Entrepreneurship

Unit 2
Module 3:Venture Life Cycle
“All things in life goes through a life cycle”
Lesson Objectives
� At the end of this lesson , students should be able to :

1) Identify the stages of the venture lifecycle

2) Explain the business activity that occurs at each
stage of the venture lifecycle
What is Venture Life cycle ?

The Venture Life Cycle is the Sequences of stages in evolution

of new venture. Ventures pass through..

The venture lifecycle applies to small as well as large ventures . It

traces the venture through its development sages to introduction or
start up on the market through possible growth, stabilization and
eventual decline .
The Five Stages of a Business’s Life
Cycle
There are five key stages (just typical)
(i) New Venture Development
(ii) Start-up Activities
(iii) Growth of the Venture
(iv) Business Stabilization
(v) Innovation or Decline
Stage 1 : New Venture ent
Treyence
The first stage of a business is the new venture
Development stage . Foundational activities take place at
this stage. It is at this stage that preliminary research
activities takes place and the wonderful idea of the
Entrepreneur is tested . She /She will be involved in the
following main activities :
1) Concept Testing: Concept testing takes place when the
entrepreneur carries out activities to see whether or not
prospective consumer will accept the product.
Stage 1 : New Venture
Development Trenyece
2. Planning of the structure , Vision, Mission and
goals of the organization
3. Resourcing- The key resource that will be looked
at is that of financing .rely on funding from self,
family or associates.
4. Researching Potential suppliers and
Distribution Chain
Stage 2 :Start-up Stage Kaedon
The start up activities stage requires time being spent on:

❖ Adjusting the product based on the feedback that was received in the first stage.

❖ Aggressively marketing the product to make the business known as this stage is characterized by
the venture being legally recognized and producing goods or service to meet customers needs .

❖ The entrepreneur will have to acquire additional capital

❖ Forming a highly skilled and diverse management team

❖ Hiring highly skilled personnel for key positions

❖ Market research and risk analysis is also important to facilitate decision making and to ensure start
up moves to the growth stage

❖ Refining the business plan and the business model

Stage 3:Venture Growth
Natalya
The business has now been in the market for a while. It can now make
further adjustment to its product and services and reduce prices as
economies of scale are reaped.
Investors such as venture capitalist are now an option. Creditor are
willing to provide sizeable loans . Both are able to come on board a s
the business displays good level of credibility and dependability.
Venture Growth Natalya
� The business is highly profitable and has a strong capital
base. The venture is able to comfortably provide
dividends for its shareholders. Expansion is now on the
mind of the entrepreneur .He or she might consider
opening several branches or/and begin franchising.

� This stage may involve intense market scanning and may

result in positioning the product in new market or
repositioning in existing market .The venture may also
target new customers bases or add new product to the
existing line.
Stage 4: Stabilization/Maturity
Stage Rayanna
� This stage is usually the longest running stage of the
business. The business will find out that its ability to
grow has slowed down significantly. Complacency
sets in.The enterprise products or services becomes
standardized and are not subjected to further
change. Sales figures are stable and business depends
on the strong brand loyalty.
Stabilization Stage Rayanna
The stage is characterized by the venture facing :
✔ Increased competition
✔ High bargaining power of customers
✔ Saturation of the market
✔ The entrepreneur needs to think where will the business
be in the near future
✔ It is a stage preceding a great dilemma: to innovate or
exit the business

Activities will involved searching out new

opportunities , cost cutting and source funding.
 Stage 5: Innovation or Decline
Kayla
Similar and now innovative products are now on the market. Customer are
switching to other product. Both profit and sales are falling drastically.
� The business is faced with the following options :

� Conducted the necessary internal and external analyses and decide that
given the capabilities of the venture it will innovate e.g. design new product
for existing market or new market., venture into new geographical
territories, target new users of exiting product etc..
Innovation or Decline Kayla
� However , the decision could be to decline and service
existing clients and exit the market eventually .

� Another option is to seek to be acquired by another firm.

If the decision is to exit by selling, the venture has to be
valued.
 The growth of the venture
KAEDON
� A firm may grow internally and externally

� Internally
✔ Increasing its market share
✔ Employing more workers
✔ Expanding its factory plant
✔ Adding more product and service

Externally
✔ Entering joint ventures
✔ Taking over other businesses
✔ Engaging in mergers
Limitations of the business Lifecycle
Everyone
� You will find that firms have very unique features
. All the description of each stage of the model
may not be particular business reality.
� The sequence may not be as described. Firms may exit
at any stage. Many firms may not reach the growth
stage.
A Venture’s Typical Life Cycle
Alternative venture Life Cycle

1) Start up
2) Expansion
3) Maturity
4) Diversification
5) Lifestyle
6) Capped growth
 CASE STUDY To be posted
� END OF TOPIC

� NEXT TOPIC WILL BE VENTURE MODEL