CHAPTER 17
Planning for Growth
SUMMARY AND AUTHOR’S NOTE
The natural by-product of a successful launch is growth. However, it’s important that
entrepreneurs plan for this critical time in the life of the business because, after startup, the
growth phase is often the riskiest phase if a plan for execution and the right people are not in
place. This chapter considers intensive, integrative, and diversification strategies that
entrepreneurs may use to grow their companies, but it also explores the idea that some business
owners choose not to grow. The question of whether or not to grow is a very serious one,
CHAPTER OBJECTIVES
After reading this chapter, students will be able to:
• Explore strategic innovation as a growth strategy.
CHAPTER OUTLINE
OPENING CASE: The Dead Sea Is a Fountain of Opportunity
• Table 17.1—Top 10 Inc. 500 Companies by Growth Rate
I. To Grow or Not to Grow—controlling the rate of growth
Chapter 187: Planning for Growth 71
II. Stages of Growth in a New Venture—four phases of growth for a business
• Figure 17.1—Stages of Growth and Company Focus
III. Factors that Affect Growth—market, management, and scale factors in growth
a. Market Factors—how market strategy affects growth
IV. Strategic Innovation—Changing the Game—innovation strategies for growth
V. Growing Within the Current Market—exploiting the current market fully
a. Market Penetration—increasing sales with marketing strategies within the current
target market
b. Market Development—taking the product or service to a broader geographic area
c. Modular or Network Strategies—focusing on the core activities
GLOBAL INSIGHTS—Africa Focuses on Startups
VII. Diversification Growth Strategies—Growing Outside the Industry—investing in or
RELEVANT CASE STUDIES
Case 8 Demand Media
Case 9 The Case of Google, Inc.
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ANSWERS TO QUESTIONS ON KEY ISSUES
1. What are four characteristics of high-growth companies?
2. How can both market and management factors affect the growth of a new venture?
The market and management strategies you choose can affect the growth rate of the new
3. What questions should you ask at each level of the new venture’s growth?
Startup: Do I have sufficient startup capital, customers, a way to deliver the product or
service, and a team that can make this happen?
Initial Growth: Can the business generate sufficient cash flow to pay all the expenses and
support the growth of the company?
High Growth: How can I maintain control of rapid growth? Am I willing to give up control
to professional management?
4. What advantages do growing within the current market have over integrative and
diversification strategies?
Strategies for growing within a current market are usually less expensive and easier to
5. Why is it important to start a growth-oriented business with a plan for globalization from
the beginning?
Due to rapidly changing technology, product lives are shorter and companies are now
6. How do foreign agents, distributors, and export trading companies differ in the services
they provide?
Chapter 187: Planning for Growth 73
Agents purchase your product at a discount off list and then sell it and handle collections
SUGGESTIONS FOR EXPERIENCING ENTREPRENEURSHIP
1. Visit an export center in your area and talk to a Department of Commerce trade specialist
who can advise you on how to become prepared to export. What did you learn that you
hadn’t learned from reading this text?
2. Interview an entrepreneur whose new venture is in its early stages, and question him or her
about the growth strategy for the business. Can you identify the type of strategy being
used?
SUPPLEMENTARY LECTURE MATERIAL
Growing When It’s Hard to Grow
Four years ago Fortune magazine began tracking the fastest growing small companies on the
major stock exchanges. These companies had less than $200 million in annual revenue and a
stock price greater than $1 per share. Fortune ranked each venture in three critical areas:
earnings growth, revenue growth, and total stock return, including dividends, for the previous
three years.
Fortune wanted to learn what it takes to continue to grow in difficult times. What it found was
that only about 9 percent of 8,000 companies studied globally increased revenues and profits by
Here are the lessons that students should take from the success of these companies:
Make sure that your business model can be applied over and over again so that you don’t
depend on the success of one product.
74 Chapter 187: Planning for Growth
Take the right road. Find your core competency.
Be patient. Wait for the right moment to act; then act decisively.