Chapter 18 Planning for Growth. Copyright © Houghton Mifflin Company. All rights reserved.18 | 2 Learning Objectives Explore strategic innovation as a

Chapter 18Planning for

Growth

Copyright © Houghton Mifflin Company. All rights reserved. 18 | 2

Learning Objectives

• Explore strategic innovation as a growth strategy. • Discuss intensive growth strategies—growing within the

current market• Explain integrative growth strategies—growing within

the industry• Examine diversification growth strategies—growing

outside the industry• Consider growing by going global


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


To Grow Or Not To Grow

Market Factors That Affect Growth:– Size and Characteristics– Competition – Intellectual-property rights – Predictability


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


Figure 18.2: Stages of Growth



• Stages of growth in a new venture– Start-up success– Initial growth– Rapid growth– Stable growth and

maintenance



• Problems with growth– Inability to understand/respond to the business’s

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


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 outside

the current market/industry• Global strategies

– Exploit opportunities in the international arena


Figure 18.3: Growth Strategies for Entrepreneurs


Strategic Innovation

• New concepts are not generally attractive to established companies in the early stages because – It breaks the mold – The early markets are generally small with

low margins – Large companies typically wait to see how

the new model fares in the market and then they either change their model or attempt to acquire the entrepreneur’s company.


Intensive Growth Strategies

• Market Penetration– Increase sales through effective marketing

strategies within the current target market• Market Development

– Expand sales through expanding geographic representation


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


Intensive Growth Strategies (continued)

• Product Development– Increase sales through new

products/services


Integrative Growth Strategies (continued)

• Vertical Integration Strategies– Growing forward/backward within the

distribution channel• Horizontal Integration Strategies

– Buying up competitors/starting a competing business within the current industry

• Modular or Network Strategies– Focus on core competencies and outsource

the rest


Diversification Growth Strategies

• Investing in or acquiring products/businesses which are outside the core competencies and industries

• Use when all other growth strategies within the current market/industry have been exhausted– Synergistic strategy– Acquire products/services unrelated to the

core– Conglomerate diversification-acquiring

businesses that are unrelated to the company’s current business


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 spread

across many markets– Competition and saturated markets


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 a

world-wide basis



• Finding the best global market– Information sources

• International Trade Statistics yearbook of the United States

• International Trade Administration offices in Washington, D.C. and at district levels

• Department of Commerce


Table 18.3: Easiest Countries in Which to Do Business



• 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



• Foreign agents, distributors, and trading companies– Choosing an intermediary

• Due diligence work to assure the right partner

– Choosing a freight forwarder• Handles all aspects of delivering the product

Documents

Chapter 18 Planning for Growth. Copyright © Houghton Mifflin Company. All rights reserved.18 | 2 Learning Objectives Explore strategic innovation as a