ELE 3010 | Clemson (Parnell) | Quiz 5: Chapter 13-15

what is a penetration strategy?

encouraging EXISTING customers to buy more of what is ALREADY OFFERED; does not add anything new; relies on taking market share of target market from competitors

what is a market development strategy?

selling EXISTING products to NEW CUSTOMERS; new geographic market, new demographic market, or new product use

what is a product development strategy?

NEW product to CURRENT customers; capitalizes on existing distribution systems and the corporate reputation

what is a diversification strategy?

selling a NEW product to a NEW market; forward or backward integration

backward integration

a step back (up) in the value-added chain toward the raw materials .... I.e. toy merchandiser buy plastic production plant

forward integration

a step forward (down) in the value-added chain toward the customers ... i.e. bicycle tire manufacturer begins making entire bikes and selling directly to retailers and customers

common mistakes in the growth stage

1. Founders don't realize that their job description changes > CEO should begin leading and stop doing; allow others to complete lower level work

(Stage 1 build product, stage 2 build company)

2. Mistakes in rushed or forced hiring resulting in hiring the wrong candidates

implications of growth in a firm

- HR; hiring, roles

- management of employees; maintain motivation

- Entrepreneur's time

- Financial resources: cash, unexpected expenses

how to manage growth well

- Create a scalable management model

- Define a quality control system

- Execute the systems 100% of the time

- Listen to the numbers

principle of desire

A recognition of the need to change personal attitudes and habits regarding the allocation of time.

Principle of effectiveness

A focus on the most important issues

principle of analysis

Understanding how time is currently being allocated, and where it is being inefficiently invested

What is a joint venture (a.k.a. strategic alliance)? When are they especially useful?

a unique business organized by two or more other businesses to operate for a limited time and for a specific project. It is a type of partnership especially useful for good conduit in the international market.

Types of Joint Ventures

2+ private sectors, industry - university agreements for research, and International JV's

What is an acquisition?

One company's purchase of the all or part property and obligations of another company.

Advantages of Acquisitions

- Established business* (greatest advantage)

- Location

- Cost

- Established marketing structure

- Existing employees

- quick expansion

- New markets / new product areas

Synergy

the whole is greater than the sum of its parts

Brokers

People who sell companies

JVs v. mergers

- Merger : two separate companies combine with one another to create a newly formed organization

- Joint venture: involves separate entities undertaking a company or business together, sharing its profit, loss and control; The identity of the two companies still exists

Merger Motivations

1. survival - technology is obsolete, market loss to superior product, or loss of raw materials

2. Protection against - market infringement and lower cost competitor

3. gains in - market position, tech edge, managerial strength

What is a Leveraged Buyout (LBO)? How is it unique?

Purchasing an existing venture by any employee group; uses borrowed funds and long-term debt financing (5+ yrs)

franchisor gives _ to franchisee

exclusive rights of local distribution

describe a distribution task in negotiating.

how the benefits of the relationship will be allocated between the parties; your gain is the other party's loss; fixed resources

describe an integration task in negotiating.

possible mutual benefits from the relationship so that the "size of the pie" can be increased; Collaboration results in Greater benefits for both parties; do this FIRST

one good strategy for showing flexibility and that you are considering the other party's perspective during negotiations is to ___

make multiple offers simultaneously

ESOP (employee stock ownership plan)

a 2-3 year plan to sell the business to employees creating a new legal entity; the firm is obligated to repay the loan plus interest out of business cash flows; results in significant stock values for employees

Ch. 11 Bankruptcy (Reorganization)

- Courts try to give the venture "breathing room" to pay its debts

- Plan prepared and approved by the US Bankruptcy Court

- Decisions made reflect one or a combination of the following:

* Extension - postpone claims

* Substitution - exchange stock for debt

* Composition settlement - debt is prorated to creditors as settlement

chapter 13 bankruptcy (extended time payment plans)

- Individual creates a 5-year repayment plan under court supervision

- court appointed trustee receives money from the debtor and bears responsibility for making scheduled payments to all creditors

- About 2/3 chapter 13 filers fail to meet their planned obligations (resulting in chapter 7 filing)

Chapter 7 Bankruptcy

liquidation; may be voluntary or involuntary

warning signs of bankruptcy

Lack of spending documentation, Customers are given large discounts, Contracts are accepted below standard cost, Key personnel leave, Materials are lacking, Unpaid taxes