GROWTH

By

RAJEEV ROY
Associate Professor & NEN Faculty Leader XIMB

GROWTH

CHAPTER 17 ENTREPRENEURSHIP
By

RAJEEV ROY
OXFORD UNIVERSITY PRESS 2008

Rajeev Roy, XIMB

Entrepreneurship Oxford University Press, 2008

Chapter Objectives
To understand the role of growth in a startup To list the stages of growth To tabulate various strategies used to grow the entrepreneurial 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 growth overseas To understand the reasons for relocating the business To find out the best avenues for financing growth
Rajeev Roy, XIMB Entrepreneurship Oxford University Press, 2008

Stages of Growth
Existence Survival Success Take-off Consolidation

Rajeev Roy, XIMB

Entrepreneurship Oxford University Press, 2008

Opportunity Matrix

Rajeev Roy, XIMB

Entrepreneurship Oxford University Press, 2008

Threat Matrix

Rajeev Roy, XIMB

Entrepreneurship Oxford University Press, 2008

Growth Strategies
Diversification Joint ventures Acquisitions Mergers Franchising

Rajeev Roy, XIMB

Entrepreneurship Oxford University Press, 2008

Diversification Strategies

Rajeev Roy, XIMB

Entrepreneurship Oxford University Press, 2008

Joint Ventures
Internal reasons Leveraging strengths Spreading risks Improving access to finance Economies of scale Access to new technologies Inculcating new processes
Rajeev Roy, XIMB

Competitive goals Pre-emptive move against competition Defensive response to aggressive competitors Creation of larger and stronger competitive units Fast access to new markets

Entrepreneurship Oxford University Press, 2008

Mergers and Acquisitions

Economies of scale by cutting out duplicate operations and departments, and increasing profits. Increase in market share by combining sales and capacities of both. Increase in sales by cross selling of complementary products Synergies by making better use of complementary resources. 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 is better.
Rajeev Roy, XIMB Entrepreneurship Oxford University Press, 2008

Types of Mergers
Horizontal merger Vertical merger Congeneric merger Conglomerate merger

Rajeev Roy, XIMB

Entrepreneurship 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.

Rajeev Roy, XIMB

Entrepreneurship Oxford University Press, 2008

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 be profitable
Entrepreneurship Oxford University Press, 2008

Rajeev Roy, XIMB

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
Entrepreneurship Oxford University Press, 2008

Rajeev Roy, XIMB

Internationalisation Strategies

Rajeev Roy, XIMB

Entrepreneurship Oxford University Press, 2008

Adapting a Product

Rajeev Roy, XIMB

Entrepreneurship Oxford University Press, 2008

Barriers to International Growth

Internal ability Domestic regulations Tariff barriers Quotas Embargoes Business barriers Cultural barriers
Entrepreneurship Oxford University Press, 2008

Rajeev Roy, XIMB

Steps to International Growth

Communicate your internationalization plan to your employees Define your goals for your international operations Make a business plan on how you want to achieve your goals Accurately determine the amount of money you need Get the money ready in time

Rajeev Roy, XIMB

Entrepreneurship Oxford University Press, 2008

Steps to International Growth

Conduct market research to understand these new markets Make suitable modifications based on your market research. Pick a good team to head your international foray and train the team Hire good lawyers, accountants from the target countries Explore possibilities for cross border mergers and alliances. Plan in the long term
Rajeev Roy, XIMB Entrepreneurship Oxford University Press, 2008

Financing Growth
Internal accruals Fresh equity infusion by self Venture capital Bank finance Taking on new partners

Rajeev Roy, XIMB

Entrepreneurship Oxford University Press, 2008