Managing n Growing New Venture

7/28/2019 Managing n Growing New Venture

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ArchanaLingraj Abid hussain

PrabulingRanjan TikuShivan Gouda Jehangir SalamHima bindu Altaf


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GROUP 8


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New business ventures -high risk activityRisk of failure - 40% in first year & 90% over ten yearsMortality rate of new ventures is higher than established

businesses.Lack of organizational inertia & stability


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Probability that a firm will become insolvent and beunable to recover.

Taken over by another firm such that the initial teamloses control.


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Uncertainty Risk Inaccuracy of figures


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The process or product becoming obsoleteDecline in demand for the productChange in government policies about businessPrice fluctuationsForeign exchange restrictions

Inflationary tendencies


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Uncertainity can be managed in twoways

By applying modern quantitative techniques such as

System analysis , Market research, Operationsresearch, Network analysis.

By using some techniques for handling risk at thecapital investment appraisal stage.


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Shorter payback periodSensitivity analysisProbability analysis

To select or reject a proposalfollowing criteria is adopted:

Select the least risky proposal Avoid proposals with fluctuating returns Apply hurdle rates


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i. Risk relating to errors of forecasting.ii. Risks relating to factors external to enterprise.

Marketing Risks can be minimized by:long term contracts with suppliers and customerscollaboration with other producers for specializing incertain products or geographical areas.

Diversifying into certain related and unrelated products.


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It denote various type of business activities that make up thetotal operations of the enterprise.The firm must depend less on the core business and for the

sake of growth and development it should depend on newmarket and new products.

Strategic options can be:

1. New markets for existing products2. New products for existing markets


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The basic idea behind this approach:To reduce the risks of overdependence on a particular market.Ensuring optimum utilization of technological and productionfacilities.

Eg: Initially, Rasna Soft Drink concentrate was confined toMumbai market alone and thereafter it spread its marketoperations to entire Maharashtra, entire country and nowdifferent countries of the world.


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This the another way of concentrating on the particular targetmarket by not depending on a single product but to develop a

product mix of closely related products .

Eg: Singer company in India started its operations withsewing machine but today its product range includes toaster,grinder, mixer, microwave oven etc


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(1) MARKET SCOPE STRATEGIES.

(2) IMITATION STRATEGIES.


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The basic kinds of market measurement are:1. Absolute market potential.2. Relative market potential.

3. Industrys and the companys sales forecasts.

MARKET SCOPE STRATEGY

NARROW SCOPE BROAD SCOPE


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Imitation is another strategy for minimizing the risk of downside loss associated with new entry.Imitation involves copying the practices of other firms

whether those firms are in industry being entered or from related industry. It helps in quickly acquiring theskills that will be rewarded by the industry.

IMITATION STRATEGIES

Franchising MEE TOO


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Growth Strategy refers to a strategic plan

formulated and implemented forexpanding firms business .


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INTENSIVE GROWTH STRATEGY (Expansion)

Intensive growth strategy or expansion involves raisingthe market share, sales revenue and profit of the present

product or services. The firm slowly increases its productionand so it is called intensive growth strategy.It is a good strategy for firms with a smaller share of themarket.

Three alternative strategies are available in this regard.

Market PenetrationMarket developmentProduct development


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Productsmarkets

present new

present Market penetration(penetrate existingmarkets with existingproducts)

Product development(introduce newproducts in existingmarkets)

new Market development(enter new markets with existing products)

Diversification(introduce newproducts in new

products)


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Entering new industriesRelated diversificationUnrelated diversification

Divestiture & liquidationCorporate turnaround, retrenchment & restructuring


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A firm may use the strategy of modernization to

achieve growth. Modernization basically involves upgradation of technology to increase production, toimprove quality and to reduce wastages and cost of

production. The worn-out and obsolete machines andequipment are replaced by the modern machines andequipment.


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MERGER

Merger can occur in two ways:

*ACQUISATION OR TAKEOVER

*AMALGAMATION

Join t ventu r e


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Definition 1Increasing market share of an existing product, or promotinga new product, through strategies such as bundling,extensive advertising, lower prices, or volume discounts.

Definition 2Measure of the extent of a product's sales volume relative tothe total sales volume of all competing products, expressedas a percentage.


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Example

Market Penetration:

Starbucks was founded in 1971 in Seattle, andwas able to achieve widespread market penetrationacross the United States. Soon after, they expandedglobally.


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Growth can occur through market development strategies.Market development strategies refer to the various stepsinitiated for building up the market for a product. Market

Development Strategies involve selling the firms existing products to new groups of customers. New groups of customers can be categorized in terms of geographic, demographic, and /or based on a new product use.

1. New Geographic Market.2. New Demographic Market.3. New Product Use.


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1.New Geographical Market

This simply suggests selling the existing product in newlocations.

This has the potential of increasing sales by offering the

product to customers who have not previously had thechance to purchase its products.

The entrepreneur must be aware of possible regionaldifferences in customer preferences, language, and legalrequirements that may necessitate a slight change in the

product ( or packaging ).


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2. NEW DEMOGRAPHIC MARKET

Demographics are used to characterize ( potential ) customers based upon their income , where they live, their education, age,gender and so on.

For an entrepreneur that is currently selling the firms existing product to a specific demographic group the business couldgrow by offering the same product to a different demographicgroup.


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3. NEW PRODUCT USE

new knowledge of product use provides insight into howthe product may be valuable to new groups of buyers.it capitalizes on existing knowledge and expertise in a

particular technology and production process.A well balanced new product development strategy oftenallocates resources as follows:

- 65% core market growth- 15% adjacent or related market growth

- 15% new market creation- 5% disruption


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A product is a set of tangible and intangible attributesincluding packaging color, price, quality and brand plus the

service and reputation of the seller. - Peter D Bennelt

Anything that can be offered to satisfy a need or want.- Philip Kotler

Product planning involves devising procedures to evaluate the performance of products and planning the modification, wherenecessary, of existing products aimed at extending their lives;and the development and marketing of new products.

- Dale Littler


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To cater to Consumers Requirements

To Ensure Optimum Resource UtilizationTo locate Strengths and WeaknessesTo Ensure Firms Survival To Increase Sales


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IDEA GENERATION

SCREENINGPRODUCT

IDEAS

CONCEPTTESTING

BUSINESS ANALYSIS

PRODUCTDEVELOPMENT

TESTMARKETING

COMMERCIALISATION


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A situation where a company, who has

had poor performance for an extended periodof time, experiences a positive reversal.

A speculator may profit from a turnaround if he or sheaccurately anticipates the improvement of a poorly

performing company.


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1. Analyze the current position. -- Where are we now?

2. Define a target position. -- Where can we get from here?3. Evaluate the strategic options.4. Generate Plans, and endorse them.


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Revenue downturn caused by a weak economy Overly optimistic sales projectionsPoor strategic choices

Poor execution of a good strategy High operating costsHigh fixed costs that decrease flexibility Insufficient resourcesUnsuccessful R&D projectsHighly successful competitorExcessive debt burden

Inadequate financial controls


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Plan AheadSeek Help EarlyMinimize Expenses

Evaluate The Corporate StructurePick Battles CarefullyDispose Of Excess BaggageControl The BudgetIncrease Employee ProductivityBe Realistic And FlexibleRely On Turnaround Professionals


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Managing n Growing New Venture

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