TOPIC 4:ENTREPRENEUR AND

MANAGING BUSINESS
GROWTH
 OBJECTIVES

• Problems faced by growing business

• Business development stages
• Business growth strategies
• Business growth planning
• Issues in business growth
PROBLEM FACED BY GROWING BUSINESS

1. THE DISTINCTIVENESS OF SIZE

2. THE ONE-PERSON-BAND SYNDROME
3. TIME MANAGEMENT
4. COMMUNITY PRESSURES
5. CONTINUOUS LEARNING
 1. THE DISTINCTIVENESS OF SIZE

• restricted by its limited geographical market reach and be unable to

extend throughout a region or state
• Internet-based businesses, while not confronted with problems of
geographic reach and with the possible exception of ‘app’ business
models, may be limited by the capacity to manage large transactional
volumes.
• the higher ordering costs that burden many small firms. Because they
do not order large lots of inventory from suppliers, small businesses
usually do not receive quantity discounts and must pay higher prices.
• a smaller staff forces small firms to accept less specialisation of
labour. Therefore, employees and managers are expected to perform
numerous functions.
ADVANTAGES OF SMALL SIZE BUSINESS

• decisions can be made and implemented immediately, without the

input of committees and the delay of bureaucratic layers.
• Production, marketing and service are all areas that can be adjusted
quickly for a competitive advantage over larger businesses in the
same field.
• Constant communication with the community.
• insight of this involvement allows the entrepreneur to adjust
products or services to suit the specific needs or desires of the
particular community.
• closeness to the customer: the ability to offer personal service. The
personal service that an entrepreneur can provide is one of the key
elements of business success today.
2. THE ONE-PERSON-BAND SYNDROME

• For micro/small size business: - the business is the entrepreneur

and the entrepreneur is the business.
• one-person-band syndrome exists when an entrepreneur fails to
delegate responsibility to employees, thereby retaining all decision-
making authority.
• the owner who continues to perform as a one-person band can
restrict the growth of the business, because the owner’s ability is
limited.
• Therefore, the entrepreneur must recognise the importance of
delegation. If the owner can break away from the natural tendency
to do everything, then the business will benefit from a wider array
of that person’s abilities.
 3. TIME MANAGEMENT

• limited size and staff force the entrepreneur to face this challenge
in time management.
• entrepreneurs should learn to use time as a resource and not allow
time to use them.
• Four critical steps of time management:
• 1. Assessment. The business owner should analyse his or her daily activities
and rank them in order of importance.
• 2. Prioritisation. - divide and categorise the day’s activities based on ability to
devote time to the task. Avoid procrastination.
• 3. Creation of procedures. Repetitive daily activities can be handled easily by
an employee if instructions are provided.
• 4. Delegation. Delegation can be accomplished after the owner creates
procedures for various jobs.
 4. COMMUNITY PRESSURES

• The community presents unique pressure to emerging

entrepreneurs in three ways: participation, leadership and
donations.
• Entrepreneurs need to plan the activities that most beneficial
to participate by considering the advertising or recognition the
business will receive.
• decide which of the organisations to assist and to budget a
predetermined amount of money for annual donations.
 CONTINUOUS LEARNING

• Very little time for owners to maintain or improve their

managerial and entrepreneurial knowledge.
• Entrepreneurs need to dedicate time to learning new
techniques and principles for their businesses. Trade
associations, seminars, conferences, publications and
university courses all provide opportunities for entrepreneurs
to continue their entrepreneurial education.
VENTURE DEVELOPMENT STAGES
VENTURE DEVELOPMENT STAGES:
STAGE 1: NEW-VENTURE DEVELOPMENT

• consists of activities associated with the initial formulation of

the venture.
• This is the foundation of the entrepreneurial process that
requires creativity, assessment, accumulation and expansion of
resources and networking for initial entrepreneurial strategy
formulation.
• The enterprise’s general philosophy, mission, scope and
direction are determined during this stage.
 VENTURE DEVELOPMENT STAGES:
STAGE 2: START-UP ACTIVITIES

• encompasses the foundation work of business plan

development.
• searching for capital, carrying out marketing activities and
developing an effective entrepreneurial team.
• demand an aggressive entrepreneurial strategy with maximum
effort devoted to launching the venture.
• Designing strategic and operational planning to identify the
firm’s competitive advantage and funding sources.
• Marketing and financial considerations is paramount as the
business struggles with survival.
 VENTURE DEVELOPMENT STAGES:
STAGE 3: GROWTH STAGE

• requires major changes in entrepreneurial strategy due to

competition and other market forces.
• For example, some firms find themselves ‘growing out’ of business because
they are unable to cope with the growth of their ventures.
• Highly creative entrepreneurs sometimes are unable, or unwilling, to meet
the administrative challenges that accompany this growth stage. As a result,
they leave the enterprise and move on to other ventures.
• newer and more substantial problems than previous stages.
• transition from an entrepreneurial informal ‘one-person’
leadership to managerial formalised and team-oriented leadership
• requires developing a different set of skills while maintaining an
entrepreneurial perspective for the organisation.
 VENTURE DEVELOPMENT STAGES:
STAGE 4: BUSINESS STABILISATION
• This stage is a result of both market conditions and the
entrepreneur’s efforts.
• Development at this stage:
• increased competition
• consumer indifference to the entrepreneur’s good(s) or service(s)
• saturation of the market with a host of ‘me too’ look-alikes.
• Sales often begin to stabilise
• entrepreneur must begin thinking about where the enterprise will go
over the next three to five years.
• This stage the firm either swings into higher gear and greater
profitability or swings towards decline and failure.
• Thus innovation is often critical to future success.
 VENTURE DEVELOPMENT STAGES:
STAGE 5: INNOVATION OR DECLINE

• Companies that fail to innovate will die.

• Financially successful enterprises will often try to acquire
other innovative firms, thereby ensuring their own growth.
• many companies will work on new product/service
development in order to complement current offerings.
 BUSINESS GROWTH PLANNING:
BUILDING THE ADAPTIVE FIRM
• An Adaptive Firm
• One that Increases opportunity for its employees, initiates change, and
instills a desire to be innovative.
• How to remain adaptive and innovative:
• Share the entrepreneur’s vision
• Increase the perception of opportunity
• Institutionalize change as the venture’s goal
• Instill the desire to be innovative:
• A reward system
• An environment that allows for failure
• Flexible operations
• The development of venture teams
THE TRANSITION FROM AN ENTREPRENEURIAL
STYLE TO A MANAGERIAL APPROACH

• Impediments to Transition:
• A highly centralized decision-making system
• An overdependence on one or two key individuals,
• An inadequate repertoire of managerial skills and training
• A paternalistic atmosphere

© 2009 South-Western, a part of Cengage

13–17
Learning. All rights reserved.
UNDERSTANDING THE GROWTH STAGE

• Key Factors During the Growth Stage

• Control
• Does the control system imply trust?
• Does the resource allocation system imply trust?
• Is it easier to ask permission than to ask forgiveness?
• Responsibility
• Creating a sense of responsibility that establishes flexibility, innovation, and a
supportive environment.
• Tolerance of failure
• Moral failure
• Personal failure
• Uncontrollable failure
• Change

© 2009 South-Western, a part of Cengage

13–18
Learning. All rights reserved.
UNDERSTANDING THE GROWTH STAGE
(CONT’D)
• Managing Paradox and Contradiction
• Bureaucratization versus decentralization
• Environment versus strategy
• Strategic emphases: Quality versus cost versus innovation

© 2009 South-Western, a part of Cengage

13–19
Learning. All rights reserved.
CONFRONTING THE GROWTH WALL

• Successful growth-oriented firms have exhibited consistent

themes:
• The entrepreneur is able to envision and anticipate the firm as a larger
entity.
• The team needed for tomorrow is hired and developed today.
• The original core vision of the firm is constantly and zealously
reinforced.
• “Big-company” processes are introduced gradually as supplements to,
rather than replacements for, existing approaches.
• Hierarchy is minimized.
• Employees hold a financial stake in the firm.

© 2009 South-Western, a part of Cengage

13–20
Learning. All rights reserved.
THE INTERNATIONAL ENVIRONMENT:
GLOBAL OPPORTUNITIES
• Global Entrepreneurs
• Rely on global networks for resources, design, and distribution.
• Are adept at recognizing opportunities that require agility, certainty, and
ingenuity with a global perspective.
• Must be global thinkers in order to design and adopt strategies for
different countries.

© 2009 South-Western, a part of Cengage

13–21
Learning. All rights reserved.
 VENTURE GROWTH STRATEGY: GOING
INTERNATIONAL
• To explain the importance of international trades as one of business
strategies.
• explain “methods” to enter the global market.
• Steps to be taken before entering international markets.
• discuss “barriers” to international trades.
INTERNATIONAL TRADES AS GROWTH
STRATEGIES

• “Exchange of products or services between countries”

(buying & selling of products/services across borders of the
countries)”
 BENEFITS OF INTERNATIONAL TRADES

1) Increase domestic competitiveness (citizens get better & cheaper

products)
2) Increase sales & profits (bigger markets for entrepreneurs)
3) Reduce entrepreneurs’ dependence on local market
4) Able to conquer a share of the global market.
 BENEFITS OF INTERNATIONAL TRADES

5) Extent the product life cycle.

6) Increase the potential to expand the biz (can venture from one
country to another)
7) Access to information on foreign competitors.
8) Get publicity & recognition (entrepreneurs’ companies &
products will be known worldwide)
 CHALLENGES TO ENTER
INTERNATIONAL MARKETS
• Quite difficult to enter foreign market, too
competitive, many competitors - competition too
strong.
• Must make continuous innovation, should strive
to be a step ahead of competitors.
• Must maintain & increase quality of products.
 CHALLENGES TO ENTER
INTERNATIONAL MARKETS

• Must be sensitive to needs & wants of customers from

different countries, cultures, religions & buying
behaviors.
• Must understand & constantly update info on
international markets (changes in rules & regulations,
exchange rates, changes in products demand, latest
design & techniques, new tech, changes of raw materials
prices etc.)
METHODS TO ENTER INTERNATIONAL
MARKETS.
a) EXPORTING
• a strategy of expanding the market of local products to foreign
market - not relying on domestic market only. Increase in sales
will make the biz more cost-effective, thus increase the profit.
• Exporting involves the selling & sending of products,
manufactured goods, services or raw materials from one
country to another.
 TWO TYPES OF EXPORTING

i) Indirect Exporting
• entrepreneur appoint an agent to export his
products on his behalf.
• Easy, no need to master exporting skill &
knowledge, only pay commission/fee to
agent.
• But, entrepreneur faces the risk of loosing
his market if the agent change to other
supplier.
 TWO TYPES OF EXPORTING
ii) Direct Exporting
• entrepreneur does the exporting transaction himself.
• No agent & no intermediary.
• Entrepreneur analyze & identify market potential & select ways to
deliver products to his customers overseas.
• Greater degree of involvement, higher initial cost, more risks
because entrepreneur’s lack of experience & knowledge. In the
long run, better b’cause can increase sales & profit.
 4 COMPETITIVE STRATEGIES FOR
EXPORT MARKETS.

1) Differentiation; “to be different” in term of

‘competitive price’; ‘branding’; ‘innovative
marketing technique’. (E-bay, Smartshop,
Amazon.com)
2) Focus; focusing your product to certain group of
customers only. (Rolex, Mercedes Benz, YSL,
Gucci, Ferrari)
4 COMPETITIVE STRATEGIES FOR EXPORT
MARKETS.

3) Technology; a strategy of using advanced & competitive

technology; (Sony-Ericsson, Nokia, Samsung)
4) High Quality & Superior Service Orientation –
emphasize product quality & providing excellent
service to customers (Pizza-Huts, McDonalds, Holiday
Inn)
METHODS TO ENTER INTERNATIONAL MARKETS.

b) JOINT VENTURE
• where two or more firms sharing equity to form a new
entity (firm).
• JV can be formed for the following purposes.
• (1) to get local knowledge
• (2) to use partners existing facility
• (3) to penetrate market quickly. Main objective of JV is to
share know-how, cost & risks with someone else (partner).
 ADVANTAGES OF J.VENTURE

• Can have access to skills, expertise & experience of

foreign partner.
• Taking opportunity to expand your market & to reach
new customers.
• To penetrate difficult market.
• Have easy access to technology
• To reduce the risk of long-term investment of big
capital.
 DISADVANTAGES OF JOINT VENTURE

• Different biz objective between partners.

• Different style in mgt. & different work culture may cause problem.
• Failure of a JV can cause big implication not in term of money
alone but also reputation & credibility of each parents companies.
METHODS TO ENTER INTERNATIONAL
MARKETS.
c) LICENSING
1. giving permission to foreign firm to manufacture products
using your trademark, design, patent, technology. Foreign firm
will pay royalty. Sign ‘Licensing Agreement’.
2. “Licensing’ is a suitable method to enter international market if
you do not wish to export or enter foreign market through
direct investment or if facing import restriction.
• (Adidas in Thailand, Nike in Indonesia, Puma in S. Korea)
METHODS TO ENTER INTERNATIONAL MARKETS.

d) FRANCHISING
• If an entrepreneur has a good & well known biz, he can let
foreign firms to run a biz using the same patent, name,
brand, logo, trademark, system & procedures.
• He will receive fee & royalty from foreign franchisees.
 METHODS TO ENTER INTERNATIONAL
MARKETS.
e) COUNTERTRADE
• trading mostly done by exchanging product with product,
not money.
• Exporter will be paid by importer through exchanging
mutually needed products.
• This method is used mostly by developing nations facing
difficulty paying their trades in cash.
 * 4 TYPES OF COUNTERTRADE.

1) Barter
• Product is directly exchanged with other product of the same
value.
• Exporter in selling his product, is paid for with another product
supplied by importer without involving money at all (no cash is
involved).
 4 TYPES OF COUNTERTRADE.

2) Counter Purchase
• Exporter undertakes to buy goods within a specified period of
time from importer as a condition for allowing him to export.
• The value the exporter has to counter purchase can be 10% to
100% the value of his export.
• Sometimes the exporter also is required to buy from other parties
from the importing country.
 4 TYPES OF COUNTERTRADE.

3) Compensation
• usually when a developed co/country exports heavy equipments to
less developed country, the exporting co/country agrees to buy-
back some products as as payment.
• Exporter selling his tractors & being paid for by importer with
sugar or wheat. Usually ‘compensation’ arrangement involved
longer period of time & bigger amount than barter & counter
purchase.
4 TYPES OF COUNTERTRADE.
4) Offset – often used in selling of high-tech
products. In ‘offset’ an exporter while
manufacturing a product, agree to include
components purchased from importer as a
condition for the product to be exported in that
country.
 STEPS TO BE TAKEN BEFORE ENTERING
INTERNATIONAL MARKETS.

• Ensure the product potential. Make sure product has good potential
of success in the export market. Product should be special, new in
design, unique & of high quality.
• Analyze own capability & commitment. Entrepreneur must be
committed, focus his time & effort to develop the export market.
Ensure he has enough resources needed to enter the international
market.
 STEPS TO BE TAKEN BEFORE ENTERING
INTERNATIONAL MARKETS.

• Do market analysis – Make sure there is a market for his product

(product has great demand & many want to buy). Check whether this
market is new & expanding & growing, or is this market has reach
maturity & declining. Check the buying behavior, buying trend,
competition, technology, politics, culture, economics, social aspects.
Demographic trend, transport & logistics system of that country.
 STEPS TO BE TAKEN BEFORE ENTERING
INTERNATIONAL MARKETS.

• Identify the importers; check their credit standing with banks or

other third party before signing sales agreement & sending products
to them.
• Getting finance – cost to generate sales at international market is
high. Transactions, payments & getting return on investment (profit)
takes time. Entrepreneur needs to ensure he has adequate financing.
 STEPS TO BE TAKEN BEFORE ENTERING
INTERNATIONAL MARKETS.

• Goods delivery procedure – be sure on requirement of

procedures, rules & documents with regard to delivery of goods.
Labeling & packaging procedures, shipping procedures
(insurance documents, bill of lading, custom procedures, tariff &
non-tariff regulations, legal procedure etc.)
 STEPS TO BE TAKEN BEFORE ENTERING
INTERNATIONAL MARKETS.

• Method of getting payments – most important thing is to ensure

that payment is made by importer. Choose a safe method of
payment (letter of credit, draft export, bank transfer, t.t). Method of
payment must be understood & agreed by both parties (exporter &
importer).
 ISSUES IN
• What are the issues ?
• Examples
• How to handle the issues?
• suggestions
THANK YOU