MODULE 4

MANAGING, GROWING AND

ENDING THE VENTURE
ENTREPRENEURIAL STRATEGY:
GENERATING AND EXPLOITING
NEW ENTRIES
 NEW ENTRY

Offering a new product to an

established or new market, offering
an established product to a new
market or creating a new
organization
 GENERATION OF A NEW ENTRY
OPPORTUNITY
 Resources as a source of
competitive advantage
 Creating a resource bundle that is
valuable, rare and inimitable
1. Market knowledge
2. Technological Knowledge
 ASSESSING THE
ATTRACTIVENESS OF A NEW
ENTRY OPPORTUNITY
 Information on a New Entry
Prior Knowledge and Information Search
window of opportunity
 Comfort with Making a Decision under
Uncertainty
error of commission
error of omission
 ENTRY STRATEGY FOR NEW
ENTRY EXPLOITATION
 First movers develop a cost advantage
 First movers face less competitive rivalry
 First movers can secure important channels
 First movers are better positioned to satisfy
customer
 Firsts movers gain expertise through
participation
 Environmental instability and
First mover (Dis)advantage
 Key success factor
 Demand uncertainty
 Technological Uncertainty
 Adaptation
 Customers Uncertainty and First Mover
(Dis)Advantage

 Lead time and First mover (Dis)Advantage

1. Building customer loyalties
2. Build switching costs
3. Protecting product uniqueness
4. Securing access to important sources of
supply and distribution
 RISK REDUCTION STRATEGIES
FOR NEW ENTRY EXPLOITATION
 Probability and magnitude of
downside loss
Strategy to reduce risk
1. Market scope strategy
2. imitation strategy
3. Managing newness
 Market scope strategy
A choice about which customer group
to serve
 Narrow scope strategy
 Broad scope strategy
 Imitation strategy
 Why do it?
 Franchising
 “me-too strategy”: copying products
that already exist and attempting to
build an advantage through minor
variations
 Managing Newness
 Learning new task
 New role assignment
 Formal and informal communication
STRATEGIES FOR GROWTH
AND MANAGING THE
IMPLICATIONS OF GROWTH
 GROWTH STRATEGY
PENETRATION PRODUCT
STRATEGY DEVELOPMENT
EXISTIN
G STRATEGY
MARKE
T MARKET DIVERSIFICATION
NEW DEVELOPMENT
STRATEGY

EXISTING NEW

PRODUCT
ECONOMIC IMPLICATION OF
GROWTH
 IMPLICATION OF GROWTH FOR
THE FIRM
 Pressures on Existing Financial
Resources
 Pressure on Human Resource
 Pressure on the management of the
employee
 Pressures on the Entrepreneur’s
Time
 OVERCOMING PRESSURES ON
EXISTING FINANCIAL
RESOURCES
 FINANCIAL CONTROL
Managing cash flow
Managing inventory
Managing fixed assets
Managing costs and profits
Taxes
Record keeping
OVERCOMING PRESSURES ON
EXISTING HUMAN RESOURCES
 OVERCOMING PRESSURES ON
THE MANAGEMENT OF
EMPLOYEES
 Establisha Team spirit
 Communicate with employeesProvide
feedback
 Delegate some responsibility to
others
 Provide continuous training for
employees
 OVERCOMING PRESSURES ON
ENTREPRENEURS TIME
 Increased Productivity
 Increased Job Satisfaction
 Improved interpersonal Relationships
 Reduce time anxiety and Tension
 Better health
 Basic Principles of time
Management
 Principle of Desire
 Principle of effectiveness
 Principle of Analysis
 Principle of Teamwork
 Principle of prioritized Planning
 Principle of Reanalysis
IMPLICATIONS OF FIRM GROWTH
TO THE ENTREPRENEUR
A categorization of entrepreneurs
and their firms growth
Annual growth of the firm
Unused potential for the growth
Constrained growth
little potential for firms growth
GOING PUBLIC
 ADVANTAGES OF GOING
PUBLIC
 Abilityto obtain equity capital
 Enhanced ability to borrow
 Enhanced ability to raise equity
 Liquidity and valuation
 Prestige
 Personal wealth
 DISADVANTAGE
 Increased Risk Of Liability
 Expense
 Regulation of corporate governance
policies and procedures
 Disclosure of information
 Pressures to maintain growth pattern
 Loss of control
 THE ALTERNATIVES TO GOING
PUBLIC
 Private placement: institutional investor,
investment companies, insurance
companies and pension firm
1. Restrictive covenant: statement indicating the
things that cannot be done without approval
2. Liquidation covenant: the right of an investor to
sell the interest in the company
 Bank loans:
 Collaterals like some tangible assets
 TIMING OF GOING PUBLIC AND
UNDRWRITER SELECTION
 Timing
1. Is the company large enough
2. What is amount of the company’s earnings and
how strong is its financial performance
3. Are the market conditions favorable for IPO
4. How urgently the money needed
5. What are the needs and desires of the presents
owners
 UNDERWRITER SELECTION
 Managing underwriter : lead financial
firm in selling stocks to the public

 Underwriting syndicate : group of

firms involved in selling stock to the
pub;lic
REGISTRATION STATEMENT AND
TIMETABLE
 Fulland fair disclosure
 Prospectus
 Registration statement
 Form S-1
 The Prospectus
 Part II
 Procedure
Red herring
Comment letter
Pricing amendment
 LEGAL ISSUES AND BLUE-SKY
QUALIFICATIONS
 Quietperiod : 90 day period in going
public when no new company
information can be released

 Bluesky Qualifications : laws of each

state regulating public
 AFTER GOING PUBLIC
 Aftermarket support

 Relationship with the Financial

community

 Reporting requirements
ENDING THE VENTURE
BANKRUPTCY- AN OVERVIEW
 Business face a weak economy

 Increased competition

 Rising cost of doing business

 Lessons learned from
bankruptcy
 Should focus only on known markets
 It protect from creditors not from
competitors
 Worrying about the future of their
employees
 It needs to shared with employees
and everybody else involved
 CHAPTER 11 -
REORGANIZATION
 Surviving bankruptcy

 Prepackaged bankruptcy
CHAPTER 13-EXTENDED TIEM
PAYMENT PLANS
 CHAPTER 7-LIQUIDATION
 Voluntary bankruptcy

 Involuntary bankruptcy
 KEEPING THE VENTURE
GOING
 Avoid excess optimism when
business appears to be successful
 Always prepare good marketing
plans with clear objectives
 Make good cash projections and
avoid capitalization
 Keep abreast of the marketplace
 Identify stress points that can put the
business in jeopardy
 WARNING SIGNS OF
BANKRUPTCY
 Management of finances becomes
lax, so that no can explain, how
money is being spent
 Directors cannot document or explain
major transaction
 Customer are given large discounts
to enhance payments because of
poor cash flow
 Contracts are accepted below
standard amount s to generate net
 Bank requests subordination of its
loans
 Key personnel leave the company
 Materials to meet orders are lacking
 Payroll taxes are not paid
 Suppliers demand payment in cash
 Customers complaints regarding
service and product quality increase
 THE REALITY OF FAILURE
 The entrepreneur should consult with
his or her family
 The entrepreneur should seek outside
assistance from professionals, friends
and business associates
 It is important to not try to hang on to
a venture that will continually drain
resouces if the end is inevitable
EXIT STRATEGY
 SUCCESS OF BUSINESS
 Transfer to family members

 Transfer to non family members

 HARVESTING STRATEGY
 Direct
Sale
 Employee stock option plan
 Management buyout