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    Strategies For Firm Growth: Bruce R. Barringer R. Duane Ireland

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    Barringer entreprnurshi

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    Strategies For Firm Growth: Bruce R. Barringer R. Duane Ireland

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    mfarrukhiqbal
    99 views26 pages
    Barringer entreprnurshi

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    Barringer entreprnurshi

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    Barringer entreprnurshi

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    99 views26 pages

    Strategies For Firm Growth: Bruce R. Barringer R. Duane Ireland

    Uploaded by

    mfarrukhiqbal
    Barringer entreprnurshi

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    of 26

    Chapter 14

    Strategies for Firm


    Growth
    Bruce R. Barringer
    R. Duane Ireland

    Copyright ©2016 Pearson Education, Inc. 14-1


    Chapter Objectives

    1. Identify and discuss the core internal growth


    strategy for entrepreneurial firms.
    2. Describe additional internal product-growth
    strategies entrepreneurial firms can use.
    3. Examine international expansion as a growth
    strategy.
    4. Discuss different types of external growth
    strategies.

    Copyright ©2016 Pearson Education, Inc. 14-2


    Internal and External Growth Strategies
    1 of 2

    Internal Growth Strategies External Growth Strategies

    Involve efforts taken Rely on establishing


    within the firm itself, relationships with third
    such as new product parties, such as mergers,
    development, other acquisitions, strategic
    product-related alliances, joint ventures,
    strategies, and licensing, and
    international expansion franchising

    Copyright ©2016 Pearson Education, Inc. 14-3


    Internal and External Growth Strategies
    2 of 2

    Copyright ©2016 Pearson Education, Inc. 14-4


    Internal Growth Strategies

    New product Other product-


    development related strategies

    International
    expansion

    Copyright ©2016 Pearson Education, Inc. 14-5


    Advantages and Disadvantages of Internal
    Growth Strategies
    Advantages Disadvantages

    • Incremental, even-paced growth. • Slow form of growth.

    • Provides maximum control. • Need to develop new resources.


    • Preserves organizational culture. • Investment in a failed internal growth
    strategy can be difficult to recoup.
    • Encourages internal entrepreneurship.
    • Adds to industry capacity.
    • Allows firms to promote from within.

    Copyright ©2016 Pearson Education, Inc. 14-6


    New Product Development
    1 of 3

    • New Product Development


    – Involves the creation and sale of new products (or services)
    as a means of increasing firm revenues.
    – In many fast-paced industries, new product development is
    a competitive necessity.
    • For example, the average product life cycle in the computer
    software industry is 14 to 16 months.

    Copyright ©2016 Pearson Education, Inc. 14-7


    New Product Development
    2 of 3

    Keys to Effective New Product and Service


    Development

    • Find a niche and fill it.


    • Develop products that add value.
    • Get quality right and pricing right.
    • Focus on a specific target market.
    • Conduct ongoing feasibility analysis.

    Copyright ©2016 Pearson Education, Inc. 14-8


    New Product Development
    3 of 3

    Copyright ©2016 Pearson Education, Inc. 14-9


    Other Product-Related Strategies
    1 of 2

    Product Strategy Description

    Improving an Often a business can increase its


    Existing Product or revenues by simply increasing the
    Service quality of an existing product or service.

    Increasing Increasing the sales of a product or service


    Market through greater marketing efforts or through
    Penetration increased production capacity.

    Copyright ©2016 Pearson Education, Inc. 14-10


    Other Product-Related Strategies
    2 of 2

    Product Strategy Description

    Extending Product Making additional variations of a


    Lines product so it will appeal to a broader
    range of clientele.

    Geographic Growth via expanding to additional


    Expansion geographic locations.

    Copyright ©2016 Pearson Education, Inc. 14-11


    International Expansion
    1 of 3

    • International Expansion
    – Another common form of growth for entrepreneurial firms.
    – International new ventures are businesses that, from their
    inception, seek to derive significant competitive advantage
    by using their resources to sell products or services in
    multiple countries.
    – Although there is vast potential associated with selling
    overseas, it is a fairly complex form of growth.

    Copyright ©2016 Pearson Education, Inc. 14-12


    International Expansion
    2 of 3

    • Foreign-Market Entry Strategies


    – Exporting
    • Producing a product at home and shipping it to a foreign market.
    – Licensing
    • An arrangement whereby a firm with the proprietary rights to a
    product grants permission to another firm to manufacture that
    product for specified royalties or other payments.
    – Joint Ventures
    • Involves the establishment of a firm that is jointly owned by two or
    more otherwise independent firms.
    – Fuji-Xerox is a joint venture between an American and a Japanese
    company.

    Copyright ©2016 Pearson Education, Inc. 14-13


    International Expansion
    3 of 3

    • Foreign-Market Entry Strategies


    – Franchising
    • An agreement between a franchisor (a company like McDonald’s
    Inc., that has an established business method and brand) and a
    franchisee (the owner of one or more McDonald’s restaurants).
    – Turnkey Project
    • A contractor from one country builds a facility in another country,
    trains the personnel that will operate the facility, and turns over the
    keys to the project when it is completed and ready to operate.
    – Wholly Owned Subsidiary
    • A company that has made the decision to manufacture a product in
    a foreign country and establish a permanent presence.

    Copyright ©2016 Pearson Education, Inc. 14-14


    External Growth Strategies

    Mergers and
    Licensing
    Acquisitions

    Strategic Alliances Franchising


    and Joint Ventures (Chapter 15)

    Copyright ©2016 Pearson Education, Inc. 14-15


    Advantages and Disadvantages of External
    Growth Strategies
    Advantages Disadvantages

    • Reducing competition. • Incompatibility of top management.

    • Gaining access to proprietary • Clash of corporate cultures.

    products or services. • Operational problems.


    • Gaining access to new products • Increased business complexity.
    and markets. • Loss of organizational flexibility.
    • Obtaining access to technical expertise.
    • Antitrust implications.
    • Gaining access to an established
    brand name.
    • Economies of scale.
    • Diversification of business risk.
    Copyright ©2016 Pearson Education, Inc. 14-16
    Mergers and Acquisitions

    • Mergers and Acquisitions


    – A merger is the pooling of interests to combine two or more
    firms into one.
    – An acquisition is the outright purchase of one firm by
    another.
    • Purpose of Acquisitions
    – Acquiring another business can fulfill several of a
    company’s needs, such as:
    • Expanding its product line.
    • Gaining access to distribution channels.
    • Achieving competitive economies of scale.

    Copyright ©2016 Pearson Education, Inc. 14-17


    The Process of Completing an Acquisition

    Copyright ©2016 Pearson Education, Inc. 14-18


    Licensing
    1 of 2

    • Licensing
    – The granting of permission by one company to another
    company to use a specific form of its intellectual property
    under clearly defined conditions.
    – Virtually any intellectual property a company owns that is
    protected by a patent, trademark, or copyright can be
    licensed to a third party.
    • Licensing Agreement
    – The terms of a license are spelled out by a licensing
    agreement.

    Copyright ©2016 Pearson Education, Inc. 14-19


    Licensing
    2 of 2

    Type of Licensing Description

    Technology The licensing of proprietary technology


    Licensing that the licensor typically controls by
    virtue of a utility patent.

    Merchandise The licensing of a recognized trademark or


    and Character brand that the licensor typically controls
    Licensing through a trademark or copyright.

    Copyright ©2016 Pearson Education, Inc. 14-20


    Strategic Alliances
    1 of 2

    • Strategic Alliances
    – A strategic alliance is a partnership between two or more
    firms developed to achieve a specific goal.
    – Strategic alliances tend to be informal and do not involve
    the creation of a new entity.
    – Participating in strategic alliances can boost a firm’s rate of
    product innovation and foreign sales.

    Copyright ©2016 Pearson Education, Inc. 14-21


    Strategic Alliances
    2 of 2

    Type of Alliance Description

    Technological Feature cooperation in R&D,


    Alliances engineering, and manufacturing.

    Marketing Typically match a company with excess


    Alliances distribution capacity with a company that has
    a product to sell.

    Copyright ©2016 Pearson Education, Inc. 14-22


    Joint Ventures
    1 of 2

    • Joint Ventures
    – A joint venture is an entity created when two or more firms
    pool a portion of their resources to create a separate, jointly
    owned organization.
    – A common reason to form a joint venture is to gain access
    to a foreign market. In these cases, the joint venture
    typically consists of the firm trying to reach a foreign
    market and one or more local partners.

    Copyright ©2016 Pearson Education, Inc. 14-23


    Joint Ventures
    2 of 2

    Type of Joint Venture Description

    Partners collaborate at a single point in


    Scale Joint Venture the value chain to gain economies of
    scale in production or distribution.

    Positions of the partners are not


    Link Joint
    symmetrical, and the partners help each
    Venture
    other access adjacent links in the value
    chain.

    Copyright ©2016 Pearson Education, Inc. 14-24


    Advantages and Disadvantages of Participating
    in Strategic Alliances and Joint Ventures

    Advantages Disadvantages

    • Gain access to a specific resource. • Loss of proprietary information.


    • Economies of scale. • Management complexities.
    • Risk and cost sharing. • Financial and organizational risks.
    • Gain access to a foreign market. • Risk becoming dependent on a partner.
    • Learning. • Partial loss of decision autonomy.
    • Speed to market. • Partners’ cultures may clash.
    • Neutralizing or blocking • Loss of organizational flexibility.
    competitors.
    Copyright ©2016 Pearson Education, Inc. 14-25
    Copyright ©2016 Pearson Education, Inc. 14-26

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