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Chapter 18Planning for

Growth

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Learning Objectives

Explore strategic innovation as a growth strategy. Discuss intensive growth strategiesgrowing within the

current market

Explain integrative growth strategiesgrowing within

the industry Examine diversification growth strategiesgrowing

outside the industry

Consider growing by going global

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Figure 18.1: Characteristics of the 2006Inc. 500 Rapidly Growing Private Companies

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To Grow Or Not To Grow

Market Factors That Affect Growth: Size and Characteristics

Competition

Intellectual-property rights Predictability

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To Grow Or Not To Grow(continued)

Management factors that affect growth Ability to adapt and change business over

time even of the business is successful

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Figure 18.2: Stages of Growth

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To Grow Or Not To Grow(continued)

Stages of growth in a newventure

Start-up success

Initial growth

Rapid growth

Stable growth andmaintenance

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To Grow Or Not To Grow(continued)

Problems with growth Inability to understand/respond to the businesss

environment

Framework for growth

Scan and assess the environment Plan the growth strategy

Hire for growth

Create a growth culture

Build a strategy advisory board

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Growth Strategies

Intensive growth strategies Exploit opportunity in the current market

Integrative growth strategies

Exploit growth within the industry as a whole Diversification strategies

Exploit opportunities outsidethe current market/industry

Global strategies Exploit opportunities in the

international arena

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Figure 18.3: Growth Strategies forEntrepreneurs

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Strategic Innovation

New concepts are not generally attractive toestablished companies in the early stagesbecause

It breaks the mold

The early markets are generally small withlow margins

Large companies typically wait to see howthe new model fares in the market and thenthey either change their model or attempt toacquire the entrepreneurs company.

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Intensive Growth Strategies

Market Penetration Increase sales through effective marketing

strategies within the current target market

Market Development

Expand sales through expanding geographicrepresentation

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Intensive Growth Strategies(continued)

Market Development (continued) Franchising

Licensing- steps for a successful transaction

Decide exactly what will be licensed

Understand/define the benefits the buyer will receive from the

transaction Conduct thorough market research

Conduct due diligence on potential licensees

Determine the value of the license agreement

Create a license agreement

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Intensive Growth Strategies(continued)

Product Development Increase sales through new

products/services

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Integrative Growth Strategies(continued)

Vertical Integration Strategies Growing forward/backward within the

distribution channel

Horizontal Integration Strategies

Buying up competitors/starting a competingbusiness within the current industry

Modular or Network Strategies

Focus on core competencies and outsourcethe rest

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Diversification Growth Strategies

Investing in or acquiring products/businesseswhich are outside the core competencies andindustries

Use when all other growth strategies within the

current market/industry have been exhausted Synergistic strategy

Acquire products/services unrelated to thecore

Conglomerate diversification-acquiringbusinesses that are unrelated to thecompanys current business

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Growing by Going Global

Reasons to go global early in development Product lives are short due to rapid

technology changes

R&D is expensive and must be spreadacross many markets

Competition and saturated markets

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Growing by Going Global(continued)

Characteristics of successful globalization A global vision from the start

Internationally experienced managers

Strong international business networks Preemptive technology

A unique intangible asset

Closely linked product/service extensions

A closely coordinated organization on aworld-wide basis

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Growing by Going Global(continued)

Finding the best global market Information sources

International Trade Statistics yearbook of theUnited States

International Trade Administration offices inWashington, D.C. and at district levels

Department of Commerce

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Table 18.3: Easiest Countriesin Which to Do Business

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Growing by Going Global(continued)

Export Financing sources Bank financing

Internal cash flow

Venture capital or private investor capital Prepayment from foreign client

Down payment from foreign client

Progress payments from foreign client

Assurances

The Import-Export Bank

G G G

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Growing by Going Global(continued)

Foreign agents, distributors, and tradingcompanies

Choosing an intermediary Due diligence work to assure the right partner

Choosing a freight forwarder Handles all aspects of delivering the product