Mastering entrepreneurship

Lecture 10 Strategies
Growth
“ To teach is to learn
twice.
”
Joseph Joubert
“ There is a great difference between knowing
and understanding: you can know a lot about
something and not really understand it

”
Charles F. Kettering
 Outline
!   Growth models

!   Ansoff’s Matrix

!   External strategies

!   Born global
GLAMSQUAD

!   on-demand blow-out company

!   Founded in 2014

!   Raised $7 million in 2014 and

$15 million in 2015

!   Can be ordered on demand to come to your home, office (in New

York), or wherever else is convenient, and either blow dry your hair
for $50 or do your makeup for $75.
!   m
 GLAMSQUAD

!   This is great for all of us beauty pros who prefer to freelance. Set your
own schedule, be your own boss. Love, love, love it.

!   These people are slave masters - sending me to God only knows who
to be underpaid from initial promises - clients can be scary and treat
you bad if your version of a smokey eye - clearly in the book - is not
their vision and risky going to unknown homes for cheap - a lot of
risk
!   logistics platform founded in 2013

!   lets customers order food from local restaurants such as Gourmet

Burger Kitchen, Nando's and Gaucho

!   Deliveroo drivers collect the food and deliver it "usually seven to

eight minutes after it leaves the kitchen".

!   in ten UK cities -- as well as Dublin, Paris and Berlin

!   Raised $25 m in January and $70 million in July 2015

76-78 Charlotte Street

Theoretically: Early growth
Theoretically: Later growth
But it is not that easy…
 Common Growth Risk

!   Start-ups without a product

!   No systematic approach to business plan

!   Entrepreneur knows best

!   Understanding marketing & market launch of innovative

products

!   One product company

 Why grow?
!   To achieve your aims (financial, change the world etc)

!   Things change fast, you become obsolete

!   If you don t grow you die (someone else will steal your market
share
 How do you grow?

!   Attitudes to growth

!   Strategic choices: Ansoff

!   External growth
 Outline
!   Growth models

!   Ansoff’s Matrix

!   External strategies

!   Born global
 Internal and External Growth Strategies

Internal Growth Strategies External Growth Strategies

 Internal Growth Strategies

!   Advantages:
!   Provides maximum control
!   Preserves organizational culture
!   Encourages internal entrepreneurship

!   Disadvantages
!   Slow form of growth
!   Need to develop new resources
!   m
 Market Penetration
!   Market existing products to existing customers
!   Increasing revenue (by promotion, repositioning the
brand, etc.)
!   The product is not altered, not seeking for new
customers
!   Often a low risk, low return option
 Market Development
!   Market the existing product range in a new market.

!   The product remains the same, but it is marketed to a

new audience.
!   Medium risk/return
 Product Development
!   A new product to be marketed to the existing
customers.
!   Develop and innovate new product offerings to replace
existing ones.
!   Such products are then marketed to the existing
customers.
!   Medium risk/return
 Diversification
!   Market completely new products to new customers.

!   Related
!   remain in a familiar market or industry
!   the most risky option

!   Unrelated

!   no previous industry nor market experience.

Copyright © 2013 eCornell
 How would you use it?

!   Helps companies put the options in the right box and then focus
on what is the best for them

!   Not to look at it as 4 categories, but as scale.

 Outline
!   Growth models

!   Ansoff’s Matrix

!   External strategies

!   Born global
 External Growth Strategies

!   Advantages
!   Reducing competition
!   Access to an established brand name
!   Economies of scale
!   Diversification of business risk

!   Disadvantages:
!   Clash of corporate cultures
!   Increased business complexity
!   Loss of organizational flexibility
 External Expansion
!   Mergers and acquisitions
!   Licensing
!   Strategic alliances
!   Joint Ventures
!   Franchising
 Mergers and Acquisitions
!   Many entrepreneurial firms grow through mergers and
acquisitions.
Merger vs Acquisition = Degree
of control
!   Purpose of Acquisitions ?
Mergers = Relatively equal-sized
organisations

Horizontal vs Vertical integration

Types of Mergers and Acquisitions

Source: Byers, T, Dorf, R, Nelson, A (2014) Technology Ventures: from Idea to Enterprise. McGraw Hill, New York, NY
 Licensing
!   Is the granting of permission by one company to another company
to use a specific form of its intellectual property under clearly
defined conditions.
 Types of licensing

Type of Licensing Description

Technology licensing of proprietary technology that the

Licensing licensor typically controls by virtue of a
patent.

Merchandise licensing of a recognized trademark or brand

and Character that the licensor typically controls through a
Licensing registered trademark or copyright.
 Strategic Alliances

!   A partnership between two or more firms developed to

achieve a specific goal.

!   Tend to be informal and do not involve the creation of a

new entity.

!   Can boost a firm s rate of product innovation and

foreign sales.
 Joint Ventures

!   A joint venture is an entity created when two or more

firms pool a portion of their resources to create a
separate, jointly owned organization.
Participating in Strategic Alliances and
Joint Ventures
!   Advantages
!   Gain access to a particular resource
!   Economies of scale, Risk and cost sharing
!   Gain access to a foreign market

!   Disadvantages:
!   Management complexities
!   Financial and organizational risks
!   Risk becoming dependent on a partner
 Franchising
!   Franchisor - creates value - viable opportunity funded
partly by franchisee - low cost startup

!   Franchisee buys right to run franchise, i.e. up-front fee

and royalties
 Types of franchising
!   A business format franchise

!   A trade-name and product franchise

!   A manufacturing franchise
!   Mergers and acquisitions

!   Licensing

!   Strategic alliances

!   Joint Ventures

!   Franchising
 Outline
!   Growth models

!   Ansoff’s Matrix

!   Internal strategies and External strategies

!   Born global
 Local or Regional strategy

— Focuses firm’s efforts locally

— Local competitive advantage

— Know the regional market well,

understand their customers,
why they buy the product

— esp. early stage companies

Source: Byers, T, Dorf, R, Nelson, A (2014) Technology Ventures: from Idea to Enterprise. McGraw Hill, New York, NY
 Globalisation

Globalisation involves the integration of markets, nation-states

and technologies, enabling people and companies to reach
around the world to offer and see their products in any country
of the world
 Strategies for Globalisation

Source: Byers, T, Dorf, R, Nelson, A (2014) Technology Ventures: from Idea to Enterprise. McGraw Hill, New York, NY

Strategies for Globalisation

Comparison of Global Strategies

Comparison of Global Strategies

Source: Byers, T, Dorf, R, Nelson, A (2014) Technology Ventures: from Idea to Enterprise. McGraw Hill, New York, NY
 Born global
!   By "born global" we mean a firm that has at least 25
percent international sales within three years of
founding and which derives its competitive advantage
from the use of resources and the sales of its products or
services in multiple countries.
 Born global
!   Factors driving the increase in international
entrepreneurship:

!   fall of tariff barriers and other legal barriers to trade

!   changes in technology

!   increasing use of alliances

 Takeaways
!   Growth is crucial. Standing still is not an option

!   Figure out strategically how you grow

!   Be aware of the risks

Assessment Criteria for Coursework 2
Distinction Answers (70%+)…
• Demonstrate excellent critical thinking by
o analysing and comparing the most relevant factors/options
o explicitly using the most relevant concepts or theoretical models taught in the
module
o linking to logical supporting examples from the case
• State a conclusion that follows logically from the preceding arguments

Answers earn a maximum of High Merit (65-69%) if they…

• Demonstrate good critical thinking by
o analysing and comparing the most relevant factors/options, and emphasising less
relevant factors/options
o explicitly using the most relevant concepts or theoretical models taught in the
module
o along with weak or vague supporting examples from the case
• State a conclusion that follows logically from the preceding arguments

Answers earn a maximum of Low Merit (60-64%) if they…

• Demonstrate mediocre critical thinking by
o analysing and comparing the most relevant factors/options, and emphasising less
relevant factors/options
o missing some of the most relevant concepts or theoretical models taught in the
module, or applying them with weak logic
o along with weak or vague supporting examples from the case
• State a conclusion that is vague and/or uses weak logic that may or may not follow from
the preceding arguments

Answers earn a maximum of Pass (50-59%) if they…

• Demonstrate limited critical thinking by
o missing the most relevant factors/options taught in the module
o missing some of the most relevant concepts or theoretical models taught in the
module, or applying them with weak logic
o along with weak or vague supporting examples from the case
• State a conclusion that is vague and/or uses weak logic that may or may not follow from
the preceding arguments

Fail Answers (<50%)…

• Fail to demonstrate critical thinking by
o missing the most relevant factors/options taught in the module
o missing the most relevant concepts or theoretical models taught in the module,
or applying them with weak logic
o missing supporting examples from the case
• Miss a logical a conclusion
 Luck is what happens when
“ opportunity meets
preparation
”
-- Seneca, Roman philosopher