summary session 24

                                                                                                                                                        Gabriela Hartanto

                                                                                                                                                        LC02/2301851471

Summary session 24

Strategies For Firm Growth

                Internal and external growth strategies

-          Internal Growth strategies : Involve efforts taken within the firm itself, such as :

§  new product development  ->  Involves the creation and sale of new products (or services) as a means of increasing firm revenues.

§  other product related strategies  

§  international expansion -> International new ventures are businesses that, from their inception, seek to derive significant competitive advantage by using their resources to sell products or services in multiple countries.

-          External growth strategies : Rely on establishing relationships with third parties, such as  :

§  Mergers & acquisitions -> An acquisition is the outright purchase of one firm by another .A merger is the pooling of interests to combine two or more firms into one.

§  Strategic alliances & joint ventures -> A strategic alliance is a partnership between two or more firms developed to achieve a specific goal.Strategic alliances tend to be informal and do not involve the creation of a new entity.Participating in strategic alliances can boost a firm’s rate of product innovation and foreign sales.

§  Licensing -> The granting of permission by one company to another company to use a specific form of its intellectual property under clearly defined conditions.Virtually any intellectual property a company owns that is protected by a patent, trademark, or copyright can be licensed to a third party.

§  Franchising

Advantages & Disadvantages

-          Internal growth strategies : 

Ø  Advantages :

·         Incremental, even-paced growth.

·          Provides maximum control.

·          Preserves organizational culture.

·          Encourages internal entrepreneurship.

·          Allows firms to promote from within.

Ø  Disadvantages :

·         Slow form of growth.

·          Need to develop new resources.

·          Investment in a failed internal growth

·           strategy can be difficult to recoup.

·          Adds to industry capacity.

-          External growth strategies :

Ø  Advantages :

·         Reducing competition.

·          Access to proprietary products.

·          Gaining access to new products.

·          Gaining access to new markets.

·          Access to technical expertise.

·          Access to an established brand name.

·          Economies of scale.

·          Diversification of business risk.

Ø  Disadvantages :

·         Incompatibility of top management.

·          Clash of corporate cultures.

·          Operational problems.

·          Increased business complexity.

·          Loss of organizational flexibility.

·         Antitrust implications.

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