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Growth Strategies

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Growth Strategy
A strategy basedon investing in companies and sectors which are growing faster than their peers. The benefits are usually in the form of capital gains rather than dividends. Strategy aimed at winning larger market share, even at the expense of short-term earnings.

Four broad growth strategies:

Four broad growth strategies:


1. Penetration- Growth By Selling More Of Existing Product To Existing Customers 2. Market Development - Involves selling the firms existing products to new groups of customers. New Geographical Market New Demographic Market New Product Use

Market Development Categories


ThemeGallery is a Design Digital New Geographical Market - Selling in new Title Content & Contents mall developed by locations. Guild Design Inc.

New demographic market - Selling to a different & Contents mall developed by Title Content demographic group. Guild Design Inc.

ThemeGallery is a Design Digital

ThemeGallery is an a Design Digital New product use - Selling existing product, & Contents mall developed by which have a new use, to new groups of Titlemay Content Guild Design Inc. buyers.

Four broad growth strategies: (cont)


3. Product Development- Sell New Products To Existing Customers 4. Diversification- Sell New Product To New Market

Related Diversification
Opportunity for growth arise from:

1
Backward integration a step back into value added chain toward the raw material.

2
Forward Integration a step forward in value added chain toward the customers.

3
Horizontal integration occurs at the same level of the value added chain but involves a different, complementary, value added chain.

A value-added chain captures the step it takes to develop raw materials into a product and get it into the hands of the customer. Value is added at every stage of the chain. For value-added, each firms make a profit.

Growth Strategies
Product Development

Existing

Penetration

Market
New

Market Diversification Development


Existing New

Product

Economic Implementation of Growth


Pursuit and achievement of growth has an impact on:

Economy

Firm

Entrepreneur

Implications Of Growth For the Firm


Growing of business provides more power to influence firm performance. But as the firm grows, it changes. Changes, introduce a number of managerial activity. And these challenges arise from the following pressure.

Managerial Pressures
1. Pressures on Existing Financial Resources 3. Pressure on management of employees

Managerial Pressures

2. Pressures on human resources

4. Pressures on the entrepreneurs time

Managerial Pressures
1. Pressures on Existing Financial Resources Growth need cash Firms own resources become stretched thin More risks in company

2. Pressures on human resources Growth is fuelled by employees Employee turnover Negative impact on firms corporate cultures Problems of employee morale, employee burn out, and an increase in employee turnover.

Managerial Pressures (Conti..)


3. Pressure on management of employees Change in management style Management decision making May require change in management style and in dealing with employees.

4. Pressures on the entrepreneurs time


Most precious but limited resources Growth needs time Cannot be created nor stored Perishable Diverting time to several activities can cause problems.

Overcoming Pressures on Existing financial Resources


To overcome pressures, the entrepreneur could acquire new resources.
The acquisition of new resources is expensive, whether in terms of the equity sold or the interest payments from debt. The need or the magnitude of the new resources required can be reduced through better management of existing resources. Cash flows, income statement and the balance sheet are the key financial areas that will need careful management and control.

Financial Control

Managing Cash Flow

Managing Costs and Profits

Managing Inventory
Managing Fixed Assets

Financial Control

Taxes
Record Keeping

Overcoming Pressures on Existing Human Resource


Some entrepreneurs are using professional employer organizations for various HR activities.

Decisions regarding the proportion of permanent and part time employees should be made; involves several trade-offs.

Overcoming Pressures on Existing Human Resource


Give employees regular feedback; identify problems along with a proposed solution. Maintain the corporate culture despite the influx of new employees.

Overcoming Pressures on Existing Human Resource


Human resource for new venture Professional employer organization

Portion of permanent and part time employees


Hiring the right person Feedback with proposed solutions

Overcoming Pressures on the Management Of Employees


Participative Style of management: The entrepreneur involve others in decision making process. Advantages complexity of growing businesses and managing change increases the information-processing demand on entrepreneur. Highly qualified management and employees are an important resource of coming up with new ways to tackle current problems. Participative decision making motivate employees towards implementation. Employees enjoy making decisions an taking initiatives

Overcoming Pressures on the Management Of Employees


The following captures some of the activities the entrepreneur can do to institute a more participative style of management and successfully grows the business.

Establish Team Spirit Communicate with Employees Provide Feedback Delegate Responsibility to others Provide Continuous training for employees

Overcoming pressures on Entrepreneur's Time


Time Management - Process of improving individual productivity through more efficient use of time.

Increased Productivity

Reduced time anxiety and tension

Increased job satisfaction Better health


Improved interpersonal relation

Basic Principles of Time Management


Desire Teamwork

Effectiveness

Principle

Prioritized planning

Analysis

Reanalysis

Basic Principles of Time Management


Time management - Process by which the entrepreneur can become a time saver 1. Principle of Desire: Recognizing being a time waster, time as an important resource and need to change personal attitudes. Principle of Effectiveness: Focusing on most important issue, when under pressure. Principle of Analysis: How time is currently being allocated

2.

3.

Basic Principles of Time Management Cont..


4. Principle of Teamwork: Recognizing small amount of time is under entrepreneur's control most of his time is taken up by others.

5.

Principle of Prioritized planning: Categorization of tasks by their degree of importance.


Principle of Reanalysis: Periodic review of ones time management process.

6.

A Categorization of Entrepreneurs and their Firms Growth


High

Professional Management
Low

Unused Potential for Actual Growth of the Firm Growth Little Potential for Firm Growth
No

Constrained Growth

Yes Growth Aspirations

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