CHAPTER 8

Managing Early Growth Of

The New Venture
GROWTH STRATEGIES

A successful new entry provides the opportunity for

the entrepreneur to grow his or her business
Eg: Introducing new product into an existing market
provides the opportunity to service a new group of
customer
 Market Product
Development Development
Strategies Strategies

Penetration Diversification
Strategies Strategies
Growth
Strategies
Refer to your text book page 359
PENETRATION STRATEGIES
The entrepreneur attempts
to penetrate this product or
Focuses on the firms
market further by
existing product in its
encouraging existing
existing market
customers to buy more of
the firms current products

Eg: Pizza company giving

Marketing can be effective promotions to increase the
in encouraging more purchasing of pizza from
frequent repeat purchases once every week to two or
three times a week
Market Development Strategies
Involves selling the firms existing products to new
groups of customer

New
Geographical
Market
New
Demographic
Market

New Product
Use
New Geographical Market

Selling the existing product in new locations

Eg: Mi Sedap, it is from Indonesia but it is

currently being sold in Malaysia

The entrepreneur must be aware of the possible

regional differences in customer preferences. Eg:
Language, Customs
New Demographical Market

Demographic are use to

Business could grow by Eg: Shampoo (Clear for
characterize (potential)
offering the same Men, Head and
customers based upon
product to a different Shoulders for Men,
their income, age,
demographic group Loreal Men)
gender, etc
New Product Use

An This new Eg: 4WD

entrepreneurial knowledge primarily used
firm might find provides insight for off-road
out that people into how the recreational, but
use its product in product may be now also used by
a way that was valuable to new housewives
not intended or groups of buyers because it is big
expected enough to take
their children to
school
PRODUCT DEVELOPMENT STRATEGIES
Involve developing an selling
new products to people who are
already purchasing the firms
existing products
Eg: Disney Corporation sells
merchandise that particularly
potray the character in their
movies
Experience with a particular
customer group is a source of
knowledge on the problems
customer have with existing
technology and ways in which
customers can be better served
A further advantage of using a
product development strategy is
the chance to capitalize on
existing distribution systems and
on the corporate reputation the
firm has with these customers
DIVERSIFICATION STRATEGIES
Diversification involve selling new product to a new
market
Forward
Integration

Backward
Horizontal
Integration

Types
Refer to your text book page 361
Backward Integration

Refers to taking a step back (up) on the value-added

chain toward the raw materials, which in this case
means that the manufacturer also becomes a raw
materials wholesaler

Forward Integration

Refers to taking a step forward (down) on the value-

added chain toward the customers, which in this case
means that the firm also becomes a finished goods
wholesaler. The firm becomes its own buyer
 Backward or forward integration provide an entrepreneur
with a potentially attractive opportunity to grow his or her
business
These growth opportunities are related to the firms existing
knowledge base, and the entrepreneur could therefore have
some advantage over others with no such experience or
knowledge
Being ones own supplier and/or buyer provide synergistic
opportunities to conduct these transactions more efficiently
that they are conducted with independent firms fulfilling
these roles
Operating as a supplier and/or buyer of the original business
provides learning opportunities that could lead to new
processes and/or new product improvements that would not
have been available if this integration had not taken place
Horizontal Integration

Occurs at the same level of the value-added

chain but simply involves a different but
complementary value-added chain
Eg: Washing machine manufacture may go into
manufacture of detergent
These product are complementary in that they
need each other to work
Horizontal integration provides the opportunity
to increase sales of the existing product
 IMPLICATION OF GROWTH &
OVERCOMING PRESSURE
IMPLICATION (363) OVERCOMING (365)
Pressures on Human Hiring
Resources Using professional employer
organizations (PEOs)
Pressures on the Participative style of
Management of management: Manager involves
Employees others in decision making
Pressures On The Time management
Entrepreneurs Time
Pressures on Existing Acquire new resources
Financial Resources
IMPLICATION OF GROWTH FOR THE
FIRM
Pressures on Human Resources

Pressures on the Management of

Employees
Pressures on the Entrepreneurs
Time
Pressures on Existing Financial
Resources
Pressures on Human Resources
If employees are spread too thin by the pursuit of growth, then the firm will face
problems of employee moral, employee burnout and increase turnover. These
employees issues could also have a negative impact on the firms corporate
culture

Pressures on the Management of Employees

Entrepreneur need to change their management style that is change the way they
deal with employees. Management decision making that is the exclusive domain
of entrepreneur can be dangerous to the success of growing venture
Pressures on the Entrepreneurs Time
Time is the entrepreneurs most precious yet limited resources. Growth is
demanding of the entrepreneurs time, but as the entrepreneur allocate time to
growth, it must be diverted from other activities and this can cause problems

Pressures on Existing Financial Resources

Growth will required lots of cash. With financial resources highly stretched, the
firm is more vulnerable unexpected expenses that could push the firm over the
edge and into bankruptcy
Overcoming Pressures on Human
Resources
Using professional employer organizations
(PEOs) for various HR activities
Giving employees regular feedback
Identifying problems along with a proposed
solution
Overcoming Pressures on the
Management of Employee
Participative style of management:
Manager involves others in decision making
To institute participative style of
management:
Establish a team spirit
Communicate with employees
Provide feedback
Delegate responsibility
Provide continuous training to employees
Overcoming Pressures on Entrepreneurs
Time
Time management
Process of improving an individuals
productivity through more efficient use of
time
Advantages of efficient time management
Increased productivity
Increased job satisfaction
Increased interpersonal relationships
Reduced time anxiety and tension
Better health
A Categorization of Entrepreneurs an
Their Firms Growth
 Actual Growth of the Firm
Posses both the necessary abilities to
make the transition to a more
professional management approach and
the aspiration to grow their business
The most likely to achieve firm growth
 Unused Potential for Growth
Posses the necessary abilities for transition
but do not aspire to do so
Constrained Growth
Aspire to grow their business but do not
posses sufficient abilities to successfully
satisfy this aspiration
Most likely to be frustrated by the firms lack
of growth and are in the most danger of
failure because the firm may be pushed
toward the pursuit of growth opportunities
and beyond the entrepreneurs ability to
cope
 Little Potential for Firm Growth
Posses neither the necessary abilities to
make the transition to a more
professional management approach nor
the aspiration to grow their business
These business have little potential for
growth and due to the limited abilities of
the entrepreneur to manage growth,
these firms may actually perform better if
they remain at a smaller scale