Chapter 19

Question 1

Barriers to entrepreneurial growth

Answer 1

Attitudinal problems

Entrepreneurs value of independence and ownership control

External factors:

• lack of finance
• no market demand growth
• increasing competition

Question 2

Internal and external motivators for growth

Answer 2

Internal entrepreneur

• satisfy need for achievement
• increase for control and independence
• generate store of wealth for family

External motivators

• increase status of owner in social/business networks
• leverage external resources
• Consider threats

Question 3

Business life cycle

Answer 3

Stage 1: Nascent stage - R&D takes place to develop idea into opportunity. No growth recorded

Stage 2: Start up - company establishes existence, marketing, finance and operations need development, sales and profits increase;can last 2-3 years

Question 4

GENERIC GROWTH STRATEGIES

Answer 4

PART-TIME COMPANY

TRADITIONAL SMALL BUSINESS

HIGH PERFORMANCE SMALL BUSINESS
(5% -15%)

HIGH GROWTH VENTURES
(25 %)

Question 5

Growth strategies

Answer 5

Internal

• invest in new products
• exclusive agreements with customers
• licensing
• alliances
• dealerships
• franchising

External

• mergers and acquisitions
• joint ventures

Question 6

Entrepreneurs growth orientation

Answer 6

• embraces calculated risk
• delivering value proposition satisfying needs
• entrepreneurs focuses on quality

Fear of success:

• procrastination
• low self esteem

Question 7

Growing your business - marketing practices

Answer 7

• new products and services
• market structure: understanding, who are your competitors ? Suppliers?
• Markets size and growth
• Geographic expansion

Question 8

Growing the business - financial practices

Answer 8

-Financial nature of the business

cash flow, timing, valuation methods

• Equity capital: money given to the business in enhance for part ownership of the business
• Debt capital: money borrowed to invest in the business, with a legal obligation to repay the money in the future

Question 9

Growing your business management practices

Answer 9

• Collaborative decision making style
• Balanced top-management team (knowledge background of key functional areas
• Alignment of number of management levels with number of individuals in top management
• balanced board of directors
• calibrate strategies
• involve board of directors at strategic inflection points ( big decisions needs expertise of directors)

Question 10

Growing your business - planning practices

Answer 10

Prepare detailed written monthly plans

Establish functional planning and control systems

Share performance data with employees

Link job performance standards

Model firm based on benchmarks

Question 11

Harvesting the business

Answer 11

Harvesting : recovery of value through the sale of a company’s its assets.

Reasons for harvesting :

external factors

Death/ill health

Psychological and mental breakdown

Loss of key expertise

Internal factors :

Goal of entrepreneur

Pursuit of new ventures

Succession

Disillusionment

Retirement

Question 12

Harvesting options

Answer 12

• Outright sale
• Buyouts :

leveraged buyout LBO

Management buyout

Management buy in

• employee share option plans
• merging with another business venture
• initial public offering