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Shepherd
Figure 13.1 - Growth Strategies Based
upon Knowledge of Product and/or Market
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Growth Strategies
Penetration Strategy
A strategy to grow by encouraging existing
customers to buy more of the firm’s current
products.
Marketing can be effective in encouraging
frequent repeat purchases.
Does not involve anything new for the firm.
Relies on taking market share from competitors
and/or expanding the size of the existing
market.
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Growth Strategies (cont.)
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Growth Strategies (cont.)
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Growth Strategies (cont.)
Diversification Strategies
A strategy to grow by selling a new product to a
new market.
Backward integration - A step back (up) in the
value-added chain toward the raw materials.
Forward integration - A step forward (down) in
the value-added chain toward the customers.
Horizontal integration - Occurs at the same level
of the value-added chain but simply involves a
different, but complementary, value-added
chain.
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Figure 13.2 - Example of a Value-Added
Chain and Types of Related Diversification
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Growth Strategies (cont.)
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Growth Strategies (cont.)
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Figure 13.3 - A Follow-Up of Inc. Magazine’s
1984 Fastest-Growing Ventures
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Implications of Growth for the Firm
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Implications of Growth for the Firm
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Overcoming Pressures on
Existing Financial Resources
To overcome pressures, the entrepreneur
could acquire new resources.
The acquisition of new resources is
expensive, whether in terms of the equity
sold or the interest payments from debt.
The need or the magnitude of the new
resources required can be reduced through
better management of existing resources.
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Financial Control
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Financial Control (cont.)
Managing Inventory
Perpetual inventory systems can be structured
using computers or a manual system.
To check the inventory balance, it may be
necessary to physically count inventory
periodically.
Link the needs of a retailer with the wholesaler
and producer allowing for a fast order entry and
response.
Transport mode selection can also be important.
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Financial Control (cont.)
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Financial Control (cont.)
Taxes
Withhold federal and state taxes for employees.
Pay a number of taxes (state and federal
unemployment taxes and business taxes).
Allocate taxes as part of any budget.
File end-of-year returns of the business.
Consider use of a tax accountant.
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Financial Control (cont.)
Record Keeping
It is helpful to consider using a software
package.
It may be necessary to enlist the support and
services of an accountant/ consultant.
It is important to use a system for storing and
using customer information.
Build organizational knowledge to reduce
dependency on any one individual.
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Overcoming Pressures on
Existing Human Resource
Some entrepreneurs are using professional
employer organizations (PEOs) for various
HR activities.
Decisions regarding the proportion of
permanent and part time employees should
be made; involves several trade-offs.
Give employees regular feedback; identify
problems along with a proposed solution.
Maintain the corporate culture despite the
influx of new employees.
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Overcoming Pressures on
Existing Human Resource (cont.)
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Overcoming Pressures on
Existing Human Resource (cont.)
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Overcoming Pressures on
Existing Human Resource (cont.)
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Overcoming Pressures on
Existing Human Resource (cont.)
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Figure 13.4 - Four Types of
Entrepreneurs and Firm Growth
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