Chapter 17 Planning for Growth and Change

Copyright © Houghton Mifflin Company17-2 Overview The decision to grow Intensive growth strategies Integrative growth strategies Diversification growth strategies Growing by going global

Copyright © Houghton Mifflin Company17-3 Factors That Affect Growth Environmental factors –Target market characteristics –Nature of competition –State of innovation and intellectual property –Volatility and predictability –Industry entry difficulty

Copyright © Houghton Mifflin Company17-4 Factors That Affect Growth (cont.) The inertia of success The entrepreneur’s intentions Ability of the entrepreneur to delegate Ability of team to buy into the growth vision

Copyright © Houghton Mifflin Company17-5 Stages of Growth

Copyright © Houghton Mifflin Company17-6 A Framework for Growth

Copyright © Houghton Mifflin Company17-7 Scan and Assess the Environment Is the customer base growing or shrinking? How are competitors doing? Is the market growing? How does your company compare technologically with others in the industry? What are the results of your SWOT analysis?

Copyright © Houghton Mifflin Company17-8 Plan the Growth Strategy Determine the problem Brainstorm solutions Set a major goal for significant change Set smaller, achievable goals that get you to the major goal Dedicate resources toward these goals

Copyright © Houghton Mifflin Company17-9 Hire for Growth Put someone in charge of the growth plan Bring in key professional management with experience in growing companies Provide education and training for employees

Copyright © Houghton Mifflin Company17-10 Create a Growth Culture Involve everyone in the organization in the growth plan Reward achievement of interim goals

Copyright © Houghton Mifflin Company17-11 Build a Strategy Advisory Board Invite key people from industry Make them part of the planning process Invite more outsiders than insiders

Copyright © Houghton Mifflin Company17-12 Growth Strategies

Copyright © Houghton Mifflin Company17-13 Franchising Permits growing the business rapidly in several markets at once Franchisee pays a fee and royalty on sales Types: dealerships, service, and product franchises

Copyright © Houghton Mifflin Company17-14 Franchising (cont.) Need –Successful prototype store –Registered trademarks and consistent image –An easily replicable business –A product that can be sold in many geographic regions –A prospectus –An operations manual, training and support system –Site selection criteria

Copyright © Houghton Mifflin Company17-15 Licensing Grant to someone to use your intellectual property and exploit it in the marketplace Steps –Define the benefits of the intellectual property to the licensee –Conduct thorough market research –Conduct due diligence on the potential licensees –Determine the value of the license agreement –Create a license agreement

Copyright © Houghton Mifflin Company17-16 The License Agreement Grant clause: specifies what is being delivered Performance clause Secrecy clause Payment clause Grantback clause or improvement clause Definite term for the agreement Sublicense clause

Copyright © Houghton Mifflin Company17-17 Growing Within the Current Market Market penetration Market development –Franchising –Licensing Product development –Incremental changes –Breakthrough products

Copyright © Houghton Mifflin Company17-18 Growing Within the Industry Vertical integration –Backward or forward Horizontal integration –Buy up competitors –Acquisitions & consolidation –Modular, agile web, or network strategies

Copyright © Houghton Mifflin Company17-19 Growing Outside the Industry Synergistic strategy –Complementary products or businesses Unrelated products and services Conglomerate diversification— unrelated industries

Copyright © Houghton Mifflin Company17-20 Global Strategies Find the best global market –International Trade Statistics Yearbook –SITC: harmonized system of classification Determine demand for products –Dollar value of imports to a country –Level of demand exceeds world averages –Look for share of U.S. imports > 5%

Copyright © Houghton Mifflin Company17-21 More Global Strategies Secure export financing and a guarantee of payment from the Import-Export Bank –Export lenders –Bank financing –Internal cash flows –Venture capital or private investor –Prepayment, down payment or progress payments Find a foreign intermediary Choose a reputable freight forwarder

Copyright © Houghton Mifflin Company17-22 Global Franchising: Keys to Success Suitability of concept to culture Potential for profit Target market characteristics Current infrastructure Availability of supplies Currency and exchange Competition International relations and legal Real estate, labor, and taxes

Copyright © Houghton Mifflin Company17-23 Take-Aways List what students took away from the discussion in real time