CHAPTER 7

MANAGING GROWTH AND TRANSITION

After completing this chapter, students will be able to:

• Identify factors that affect business growth,
• Understand business expansion strategies,
• Know & internalize business ethics & social
responsibilities
 7.2 Timmons Model of Entrepreneurship
• What key aspects does an entrepreneur need to manage
to start and grow a business?
• Timmons basic model of entrepreneurship
• Internal and external factors determine the growth of
business.
• Success in creating a new venture --(three critical factors
of entrepreneurship”
1) opportunities,
2) team and
3) resources
 Controllable factors for business success:
1. opportunity,
2. a lead entrepreneur and an entrepreneurial team,
3. creativity, being careful with money

Applies an integrated, holistic, sustainable and balanced

approach to the challenges ahead
 1) Opportunities:
• Problems in the environment become opportunities
for entrepreneurs.
• Identify and evaluate a solidly viable market
opportunity first
• Followed by business plan, money, strategy,
networks or team
• Capitalize available and right opportunities
 2) Teams:
• Gather a good team of people to unlock the potential of
the opportunity.
• Sizes and the background of the team
• The two major roles of the team, relative to the other
critical factors are:
1. Removing the ambiguity and uncertainty of the opportunity
by applying creativity (inventiveness).
2. Providing leadership to manage the available resources in the
most effective manner constantly.
 3) Resources:
• Resources may include tangible and intangible resources.
• Knowledge, goodwill, information, etc., are intangible
resources.
• Buildings, land, information technology, human resource,
money, etc., are tangible resources.
 7.3 New Venture Expansion Strategies
• Growth in size, operation, market share, distribution
outlets, profit and expansion in related/unrelated
business
• Business growth is favourable for owner/s and employees
• It should be healthy/optimal (otherwise, will cause
failure…ex..cashflow problem)
• Growth causes a variety of changes:
• Different managerial, legal, and financial challenges
• Requires effective management
 7.3.2 Methods of Growth
Common routes of small business expansion include the following common
options:
• Growth through acquisition of another existing business (almost always smaller in
size),
• Offering franchise ownership to other entrepreneurs,
• Licensing of intellectual property to third parties, (license for the use of certain
innovative models on fee basis may be given to certain companies).
• Establishment of business agreements with distributorships and/or dealerships,
• Pursuing new marketing routes (such as catalogs/new registers),
• Joining industry cooperatives to achieve savings in certain common areas of
operation, including advertising and purchasing,
• Public stock offerings (selling shares to investors and to the general public),
• Employee stock ownership plans (entrepreneurs may give/sell shares to
employees as incentive for motivation.
 7.3.3 The Ansoff Matrix – Growth Strategy
• About new or existing markets and products?
• The Ansoff Matrix is a strategic-planning (by Russian-American Igor
Ansoff)
• FW that helps executives, senior managers, and marketers devise
strategies for future growth
• Only two approaches to developing a growth strategy;
• Through varying what is sold (product growth) and
• Who it is sold to (market growth).
• “When we are in peak, we make a ton of money, as soon as we make a
ton of money; we are desperately looking for ways to spend it. And we
diversify into areas that, frankly, we don’t know how to run very well,”
• Ex. Henry Ford’s sub-optimal growth paths.
• Ansoff created the product/market matrix (along risks)
7.3.3.1 Selecting a Product-Market Growth Strategy
Ansoff’s Matrix
 1) Market penetration / consumption:
•Low risk strategy (good pdt & mkt experience).
•Further exploitation of the products without
necessarily changing the product or the outlook
of the product
•Strategy can be: promotional methods, various
pricing policies & extensive distribution
•Ex: wider toothpaste head.
 2) Market development
• Medium to high risk.
• Through further market segmentation to aid in identifying a new
clientele base.
• Approaches: new geographical markets, new distribution
channels, new product packaging, and different pricing policies
• New distribution channels could entail selling the products via e-
commerce or mail order.
• New product packaging (size utility)—repacking the product in
another method or dimension.
• Lower prices for price sensitive customers (& b/c of change in
pdt size & packaging quality)
• Ex-Guinness beer (in cold and hot environments)
 3) Product development
•Medium to high risk (lack of experience about the
new product).
•Introduction of a new product in an existing market
or
•Modification of an existing product (more appealing
by changing its outlook or presentation, increase
the product’s performance or quality).
•Ex. Car manufacturers who offer a range of car
parts& accessories
 4) Diversification
• High risk (no/new experience for pdt & mkt).
• High R&D…high risk/reward from new pdt
• It involves two unknowns:
• New products are being created and the business does not
know the development problems that may occur in the process.
• A new market being targeted will bring the problem of having
unknown characteristics.
• Two types of diversification
1. Related diversification (same industry)
2. Unrelated diversification (new industry)
 7.3.4 Expansion Issues
• Growth means understanding, adjusting to, and managing a whole
new set of challenges in essence, a very different business.
• Healthy (incremental) growth is recommended
1. Growing too fast (not recommended)
2. Recordkeeping and other infrastructure needs
3. Expansion capital
4. Personnel issues
5. Customer service
6. Family issues
7. Transformation of company culture
8. Changing role of owner at the initial state
 7.3.5 Choosing not to Grow
• When the greatest satisfactions in owning a business, which
often include working closely with customers and employees
• To avoid the headaches that inevitably occur with increases in
staff size, etc.
• To devote time to family and other interests that would
otherwise be allocated to expansion efforts.
Choosing to grow slowly:
• To effectively serve existing customers
• To deliver products/services in right time and place
• To avoid lost customers
• To specialize in existing one (skill/business)
 7.4 Business Ethics and Social Responsibility
• Traditional view of the corporation, it exists primarily to make profits
(money-centered perspective)
• CR questions/dilemmas include:
• “What obligations do organizations have to ensure that individuals
seeking employment or promotion are treated fairly?”
• “How should conflicts of interest be handled?”
• “What kind of advertising strategy should be pursued?”
• “What pricing strategy should be pursued?”
• Present approaches: Eg. Social marketing, social entrepreneurship,
public enterprises, NGOs
• Three broad theoretical approaches to these new responsibilities:
 1) Corporate social responsibility (CSR)
• Both responsibilities: to make money and to interact
ethically (socially)
• Producing a reliable product, charging a fair price with fair
profit margins, and paying a fair wage to employees, caring
for the environment and acting on other social concerns.
• CSR) is composed of four obligations:
1. The economic responsibility to make money
2. The legal responsibility
3. The ethical responsibility
4. The philanthropic responsibility
 2) The triple bottom line
• Corporate leaders formulate bottom-line results not only in
economic terms (costs versus revenue) but also in terms of
company effects in the social realm, and with respect to
the environment.
• There are two keys to this idea.
1. First, the three columns of responsibility must be kept
separate, with results reported independently for each.
2. Second, in all three of these areas, the company should
obtain sustainable results.
Triple bottom lines
 3) Stakeholder theory
• By Edward Freeman and others
• Is the mirror image of corporate social responsibility.
• Instead of starting with a business and looking out into the world to see
what ethical obligations are there, stakeholder theory starts in the world.
• It lists and describes those individuals and groups who will be affected by
(or affect) the company’s actions
• Stakeholder theory affirms that those whose lives are touched by a
corporation hold a right and obligation to participate in directing it.
• CSR perspective attaches a responsibility directly to factory owners to
dispose of the waste safely.
• By contrast, a stakeholder theorist begins with people right—clean env’t,
water, air
• Stakeholder theory—one insistently bestowing the power to make ethical
claims on anyone affected by a company’s action
 7.4.3 Business Ethics Principles
1. Honesty
2. Integrity
3. Promise-Keeping & Trustworthiness
4. Loyalty
5. Fairness
6. Concern for Others
7. Respect for Others
8. Commitment to Excellence
9. Leadership
10.Reputation and Morale
11.Accountability
End of the Course!

Thank you!

Final Exam: Chs 3-7