Download - Unit 10 ENT600 Growth and Exit Strategies
7/21/2019 Unit 10 ENT600 Growth and Exit Strategies
http://slidepdf.com/reader/full/unit-10-ent600-growth-and-exit-strategies 1/26
UNIT 10 :
GROWTH AND EXIT STRATEGIES
Entrepreneurship Dept, FBM(2009)
1ENT600/UNIT 10 : GR!T" #ND E$IT%TR#TEGIE%
TECHNOLOGY ENTREPRENEURSHIP
(ENT600)
7/21/2019 Unit 10 ENT600 Growth and Exit Strategies
http://slidepdf.com/reader/full/unit-10-ent600-growth-and-exit-strategies 2/26
Introdut!on To Gro"t# $ E%!t Str&t'!'
• Gro"t# tr&t'!' Businesses that survive the critical embryonic period
will have to address issues of growth in order toremain competitive
This is done by selecting and implementing suitablegrowth strategies
• E%!t tr&t'!'
Entrepreneurs may choose to exit or end a businessfor various reasons
Careful selection and implementation of strategies isimportant in order to ensure a gainful exit
Entrepreneurship Dept, FBM(2009)
ENT600/UNIT 10 : GR!T" #ND E$IT%TR#TEGIE%
2
7/21/2019 Unit 10 ENT600 Growth and Exit Strategies
http://slidepdf.com/reader/full/unit-10-ent600-growth-and-exit-strategies 3/26
Introdut!on To *u!n' Gro"t#
• Businesses that survive the critical embryonic
period may experience growth in several ways
• The growth period of a business is often
manifested by: An increase in demand of its existing
products
An expansion and development of new
markets
A complete diversification into new products
and new markets
Entrepreneurship Dept, FBM(2009)
&ENT600/UNIT 10 : GR!T" #ND E$IT%TR#TEGIE%
7/21/2019 Unit 10 ENT600 Growth and Exit Strategies
http://slidepdf.com/reader/full/unit-10-ent600-growth-and-exit-strategies 4/26
I+,-!&t!on o. Gro"t#
• rowth will challenge a business!s capabilities andresources" #tock and supply of physical resources such
as raw materials and accessories need to be planned in
order to cushion future shortcomings
• rowth may create pressure on human resources"
Employee morale and motivation may be affected due to
over stretch in work or under pay" rowth therefore may
lead to resistance to change
• rowth may re$uire the business to be restructured to
facilitate management efficiency
Entrepreneurship Dept, FBM(2009)
ENT600/UNIT 10 : GR!T" #ND E$IT%TR#TEGIE%
'
7/21/2019 Unit 10 ENT600 Growth and Exit Strategies
http://slidepdf.com/reader/full/unit-10-ent600-growth-and-exit-strategies 5/26
Gro"t# Str&t'!'
• Ansoff %&'()* developed a growth strategy matrix based
on: Existing or +ew ,roducts
Existing or +ew -arkets
• Based on the two dimensions of product and market. Ansoff identified four main growth strategies:
-arket ,enetration
-arket /evelopment
,roduct /evelopment
/iversification
Entrepreneurship Dept, FBM(2009)
ENT600/UNIT 10 : GR!T" #ND E$IT%TR#TEGIE%
7/21/2019 Unit 10 ENT600 Growth and Exit Strategies
http://slidepdf.com/reader/full/unit-10-ent600-growth-and-exit-strategies 6/26
6
-arket/evelopment
/iversification
-arket ,enetration ,roduct/evelopment
Ano.. Gro"t# Str&t'!'
Entrepreneurship Dept, FBM(2009)
ENT600/UNIT 10 : GR!T" #ND E$IT%TR#TEGIE%
Produt
E%!t!n
/
& r 0 ' t
E%!t!n
N'"
N'"
7/21/2019 Unit 10 ENT600 Growth and Exit Strategies
http://slidepdf.com/reader/full/unit-10-ent600-growth-and-exit-strategies 7/26
/&r't P'n'tr&t!on Str&t'
• -arket ,enetration seeks to increase market
share for existing products or services in
existing markets
• This could be achieved through intensive
marketing efforts
Entrepreneurship Dept, FBM(2009)
ENT600/UNIT 10 : GR!T" #ND E$IT%TR#TEGIE%
7/21/2019 Unit 10 ENT600 Growth and Exit Strategies
http://slidepdf.com/reader/full/unit-10-ent600-growth-and-exit-strategies 8/26
/&r't P'n'tr&t!on Str&t'
• -arket ,enetration is especially effective when: Current markets are not yet saturated
Current customers! usage can be increased
-arket shares of ma0or competitors are on the decline.
but industry sales are increasing
1ncreased economies of scale provide competitive
advantage
2istorically. sales and marketing expenditures are
highly and positively correlated
Entrepreneurship Dept, FBM(2009)
*ENT600/UNIT 10 : GR!T" #ND E$IT%TR#TEGIE%
7/21/2019 Unit 10 ENT600 Growth and Exit Strategies
http://slidepdf.com/reader/full/unit-10-ent600-growth-and-exit-strategies 9/26
/&r't D'2'-o,+'nt Str&t'
• -arket /evelopment #trategy involves introducing
present products or services to new groups of
customers
• These new groups of customers may come from new
geographical areas. or they may come from a different
demographic market
• -arket /evelopment may also go beyond national
boundaries
• -arket /evelopment reduces the overall risks
associated with fluctuations of demand in existing
market
Entrepreneurship Dept, FBM(2009)
9ENT600/UNIT 10 : GR!T" #ND E$IT%TR#TEGIE%
7/21/2019 Unit 10 ENT600 Growth and Exit Strategies
http://slidepdf.com/reader/full/unit-10-ent600-growth-and-exit-strategies 10/26
10
/&r't D'2'-o,+'nt Str&t'
-arket /evelopment can be most effective as a growthstrategy when:
+ew untapped or unsaturated markets exist
+ew channels of distribution are available that arereliable. inexpensive. and of good $uality Business has the needed capital and human
resources to manage expanded operations Business has excess production capacity
The business! basic industry is rapidly becomingglobal in scope
Entrepreneurship Dept, FBM(2009)
ENT600/UNIT 10 : GR!T" #ND E$IT%TR#TEGIE%
7/21/2019 Unit 10 ENT600 Growth and Exit Strategies
http://slidepdf.com/reader/full/unit-10-ent600-growth-and-exit-strategies 11/26
Produt D'2'-o,+'nt Str&t'
• ,roduct /evelopment #trategy involves
increasing sales by improving or
modifying present products or services
Entrepreneurship Dept, FBM(2009)
11ENT600/UNIT 10 : GR!T" #ND E$IT%TR#TEGIE%
7/21/2019 Unit 10 ENT600 Growth and Exit Strategies
http://slidepdf.com/reader/full/unit-10-ent600-growth-and-exit-strategies 12/26
Produt D'2'-o,+'nt Str&t'
,roduct /evelopment may be best employed when:
A business has successful products that are in the
maturity stage of the product life cycle
A business operates in an industry that is characteri3edby rapid technological development
A business operates in a high4growth industry
-a0or competitors offer better $uality products at
comparable prices
A business has strong 56/ capabilities
Entrepreneurship Dept, FBM(2009)
12ENT600/UNIT 10 : GR!T" #ND E$IT%TR#TEGIE%
7/21/2019 Unit 10 ENT600 Growth and Exit Strategies
http://slidepdf.com/reader/full/unit-10-ent600-growth-and-exit-strategies 13/26
D!2'r!.!&t!on Str&t'
• /iversification strategy involves branching outinto new products and new territories
• Businesses diversify for the following reasons: Being in a single industry can be very risky
+ew technologies. new products or fast4
changing consumer preferences can destroy
a particular business
Entrepreneurship Dept, FBM(2009)
1&ENT600/UNIT 10 : GR!T" #ND E$IT%TR#TEGIE%
7/21/2019 Unit 10 ENT600 Growth and Exit Strategies
http://slidepdf.com/reader/full/unit-10-ent600-growth-and-exit-strategies 14/26
T,' o. D!2'r!.!&t!on Str&t'
R'-&t'd D!2'r!.!&t!on Str&t'
5efers to a situation whereby a business diversifies
into another area that is strategically fit with the
existing business" 5elated diversification is meant to
allow the business to capitali3e on synergies as
follows:
The transfer and share of valuable expertise.
technological know4how and other competitive
capabilities
To consolidate the related activities into a singleoperation to achieve lower costs
To capitali3e on a well4established brand name
Entrepreneurship Dept, FBM(2009)
1'ENT600/UNIT 10 : GR!T" #ND E$IT%TR#TEGIE%
7/21/2019 Unit 10 ENT600 Growth and Exit Strategies
http://slidepdf.com/reader/full/unit-10-ent600-growth-and-exit-strategies 15/26
T,' o. D!2'r!.!&t!on Str&t'
Unr'-&t'd D!2'r!.!&t!on Str&t' 5efers to a situation whereby a business diversifies
into another area that is totally different from the
existing business activities" 7nrelated diversification
may be carried out: 1n order to distribute and spread the risks of doing
business across different industries
8hen the business is currently operating in an
unattractive industry and there is a need to look forother possibilities
Entrepreneurship Dept, FBM(2009)
1ENT600/UNIT 10 : GR!T" #ND E$IT%TR#TEGIE%
7/21/2019 Unit 10 ENT600 Growth and Exit Strategies
http://slidepdf.com/reader/full/unit-10-ent600-growth-and-exit-strategies 16/26
I+,-'+'nt!n Gro"t# Str&t'!':
A3u!!t!on
• 9ne method to implement growth strategies is
through the process of ac$uisition
• Ac$uisition is growth through gaining control over
other businesses• Ac$uisition can be either through ertical. ;ateral
or 2ori3ontal 1ntegration
• Ac$uisition is considered an alternative to
organic growth that refers to growth from within
the company
Entrepreneurship Dept, FBM(2009)
16ENT600/UNIT 10 : GR!T" #ND E$IT%TR#TEGIE%
7/21/2019 Unit 10 ENT600 Growth and Exit Strategies
http://slidepdf.com/reader/full/unit-10-ent600-growth-and-exit-strategies 17/26
T,' o. A3u!!t!on
There are three types of Ac$uisition
• 4'rt!&- Int'r&t!on 5or"&rd Int'r&t!on4 gaining ownership or increase
control over distributorship or retailers"
*&"&rd Int'r&t!on 4 seeking ownership or
increase control of firm!s suppliers
• L&t'r&- Int'r&t!on 4 integrate into unrelated business atthe same level of value adding process as itself
• Hor!ont&- !nt'r&t!on < ac$uiring competitors" That is toseek ownership or increase control over competitors! ownbusiness
Entrepreneurship Dept, FBM(2009)
1ENT600/UNIT 10 : GR!T" #ND E$IT%TR#TEGIE%
7/21/2019 Unit 10 ENT600 Growth and Exit Strategies
http://slidepdf.com/reader/full/unit-10-ent600-growth-and-exit-strategies 18/26
Introdut!on to *u!n' E%!t
• There may come a time in a business life4cycle when theentrepreneur decides to exit the business or to end thebusiness
• Business exit can be due to several reasons:
The decision to terminate the business operations may not bebecause of plummeting demand but due to reasons associatedwith the business owners"
-ost business ventures ended because they have reached thedeclining stage of their product or the venture is operating in adeclining industry and experiencing a decline in profits
• This stage sometimes is similar to the end4game strategy inchess where the player has to seriously consider reduction offorces"
Entrepreneurship Dept, FBM(2009)
ENT600/UNIT 10 : GR!T" #ND E$IT%TR#TEGIE%
1*
7/21/2019 Unit 10 ENT600 Growth and Exit Strategies
http://slidepdf.com/reader/full/unit-10-ent600-growth-and-exit-strategies 19/26
E%!t Str&t'!'
• Ending a business operation cannot be done abruptly" Thereare numerous exit barriers that may hinder the efficienttermination of a business operation"
• These exit barriers could be in the form of obligation tocustomers. long term contract with suppliers. financialobligation with financial institutions or high investment in fixedassets"
• There are various strategies of terminating a businessoperation:
R'tr'n#+'nt D!2't+'nt L!3u!d&t!on H&r2't!n
Entrepreneurship Dept, FBM(2009)
ENT600/UNIT 10 : GR!T" #ND E$IT%TR#TEGIE%
19
7/21/2019 Unit 10 ENT600 Growth and Exit Strategies
http://slidepdf.com/reader/full/unit-10-ent600-growth-and-exit-strategies 20/26
E%!t Str&t':
R'tr'n#+'nt
• 5etrenchment occurs when a business regroupsby reducing cost and asset to reverse decliningsales and profits" 5etrenchment includesactivities such as:
#elling off assets to raise needed cash
,runing product line
Closing down businesses that are performing
poorly 5educing the number of employees
/eclaring bankruptcy
Entrepreneurship Dept, FBM(2009)
ENT600/UNIT 10 : GR!T" #ND E$IT%TR#TEGIE%
20
7/21/2019 Unit 10 ENT600 Growth and Exit Strategies
http://slidepdf.com/reader/full/unit-10-ent600-growth-and-exit-strategies 21/26
W#'n to U' R'tr'n#+'nt
• 5etrenchment is best used when:
A business has distinctive competencies
but has failed to meet its ob0ectives
A business is plagued by inefficiency. lowprofitability. and poor employee morale
8hen a business has grown so large so
$uickly that ma0or reorgani3ation isneeded
Entrepreneurship Dept, FBM(2009)
ENT600/UNIT 10 : GR!T" #ND E$IT%TR#TEGIE%
21
7/21/2019 Unit 10 ENT600 Growth and Exit Strategies
http://slidepdf.com/reader/full/unit-10-ent600-growth-and-exit-strategies 22/26
E%!t Str&t':
D!2't+'nt
• /ivestment. sometimes also termed as
divestiture. is a strategy to end a business
• This is done cautiously by selling part of the
venture for cash to be reinvested in a more
promising business
Entrepreneurship Dept, FBM(2009)
ENT600/UNIT 10 : GR!T" #ND E$IT%TR#TEGIE%
22
7/21/2019 Unit 10 ENT600 Growth and Exit Strategies
http://slidepdf.com/reader/full/unit-10-ent600-growth-and-exit-strategies 23/26
W#'n to U' D!2't+'nt
• /ivestiture can be used when:
A business has pursued a retrenchment strategy
but failed to accomplish needed improvements A business needs more resources to be
competitive than what the company can provide
8hen one particular division is responsible for a
business!s overall poor performance 8hen a division does not fit well with the rest of
the business
Entrepreneurship Dept, FBM(2009)
ENT600/UNIT 10 : GR!T" #ND E$IT%TR#TEGIE%
2&
7/21/2019 Unit 10 ENT600 Growth and Exit Strategies
http://slidepdf.com/reader/full/unit-10-ent600-growth-and-exit-strategies 24/26
E%!t Str&t':
L!3u!d&t!on
• ;i$uidation involves the selling all of a company!s
assets for their tangible worth" ;i$uidation is a
recognition of defeat
• ;i$uidation is undertaken when both
retrenchment and divestiture have been
unsuccessful
• ;i$uidation enables stockholders to minimi3e
their losses
Entrepreneurship Dept, FBM(2009)
ENT600/UNIT 10 : GR!T" #ND E$IT%TR#TEGIE%
2'
7/21/2019 Unit 10 ENT600 Growth and Exit Strategies
http://slidepdf.com/reader/full/unit-10-ent600-growth-and-exit-strategies 25/26
W#'n to U' L!3u!d&t!on
• ;i$uidation may be a good strategy when:
There is a need to orderly raise cash to
pay off creditors
The organi3ation seeks to minimi3e
losses
8hen an organi3ation!s only otheralternative is bankruptcy
Entrepreneurship Dept, FBM(2009)
ENT600/UNIT 10 : GR!T" #ND E$IT%TR#TEGIE%
2
7/21/2019 Unit 10 ENT600 Growth and Exit Strategies
http://slidepdf.com/reader/full/unit-10-ent600-growth-and-exit-strategies 26/26
E%!t Str&t':
H&r2't!n
• 2arvesting is a strategy pursued by a business in an effort tocash out and harvest the profit
• 1n contrast to retrenchment. divestiture and li$uidation.harvesting is associated more with the owners! personal reasonsfor terminating the venture" These reasons may include: Boredom and burnout ;ack of operating and growth capital +o heirs to leave the business to /esire for li$uidity Aging and health problems
/esire to pursue other interests
• By pursuing the harvesting strategy. business owners could sellout the venture for cash at market value
Entrepreneurship Dept, FBM(2009)
ENT600/UNIT 10 : GR!T" #ND E$IT%TR#TEGIE%
26