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GROWTH

By

RAJEEV ROYAssociate Professor & NEN Faculty Leader

XIMB

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GROWTH

CHAPTER 17

ENTREPRENEURSHIP

By

RAJEEV ROYOXFORD UNIVERSITY PRESS 2008

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Chapter Objectives

To understand the role of growth in a startup

To list the stages of growth

To tabulate various strategies used to grow theentrepreneurial enterprise

To understand diversification of a business

To discuss franchising a business

To discuss various ways to start international operations

To list the barriers to international growth

To discuss the steps to take for successful growthoverseas

To understand the reasons for relocating the business

To find out the best avenues for financing growth

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Stages of Growth

Existence

Survival

Success Take-off

Consolidation

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Threat Matrix

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Growth Strategies

Diversification

Joint ventures

Acquisitions Mergers

Franchising

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Diversification Strategies

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Joint Ventures

Internal reasons

Leveraging strengths

Spreading risks

Improving access tofinance

Economies of scale

Access to new

technologies Inculcating new

processes

Competitive goals

Pre-emptive move

against competition

Defensive response toaggressive competitors

Creation of larger and

stronger competitive units

Fast access to newmarkets

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Mergers and Acquisitions

Economies of scale by cutting out duplicate operationsand departments, and increasing profits.

Increase in market share by combining sales andcapacities of both.

Increase in sales by cross selling of complementaryproducts

Synergies by making better use of complementaryresources.

Reducing risk by diversification into other products and

markets Sometimes there can be a tax saving angle when losses

in one can be used to offset profits in another.

Bigger entities are more likely to survive. So bigger isbetter.

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Types of Mergers

Horizontal merger

Vertical merger Congeneric merger

Conglomerate merger

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Oxford University Press, 2008

Acquisitions

Acquisition can be of two types:

The acquirer buys the assets of the target

company so that they have no role in

discharging liabilities.

The acquirer buys the equity of the target

company and takes on all assets and

liabilities.

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Franchising

Characteristics of a franchisable business:

It needs to have a proven track record

The business should have a strong brand Operating processes should be

standardized and documented

Ultimately, the business should beprofitable

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Road Map to Successful

Franchising

Build a top-notch sales team.

Have adequate financial resources

Carefully select franchisees Have good training material

Have a quality programme

Keep building the brand Invest in research and development

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Entrepreneurship

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Internationalisation Strategies

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Entrepreneurship

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Adapting a Product

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Entrepreneurship

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Barriers to International Growth

Internal ability

Domestic regulations

Tariff barriers Quotas

Embargoes

Business barriers Cultural barriers

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Entrepreneurship

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Steps to International Growth

Communicate your internationalization plan toyour employees

Define your goals for your internationaloperations

Make a business plan on how you want toachieve your goals

Accurately determine the amount of money youneed

Get the money ready in time

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Entrepreneurship

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Steps to International Growth

Conduct market research to understand thesenew markets

Make suitable modifications based on yourmarket research.

Pick a good team to head your internationalforay and train the team

Hire good lawyers, accountants from the targetcountries

Explore possibilities for cross border mergersand alliances.

Plan in the long term

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Financing Growth

Internal accruals

Fresh equity infusion by self

Venture capital Bank finance

Taking on new partners