Chapter 13/14

Question 1

Penetration strategy

Answer 1

Existing product, existing market: taking market share from competitors

Question 2

Market development strategies

Answer 2

Existing product, new customers (geographic, demographic, new use)

Question 3

Product development strategies

Answer 3

New products, existing customers: experience with customer group important in coming up with new product (good: existing distribution system, reputation)

Question 4

Diversification strategy

Answer 4

New product, new market: backward integration- firm becomes own supplier, forward integration - firm becomes own buyer, horizontal: diversifies into related products. *unrelated diversification: almost always mistake

Question 5

Growth implications on firm

Answer 5

Pressure on: HR, management of employees, entrepreneur’s time, existing financial resources

Question 6

Joint venture success factors

Answer 6

Managers must work well together
Symmetry of objectives and capabilities
Fair relationship
Realistic expectations consistent across all partners
Right timing

Question 7

Acquisitions

Answer 7

Purchase of a company or part of it - the acquired company no longer exists independently. Excellent for growth/entering new markets, structure of deal can more more important to success than the price

Question 8

Acquisition advantages and disadvantages

Answer 8

Good: established business, so customers know locations, marketing structure established, existing employees.
Bad: margin al success record, overconfidence, lack of synergy, key employee loss

Question 9

Leveraged buyout

Answer 9

An entrepreneur uses borrowed funds to purchase an existing venture for cash - often because entrepreneur thinks they can run the company more efficiently

Question 10

Advantages of franchising for franchisee

Answer 10

Accepted name and product, managerial assistance from franchisor, new venture while saving capital, years of experience, standardized products

Question 11

Advantages of franchising for franchisor

Answer 11

Allows quick expansion with little capital, can achieve Econ omits of scale by purchasing large quantities, advertising pool

Question 12

Disadvantages of franchising

Answer 12

Problems between franchisor and franchisee, poor management can lead to stores failing - reflecting negatively on entire system