MODULE 4MODULE 4

MANAGING, GROWING AND MANAGING, GROWING AND ENDING THE VENTUREENDING THE VENTURE

ENTREPRENEURIAL STRATEGY: ENTREPRENEURIAL STRATEGY: GENERATING AND EXPLOITING GENERATING AND EXPLOITING

NEW ENTRIESNEW ENTRIES

NEW ENTRYNEW ENTRY

Offering a new product to an Offering a new product to an established or new market, offering established or new market, offering an established product to a new an established product to a new market or creating a new market or creating a new organizationorganization

GENERATION OF A NEW ENTRY GENERATION OF A NEW ENTRY OPPORTUNITYOPPORTUNITY

Resources as a source of Resources as a source of competitive advantagecompetitive advantage

Creating a resource bundle that is Creating a resource bundle that is valuable, rare and inimitablevaluable, rare and inimitable

1.1. Market knowledgeMarket knowledge

2.2. Technological KnowledgeTechnological Knowledge

ASSESSING THE ASSESSING THE ATTRACTIVENESS OF A NEW ATTRACTIVENESS OF A NEW

ENTRY OPPORTUNITYENTRY OPPORTUNITY Information on a New EntryInformation on a New Entry

Prior Knowledge and Information Prior Knowledge and Information SearchSearch

window of opportunitywindow of opportunityComfort with Making a Decision Comfort with Making a Decision

under Uncertaintyunder Uncertainty

error of commissionerror of commission

error of omissionerror of omission

ENTRY STRATEGY FOR NEW ENTRY STRATEGY FOR NEW ENTRY EXPLOITATIONENTRY EXPLOITATION

First movers develop a cost advantageFirst movers develop a cost advantageFirst movers face less competitive First movers face less competitive

rivalryrivalryFirst movers can secure important First movers can secure important

channelschannelsFirst movers are better positioned to First movers are better positioned to

satisfy customersatisfy customerFirsts movers gain expertise through Firsts movers gain expertise through

participationparticipation

Environmental instability and Environmental instability and First mover (Dis)advantageFirst mover (Dis)advantage

Key success factorKey success factorDemand uncertaintyDemand uncertaintyTechnological UncertaintyTechnological UncertaintyAdaptationAdaptation

Customers Uncertainty and First Mover Customers Uncertainty and First Mover (Dis)Advantage(Dis)Advantage

Lead time and First mover Lead time and First mover (Dis)Advantage(Dis)Advantage

1.1. Building customer loyaltiesBuilding customer loyalties

2.2. Build switching costsBuild switching costs

3.3. Protecting product uniquenessProtecting product uniqueness

4.4. Securing access to important sources of Securing access to important sources of supply and distributionsupply and distribution

RISK REDUCTION STRATEGIES RISK REDUCTION STRATEGIES FOR NEW ENTRY EXPLOITATIONFOR NEW ENTRY EXPLOITATION

Probability and magnitude of Probability and magnitude of downside lossdownside loss

Strategy to reduce risk Strategy to reduce risk 1.1. Market scope strategyMarket scope strategy

2.2. imitation strategyimitation strategy

3.3. Managing newnessManaging newness

Market scope strategyMarket scope strategy

A choice about which customer group A choice about which customer group to serveto serve

Narrow scope strategyNarrow scope strategyBroad scope strategy Broad scope strategy

Imitation strategyImitation strategy

Why do it?Why do it?Franchising Franchising ““me-too strategy”: copying products me-too strategy”: copying products

that already exist and attempting to that already exist and attempting to build an advantage through minor build an advantage through minor variationsvariations

Managing NewnessManaging Newness

Learning new taskLearning new taskNew role assignmentNew role assignmentFormal and informal communicationFormal and informal communication

STRATEGIES FOR GROWTH STRATEGIES FOR GROWTH AND MANAGING THE AND MANAGING THE

IMPLICATIONS OF GROWTHIMPLICATIONS OF GROWTH

GROWTH STRATEGYGROWTH STRATEGY

PENETRATION PENETRATION STRATEGYSTRATEGY

PRODUCT PRODUCT DEVELOPMENT DEVELOPMENT STRATEGYSTRATEGY

MARKET MARKET DEVELOPMENT DEVELOPMENT STRATEGYSTRATEGY

DIVERSIFICATIONDIVERSIFICATION

EXISTING

NEW

EXISTING NEW

PRODUCT

MARKET

ECONOMIC IMPLICATION OF ECONOMIC IMPLICATION OF GROWTHGROWTH

IMPLICATION OF GROWTH FOR IMPLICATION OF GROWTH FOR THE FIRM THE FIRM

Pressures on Existing Financial Pressures on Existing Financial ResourcesResources

Pressure on Human ResourcePressure on Human ResourcePressure on the management of the Pressure on the management of the

employeeemployeePressures on the Entrepreneur’s Pressures on the Entrepreneur’s

TimeTime

OVERCOMING PRESSURES ON OVERCOMING PRESSURES ON EXISTING FINANCIAL EXISTING FINANCIAL

RESOURCESRESOURCESFINANCIAL CONTROLFINANCIAL CONTROL

Managing cash flowManaging cash flow

Managing inventoryManaging inventory

Managing fixed assetsManaging fixed assets

Managing costs and profitsManaging costs and profits

TaxesTaxes

Record keepingRecord keeping

OVERCOMING PRESSURES ON OVERCOMING PRESSURES ON EXISTING HUMAN RESOURCESEXISTING HUMAN RESOURCES

OVERCOMING PRESSURES ON OVERCOMING PRESSURES ON THE MANAGEMENT OF THE MANAGEMENT OF

EMPLOYEESEMPLOYEESEstablish a Team spiritEstablish a Team spiritCommunicate with employeesProvide Communicate with employeesProvide

feedbackfeedbackDelegate some responsibility to Delegate some responsibility to

othersothersProvide continuous training for Provide continuous training for

employeesemployees

OVERCOMING PRESSURES ON OVERCOMING PRESSURES ON ENTREPRENEURS TIMEENTREPRENEURS TIME

Increased ProductivityIncreased Productivity Increased Job SatisfactionIncreased Job Satisfaction Improved interpersonal RelationshipsImproved interpersonal RelationshipsReduce time anxiety and TensionReduce time anxiety and TensionBetter healthBetter health

Basic Principles of time Basic Principles of time ManagementManagement

Principle of DesirePrinciple of DesirePrinciple of effectivenessPrinciple of effectivenessPrinciple of AnalysisPrinciple of AnalysisPrinciple of TeamworkPrinciple of TeamworkPrinciple of prioritized PlanningPrinciple of prioritized PlanningPrinciple of ReanalysisPrinciple of Reanalysis

IMPLICATIONS OF FIRM GROWTH IMPLICATIONS OF FIRM GROWTH TO THE ENTREPRENEURTO THE ENTREPRENEUR

A categorization of entrepreneurs A categorization of entrepreneurs and their firms growthand their firms growth

Annual growth of the firmAnnual growth of the firm

Unused potential for the growthUnused potential for the growth

Constrained growthConstrained growth

little potential for firms growthlittle potential for firms growth

GOING PUBLICGOING PUBLIC

ADVANTAGES OF GOING ADVANTAGES OF GOING PUBLICPUBLIC

Ability to obtain equity capitalAbility to obtain equity capitalEnhanced ability to borrowEnhanced ability to borrowEnhanced ability to raise equityEnhanced ability to raise equityLiquidity and valuationLiquidity and valuationPrestigePrestigePersonal wealthPersonal wealth

DISADVANTAGEDISADVANTAGE

Increased Risk Of LiabilityIncreased Risk Of LiabilityExpenseExpenseRegulation of corporate governance Regulation of corporate governance

policies and procedurespolicies and proceduresDisclosure of informationDisclosure of informationPressures to maintain growth patternPressures to maintain growth patternLoss of controlLoss of control

THE ALTERNATIVES TO GOING THE ALTERNATIVES TO GOING PUBLICPUBLIC

Private placement: institutional Private placement: institutional investor, investment companies, investor, investment companies, insurance companies and pension firminsurance companies and pension firm1.1. Restrictive covenant: statement Restrictive covenant: statement

indicating the things that cannot be done indicating the things that cannot be done without approval without approval

2.2. Liquidation covenant: the right of an Liquidation covenant: the right of an investor to sell the interest in the investor to sell the interest in the companycompany

Bank loans: Bank loans: Collaterals like some tangible assetsCollaterals like some tangible assets

TIMING OF GOING PUBLIC AND TIMING OF GOING PUBLIC AND UNDRWRITER SELECTION UNDRWRITER SELECTION

TimingTiming1.1. Is the company large enoughIs the company large enough

2.2. What is amount of the company’s What is amount of the company’s earnings and how strong is its financial earnings and how strong is its financial performanceperformance

3.3. Are the market conditions favorable for Are the market conditions favorable for IPOIPO

4.4. How urgently the money neededHow urgently the money needed

5.5. What are the needs and desires of the What are the needs and desires of the presents ownerspresents owners

UNDERWRITER SELECTIONUNDERWRITER SELECTION

Managing underwriter : lead financial Managing underwriter : lead financial firm in selling stocks to the public firm in selling stocks to the public

Underwriting syndicate : group of Underwriting syndicate : group of firms involved in selling stock to the firms involved in selling stock to the pub;licpub;lic

REGISTRATION STATEMENT AND REGISTRATION STATEMENT AND TIMETABLETIMETABLE

Full and fair disclosureFull and fair disclosureProspectusProspectusRegistration statementRegistration statementForm S-1Form S-1

The ProspectusThe ProspectusPart IIPart IIProcedureProcedure

Red herringRed herring

Comment letterComment letter

Pricing amendmentPricing amendment

LEGAL ISSUES AND BLUE-SKY LEGAL ISSUES AND BLUE-SKY QUALIFICATIONSQUALIFICATIONS

Quiet period : 90 day period in going Quiet period : 90 day period in going public when no new company public when no new company information can be released information can be released

Blue sky Qualifications : laws of each Blue sky Qualifications : laws of each state regulating public state regulating public

AFTER GOING PUBLICAFTER GOING PUBLIC

Aftermarket supportAftermarket support

Relationship with the Financial Relationship with the Financial communitycommunity

Reporting requirementsReporting requirements

ENDING THE VENTUREENDING THE VENTURE

BANKRUPTCY- AN OVERVIEWBANKRUPTCY- AN OVERVIEW

Business face a weak economyBusiness face a weak economy

Increased competitionIncreased competition

Rising cost of doing businessRising cost of doing business

Lessons learned from Lessons learned from bankruptcybankruptcy

Should focus only on known marketsShould focus only on known markets It protect from creditors not from It protect from creditors not from

competitorscompetitorsWorrying about the future of their Worrying about the future of their

employeesemployees It needs to shared with employees It needs to shared with employees

and everybody else involvedand everybody else involved

CHAPTER 11 - CHAPTER 11 - REORGANIZATIONREORGANIZATION

Surviving bankruptcySurviving bankruptcy

Prepackaged bankruptcyPrepackaged bankruptcy

CHAPTER 13-EXTENDED TIEM CHAPTER 13-EXTENDED TIEM PAYMENT PLANSPAYMENT PLANS

CHAPTER 7-LIQUIDATION CHAPTER 7-LIQUIDATION

Voluntary bankruptcyVoluntary bankruptcy

Involuntary bankruptcyInvoluntary bankruptcy

KEEPING THE VENTURE KEEPING THE VENTURE GOINGGOING

Avoid excess optimism when Avoid excess optimism when business appears to be successfulbusiness appears to be successful

Always prepare good marketing Always prepare good marketing plans with clear objectivesplans with clear objectives

Make good cash projections and Make good cash projections and avoid capitalizationavoid capitalization

Keep abreast of the marketplaceKeep abreast of the marketplace Identify stress points that can put the Identify stress points that can put the

business in jeopardybusiness in jeopardy

WARNING SIGNS OF WARNING SIGNS OF BANKRUPTCYBANKRUPTCY

Management of finances becomes Management of finances becomes lax, so that no can explain, how lax, so that no can explain, how money is being spentmoney is being spent

Directors cannot document or Directors cannot document or explain major transactionexplain major transaction

Customer are given large discounts Customer are given large discounts to enhance payments because of to enhance payments because of poor cash flowpoor cash flow

Contracts are accepted below Contracts are accepted below standard amount s to generate netstandard amount s to generate net

Bank requests subordination of its Bank requests subordination of its loansloans

Key personnel leave the companyKey personnel leave the companyMaterials to meet orders are lacking Materials to meet orders are lacking Payroll taxes are not paidPayroll taxes are not paidSuppliers demand payment in cashSuppliers demand payment in cashCustomers complaints regarding Customers complaints regarding

service and product quality increaseservice and product quality increase

THE REALITY OF FAILURETHE REALITY OF FAILURE

The entrepreneur should consult with The entrepreneur should consult with his or her familyhis or her family

The entrepreneur should seek The entrepreneur should seek outside assistance from outside assistance from professionals, friends and business professionals, friends and business associatesassociates

It is important to not try to hang on It is important to not try to hang on to a venture that will continually to a venture that will continually drain resouces if the end is inevitabledrain resouces if the end is inevitable

EXIT STRATEGYEXIT STRATEGY

SUCCESS OF BUSINESSSUCCESS OF BUSINESS

Transfer to family membersTransfer to family members

Transfer to non family membersTransfer to non family members

HARVESTING STRATEGYHARVESTING STRATEGY

Direct SaleDirect SaleEmployee stock option planEmployee stock option planManagement buyoutManagement buyout