what is the lynch expansion matrix?
summarises growth options open to a business. considers options of external / internal development and home / abroad
according to the lynch matrix, what are the options to internally develop in a home country?
internal domestic development. improve human resources, finance or current technology.
according to the lynch matrix, what are the options to internally develop abroad?
exporting
overseas office
overseas manufacture
multinational operation
global operation
according to the lynch matrix, what are the options to externally develop in a home country?
merger
acquisition
alliance
franchise / licence
according to the lynch matrix, what are the options to externally develop abroad?
joint venture
merger
acquisition
alliance
franchise / licence
state five advantages of acquisition.
- quicker
- get round barriers to entry
- one less competitor
- can hide ones identity in xenophobic foreign market
- synergies (2+2=5)
state four disadvantages of acquisition.
- entry cost may be too high
- clash of cultures
- easier to control growth if organic
- reputation of target company?
state the four types of synergies in acquisitions.
- marketing and sales synergies
- operating synergies
- financial synergies
- management synergies
explain marketing and sales synergies.
having common sales team, wider product range for clients
explain operating synergies.
gaining EoS, rationalisation, use of same distribution channels
explain financial synergies.
sale of surplus assets, spread risk therefore cheaper capital to be obtained
explain management synergies.
gaining the transfer of learning & increased opportunities.
state the four options for joint development strategies.
- joint ventures
- strategic alliances
- licensing
- franchising
what is a joint venture?
contractual agreement between companies usually by setting up another separate company
what is a strategic alliance?
a long term agreement to share knowledge, technology or a business opportunity
what is licencing?
the right to exploit an invention / resource in return for share of the profit
what is franchising?
the right to exploit business brand in return for capital sum plus share of profits / rev
state seven key issues in joint development strategies.
- sharing out risks and returns
- splitting of capital and operating costs
- possible conflicts over operatint decisions
- small firms may not have critical mass to go it alone
- quality problems
- level of support
- danger of other partner gaining info / tech that could later be used against them (trade secrets)
state five advantages of franchising.
- lower risk for franchisee
- shared financing
- franchisee offers local knowledge
- rapid expansion for franchiser
- economies of scale
state three disadvantages of franchising.
- conflicts over operating decisions
- control of quality up to the franchisee - may compromise brand image
- successful franchisees often break away & set up opposition
what are the source of finance options for each growth stage?
start-up : personal finance, supplier credit, venture capital
small business : business loans, retained profits, development capital
growth to corporation : public equity, corporate bonds
mature corporation : all of above
state five advantages of listing on a recognised stock exchange.
- access to large funding pool
- enhanced marketability of shares
- exit route for investors
- higher pblic profile
- easier to make acquisitions
state four disadvantages of listing on a recognised stock exchange.
- high listing / regulation costs
- loss of control as shares fall into public hands
- increased media scrutiny
- large institutional investors to satisfy
