Chapter 13 + 14 (growth)

Question 1

Draw the market square

Question 2

What is penetration staregy?

Answer 2

-focuses on the firm’s existing product in its existing market
-this strategy relies on taking market share from competitors and/or expanding the existing market

Question 3

What is marketing development strategies

Answer 3

-strategy that focuses on selling a firm’s existing products to new groups of customers

Question 4

What is product development strategies?

Answer 4

-Developing and selling a new products to current customers
-this allows for capitalizing on existing distribution systems and corporate reputation

Question 5

**What are diversification strategies

Answer 5

-sell a new product in a new market
-can use backward and forward integration
-New product should be complementary to increase sale in an existing product
-unrelated diversification is almost always a mistake

Question 6

What are some pressures that growth puts on a business? name 4

Answer 6

1) pressure on HR: more employees to hire, manage, more demanding conditions

2) pressure on the management of employees: management style may need to change

3) pressure on the entrepreneurs time: growing will take time away from the owner in terms of thinking of new departments, employees, etc to hire

4) pressure on existing financial resources

Question 7

How may an entrepreneur overcome pressure?

Answer 7

-Practice time management

Question 8

How may a entrepreneur “time manage”

Answer 8

-teamwork
-planning ahead of time
-reanalyzing what needs to be done

Question 9

What are international joint ventures

Answer 9

Companies that come together to share resources such as money, utilities, growth, etc

Question 10

What are some advantages to joint ventures

Answer 10

-both companies share in earning and growth
-lower cash requirements
-early access to new international markets

Question 11

What are some disadvantages to joint ventures

Answer 11

-Partners may have different goals or objectives
-cultural differences
-government policies can have a negative impact

Question 12

What factors take part in the success of a joint venture

Answer 12

-managers must work well together
-same objectives
-timing must be right

Question 13

What are strategic alliances

Answer 13

Sharing resources with other companies with the idea of working with each other for a long time

Question 14

Acquisitions are good for what?

Answer 14

For growth and entering new markets

Question 15

What is the hard part about an acquisition?

Answer 15

Agreeing on a price and how it will be paid (shares, cash, cash and stock)

Question 16

What are some advantages of acquisitions

Answer 16

-enter new market
-may cost less than other methods of expansion
-existing employees are an asset
-business you are acquiring will most likely know a lot about the market and industry

Question 17

What are some disadvantages of aquisitions

Answer 17

-marginal success record
-employees may leave
-if the price is too high, the return may be too low
-lack of synergies that were thought to be present

Question 18

Does the acquiring company win or lose in the short run?

Answer 18

They lose in the short run, so it needs to be on a long term basis

Question 19

When do most LBO’s happen?

Answer 19

When entrepreneurs think they can run the company more efficiently than it is now

Question 20

What is the key success factor in an LBO

Answer 20

Want to make sure the profits are bigger than the cost of borrowing and debt

Question 21

What are some advantages of franchising?

Answer 21

-avoids the risk of starting a business from scratch
-you get the “proven formula” from the franchise itself
-enter a business with a proven name and product
-managerial assistance
-years of experience and market knowledge
-quick expansion
much less capital needed
-suppliers are already identified
-fewer employees

Question 22

What are some disadvantages of franchising

Answer 22

-problems between the franchise and franchisor are common
-lose money to the franchisor since they take a cut of sales