STRATEGIC ENTREPRENEURSHIP

TOPIC 7DR ANIS AMIRA AB RAHMAN

SITI AFIQAH BINTI ZAINUDDIN

FACULTY OF ENTREPRENEURSHIP AND BUSINESSUNIVERSITI MALAYSIA KELANTAN

anisamira@umk.edu.my

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MANAGING START-UP STAGE IN RAPID GROWTH INDUSTRY

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Strategic Entrepreneurship and Strategic Management

Source : Wheelen, T. L. and Hunger, J. D. (2000 cited in Kuratko, D. F. & Hodgetts,

R. M., 2004: 521).

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What are stages in business cycle?

Start-up stage: Strategies for the introduction stage emphasize a buyer focus, building on advertising, and increasing purchase frequency. Product development was seen as important activity.

Growth stage: Focus on strategic segmentation and building efficiencies in production and marketing.

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What are stages in business cycle?

Maturity stage: More complex, improving efficiency in process, reducing overall costs in marketing and distribution, further differentiation of products, and further market segmentation.

Decline stage: Little work has been done regarding strategies leading to high performance in the decline stage (i.e. Retain relationships with customer)

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Business Life Cycle

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Start up stage in business cycle

Business is born and now exists legally

Have overestimated money needs and the time to market

The budget best be revised often because more cash might be needed than expected

Support and coaching of the CEO and board of directors

Complete Business and Marketing Plan

Assistance in negotiations for capital increase

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Type of start-up cost

Start-up stage require establishing a customer base and market presence along with tracking and maintaining cash flow.

Sales promotion consists of short-term incentives to encourage purchase or sales of a product or service. Whereas advertising offers reasons to buy a product or service, sales promotion offers reason to buy now (Kotlerand Armstrong, 2013).

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Nature and Type of Rapid Growth Industry (RGI)

The “sales growth” is the main indicator to label anyrapid growth industries. With such indicator,Barringer et al. (2005) define the rapid growth firmsas firms with a 3-year compound annual sales growthrate of 80% or above, provide an important stimulusto the national economy.

In addition, rapid growth is frequently an indication ofmarket acceptance and firm success.

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Nature and Type of Rapid Growth Industry (RGI)

These are several factors for firm’s ability to achieve andmaintain rapid growth, which are:

(1) founder characteristics,

(2) firm attributes,

(3) business practices, and

(4) HRM practices.

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(1) Founder characteristics

The relationship between founder characteristics and firm growth is important for at least three reasons:

it is widely believed that the founders of a firm place alasting “stamp” on their companies that influences thecultures and behaviors of their firms (Mullins, 1996).

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(1) Founder characteristics

2. investors and others often assess the potential of a new venture by evaluating the attributes of its founders.

3. launching a new firm is a challenging process.

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(2) Firm attributes

Two important attributes are:

1. a growth-oriented vision.

2. commitment to growth.

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(3) Business practices

There are several key business practices that typify successful rapid-growth firms.

Creating unique value for customers.

Product superiority or Quality.

Innovation

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(4) HRM Practice

Human resource management practices must be appropriate in sustaining the firms in rapid growth industry. These involves:

Selective hiring.

Performance-based incentives.

Stock option plans and employee stock ownership plans.

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World Rapid-growth industries

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Cont..

In Malaysia, several industries have been identified in thecategory of rapid-growth industries such as E-Commerce,ICT, Financial consultation, Consumer Product, Beveragesand etc. (BERNAMA, 2014)

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Start-Up and Rapid Growth Industry

Source : Aashish Mehra (2011)

Choose the 'rightroad to run'

Convert Strategy into clear execution agenda

Link execution agenda to on-ground action

Manage change for smooth transition

Create structure, culture for growth & professional 'tango'

Reinvent and reinforce core processes to 'run well on road'

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(1) Choose the “right road to run”

Instead of being largely opportunistic, theymeticulously plan the company’s growth, andconsciously choose which road to take. But this is onlyhalf the battle won. To realize the “value potential”created by it, companies need impeccable executionand must “run well on the chosen road”- else,significant value can be lost.

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(2) A clear execution agenda

Promoters convert their strategy into a well-definedexecution agenda for top management, with clearinitiatives, goals, responsibilities, timelines and resourcerequirements.

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(3) Execution linked to “on-the-ground action”

They ensure that this execution agenda seamlessly flows intotheir annual plans and budgets, and is rigorously reviewed bytop management.

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(4) Reinvent & reinforce core processes to “run well on road”

Robust, world-class core processes. They identify a few coreprocesses, such as project planning and monitoring,equipment utilization, bidding, risk management, resourceallocation and reinvent them to world class standards foroperational excellence.

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(5) Create structure, culture for growth& promoter-professional “tango”

The “promoter-professional” tango, and a structure andculture for growth. They realize early on that it takes bothpromoters and professionals to do the billion dollar tango, andcreate the requisite organizational structure and cultureconducive for growth.

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(6) Manage change for smooth transition

Change management initiatives for smooth transition. Theydrive change from the front; gauging and managingstakeholder expectations, clearly communicating the changes,and creating success stories.

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REFERENCES

Barringer, B. R., Jones, F. F., & Neubaum, D. O. (2005). Aquantitative content analysis of the characteristics of rapid-growth firms and their founders. Journal of business venturing,20(5), 663-687.

Kotler, P. and Armstrong, G., (2013). Principles of marketing, 15th

ed. Prentice Hall.

Kuratko, D. F., & Hodgetts, R. M. (2004). Entrepreneurship: Theory,process, practice. Mason, Ohio: Thomson/South-Western

Aashish Mehra, G. S. (2011). Managing rapid growth : How midcaps can leap into the billion dollar club .

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