they break the mold, meaning significant change for the large company 2) Early markets are generally small and with low margins 3) Large companies wait to see how a new model does
What is one of the strongest competitive advantages?
Being early in the market
The Top 5 Growth Industries
Energy Online Retailing Staffing Consulting Advertising
According to Inc Magazine, which industries have the highest growth?
Environmental services Consumer product companies
What is an ETC
Export Trading Company
What does offering a diverse product line do for growth?
It maintains multiple streams of reveue and protects from the loss of any one customer or market
What happens to a company's growth rate as it gets larger?
It slows
FACTORS THAT AFFECT GROWTH
Market factors; management factors; scaling factors
How can being number 2 or 3 in a market be a winning strategy?
Pioneers usually haven't perfected the product or service, so the number 2 or 3 entrepreneur can learn from number one's mistakes and better serve customer needs
