This document discusses various strategies for growing a business and managing that growth, including: - Penetration strategies of selling more to existing customers - Market development strategies of selling to new customer groups - Product development strategies of creating new products for existing customers - Diversification strategies of entering new markets with new products It also covers accessing external resources for growth through joint ventures, acquisitions, mergers, leveraged buyouts, franchising, and negotiating for more resources. Finally, it discusses exit strategies for ending the venture such as succession, sale, merger, liquidation, and bankruptcy.

1. FROM FUNDING THE VENTURE TO LAUNCHING, GROWING, AND
ENDING THE NEW VENTURE
Hussein Gibreel Musa

2. 13. STRATEGIES FOR GROWTH AND MANAGING
THE IMPLICATIONS OF GROWTH
GROWTH STRATEGIES: WHERE TO LOOK FOR GROWTH OPPORTUNITIES
• In this chapter, we provide a model that offers suggestions on where
to look for growth opportunities in which the firm may already have a
basis for a sustainable competitive advantage.
• Then we investigate the implications of that growth for an economy,
for the firm, and for the entrepreneur, as well as the possible need to
negotiate for resources from external sources to sustain firm growth.

3. Existing
Market
New
Existing New
Product
Penetration
strategies
Product
development
strategies
Market
development
strategies
Diversification
strategies
Growth Strategies Based upon Knowledge of Product and/or Market
This figure are represent Different combinations of different
levels of types of knowledge

4. Penetration strategies
focuses on the firm’s existing product in its existing market. The entrepreneur
attempts to penetrate this product or market further by encouraging existing
customers to buy more of the firm’s current products.
For example, UMY Students” “OLIVE chicken”.
This growth strategy does not involve anything new for the firm and relies on taking
market share from competitors and/or expanding the size of the existing market.

5. Market Development Strategies
Growth also can occur through market development strategies.
Market development strategies involve selling the firm’s existing
products to new groups of customers.
New groups of customers can be categorized in terms of
geographic or demographics and/or on the basis of new product
use.
New
Geographical
Market
New
Demographic
Market
New
Product Use

6. Product Development Strategies
Product development strategies for growth involve developing and selling new
products to people who are already purchasing the firm’s existing products.
Experience with a particular customer group is a source of knowledge on the
problems customers have with existing technology and ways in which
customers can be better served.
This knowledge is an important resource in coming up with a new product.

7. Diversification Strategies
Diversification strategies involve selling a new product to a new market
Raw mateValue-added chain for product 1rials
producerBackward
integration
Raw materials wholesalerBackward
integration
Manufacturer
Finished goods wholesalerBackwardBBackward
integrationbaackwardBackward
integration
integration
integration
Retailer
Customer
Raw materials producer
Raw materials wholesaler
Manufacturer
Finished goods wholesaler
Retailer
Customer
Raw materials
producer
Raw materials
wholesaler
Manufacturer
Finished goods
wholesaler
Retailer
Customer
Raw materials
producer
Raw materials
wholesaler
Manufacturer
Finished goods
wholesaler
Retailer
Customer
Backward
integration
Value-added chain for
product 1
Value-added chain for
product 2
Horizontal
Forward
integration
Example of a Value-Added Chain and Types of Related Diversification

8. IMPLICATIONS OF GROWTH FOR THE FIRM
Because growth makes a firm bigger, the firm begins to benefit from the advantages of size.
For example, higher volume increases production efficiency, makes the firm more attractive to
suppliers.....etc).
But as the firm grows, it changes. These changes introduce a number of managerial challenges. These
challenges arise from the following pressures.
Pressures on the
Management of
Employees
Pressures on the
Entrepreneur’s Time
Pressures on Existing
Financial Resources
Pressures on Human
Resources

9. A Categorization of Entrepreneurs and Their
Firms’ Growth
categorizes entrepreneurs in terms of two dimensions: The first dimension
represents an entrepreneur’s abilities to successfully make the transition to
more professional management practices, and the second dimension
represents an entrepreneur’s growth aspirations.
High
Entrepreneur's
ability to
institute
professional
management
Practices
Low
No Yes
Entrepreneur's growth aspirations
Unused
potential
Actual
growth
Little
potential Constrained

10. 14. ACCESSING RESOURCES FOR GROWTH FROM
EXTERNAL SOURCES
JOINT VENTURES
joint ventures can involve a wide variety of
partners that include universities, not-for-profit
organizations, businesses, and the public sector.
A joint venture is a separate entity that involves a
partnership between two or more active participants.
Sometimes called strategic alliances.

11. Factors in Joint Venture Success
1. The accurate assessment of the parties involved to best manage the new entity in light of
the ensuing relationships. The joint venture will be more effective if the managers can work
well together.
2. The degree of symmetry between the partners. This symmetry goes beyond chemistry to
objectives and resource capabilities.
3. The expectations of the results of the joint venture must be reasonable.
4. The timing must be right. With environments constantly changing, industrial conditions being
modified, and markets evolving, a particular joint venture could be a success one year and a
failure the next.

12. ACQUISITIONS
An acquisition is the purchase of an entire company, or part of a
company; by definition, the company is completely absorbed and no
longer exists independently.
Advantages of an Acquisition
1. Established business. If the firm has been profitable, the entrepreneur
need only continue its current strategy.
2. Location. New customers are already familiar with the location.
3. Established marketing structure
4. Cost. The actual cost of acquiring a business can be lower than
other methods of expansion.
5. Existing employees. The employees of an existing business can
be an important asset
6. More opportunity to be creative.

13. Disadvantages of an Acquisition
Marginal
success
record.
Overconfiden
ce in ability.
Key
employee
loss.
Overvaluation.

14. Synergy
The concept that “the whole is greater than the sum of its parts”
Structuring the Deal
Once the entrepreneur has identified a good candidate for acquisition,
an appropriate deal must be structured. Many techniques are available
for acquiring a firm, each having a distinct set of advantages to both
the buyer and the seller. The deal structure involves the parties, the
assets, the payment form, and the timing of the payment.

15. MERGERS
A merger or a transaction involving two, or possibly more, companies
in which only one company survives is another method of expanding a
venture. Acquisitions are so similar to mergers that at times the two
terms are used interchangeably.
LEVERAGED BUYOUTS
A leveraged buyout (LBO) occurs when an entrepreneur (or
any employee group) uses borrowed funds to purchase an
existing venture for cash. Most LBOs occur because the
entrepreneur purchasing the venture believes that he or she
could run the company more efficiently than the current
owners.

16. franchising
Franchising is “an arrangement whereby the manufacturer or
sole distributor of a trademarked product or service gives
exclusive rights of local distribution to independent retailers
in return for their payment of royalties and conformance to
standardized operating procedures.

17. OVERCOMING CONSTRAINTS BY NEGOTIATING FOR MORE
RESOURCES
There are two primary tasks for an entrepreneur negotiating with
another party for access to an external growth mechanism.
distribution
task
integration
task

18. 15. SUCCESSION PLANNING AND STRATEGIES FOR
HARVESTING AND ENDING THE VENTURE
EXIT STRATEGY
Every entrepreneur who starts a new venture should think about an exit strategy. A
number of possible exit strategies will be discussed in the following paragraphs.
succession by a family member
or a nonfamily member
merger with another
company
liquidation of the
company
private sale of stock
sale of the company to
employees or to an
external source

19. BANKRUPTCY—AN OVERVIEW
Failure is not uncommon in many new ventures, especially in light of the poor
global economic environment, the wars in Iraq and Afghanistan, and the continued
battle against terrorism. According to the Small Business Administration, about half
of all new start-ups fail in their first years.
Surviving Bankruptcy
The most obvious way to survive bankruptcy is to avoid it altogether. However, since
bankruptcy is becoming such a common occurrence, it may be helpful for the entrepreneur to
have a plan should he or she find it necessary to declare bankruptcy.

20. THE REALITY OF FAILURE
Unfortunately, failure does happen, but it isn’t necessarily the
end. Many entrepreneurs are able to successfully turn failure
into success. It is one of the important historical characteristics
of entrepreneurs that we have continually identified
throughout this text.
Since failure can happen, there are also some
important considerations
First and foremost, the entrepreneur should consult with
his or her family. As difficult as it is for the entrepreneur
to deal with bankruptcy.
Second, the entrepreneur should seek outside assistance
from professionals, friends, and business associate