Chapter 13 + 14 (growth) Flashcards
Draw the market square
What is penetration staregy?
-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
What is marketing development strategies
-strategy that focuses on selling a firm’s existing products to new groups of customers
What is product development strategies?
-Developing and selling a new products to current customers
-this allows for capitalizing on existing distribution systems and corporate reputation
**What are diversification strategies
-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
What are some pressures that growth puts on a business? name 4
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
How may an entrepreneur overcome pressure?
-Practice time management
How may a entrepreneur “time manage”
-teamwork
-planning ahead of time
-reanalyzing what needs to be done
What are international joint ventures
Companies that come together to share resources such as money, utilities, growth, etc
What are some advantages to joint ventures
-both companies share in earning and growth
-lower cash requirements
-early access to new international markets
What are some disadvantages to joint ventures
-Partners may have different goals or objectives
-cultural differences
-government policies can have a negative impact
What factors take part in the success of a joint venture
-managers must work well together
-same objectives
-timing must be right
What are strategic alliances
Sharing resources with other companies with the idea of working with each other for a long time
Acquisitions are good for what?
For growth and entering new markets
What is the hard part about an acquisition?
Agreeing on a price and how it will be paid (shares, cash, cash and stock)
What are some advantages of acquisitions
-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
What are some disadvantages of aquisitions
-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
Does the acquiring company win or lose in the short run?
They lose in the short run, so it needs to be on a long term basis
When do most LBO’s happen?
When entrepreneurs think they can run the company more efficiently than it is now
What is the key success factor in an LBO
Want to make sure the profits are bigger than the cost of borrowing and debt
What are some advantages of franchising?
-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
What are some disadvantages of franchising
-problems between the franchise and franchisor are common
-lose money to the franchisor since they take a cut of sales
