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Three Strategies for Managing Growth

Three Strategies for Managing Growth. Erin, Giang, Jason, Mike, Scott BA 569 -- Fall 2007. Agenda. The Three Strategies: Scaling -- Giang Duplication -- Mike Granulation -- Scott Combining -- Erin. Scaling: Doing more of what you are good at. What does it start with?.

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Three Strategies for Managing Growth

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  1. Three Strategies for Managing Growth Erin, Giang, Jason, Mike, Scott BA 569 -- Fall 2007

  2. Agenda The Three Strategies: • Scaling -- Giang • Duplication -- Mike • Granulation -- Scott • Combining -- Erin

  3. Scaling: Doing more of what you are good at

  4. What does it start with? - A coherent vision about concrete product, technology and customer segment A brief, clear and understandable vision that reflects company’s commitment growth

  5. Is it the right the strategy? • Potentially large market • Unique product • Wide distribution system at low cost

  6. How to do it? • Invest aggressively • Specialize and Standardize • Hire the right mix • Adapt the structures • Find ways to learn from customers early • Video: Creating a Great Strategy: Business Week

  7. Duplication “Repeating The Business Model In New Regions” When you discover what works in one region do the same thing in the next! Duplication starts with a coherent vision of products, technologies and customer segments plus goals for geographic expansion EX: IKEA “Swedish Design skills and stores that could communicate an appealing lifestyle to young people everywhere”

  8. Balance standardization and adaptation “Package the companies entrepreneurial know-how for new geographic areas” Balance Standardization -Keeping processes and organizational details close to the way they are done in the original location Adaptation -Changing the organization and processes to address the needs of the local region Standardized Staffing, Training, and remuneration plans -Company can rotate employees instead of having to hire and train new people when sales work in one locale increases

  9. Is Duplication The Right Strategy! -The business requires physical presence and the company can repeat its business model in new geographic markets EX: For businesses that sell items that the customer wants to see and touch! -There is a need for local distribution -A company would shift from a scaling strategy to a duplication strategy when distribution channels are underdeveloped -The company can Adapt Its Experiences in product development, manufacturing and marketing approaches fairly easily -New trends from foreign markets can lead to better target marketing

  10. Duplicate key parts of the infrastructure! • A company needs to externalize or transfer key elements of the infrastructure EX: Ikea's European Expansion -European expansion group,“Knowledge Marines” Buy Land Construct Outlets Design Sore Decor Hire Employees -Two months before opening First Year Group would take charge Training People, Arranging The Store Openings Setting Up Operations Establishing local organization to run the operations Duplicate Entrepreneurial knowledge -Site locations -Logo -Store design’s and layouts -Standardized and documented products -Catalog Format -Personnel selection and training

  11. Be aware Of The Limitations Of Duplication strategies! • Customer tastes and employee backgrounds are too diverse for one set of processes and programs to fit all situations • When Ikea expanded to the US there many subtle differences in tastes and shopping, • European sheets did not fit American beds • A company must be able to learn quickly, fixing procedures and products that don’t work and make the people who created them aware of the new requirements • Senior management must have the openness and flexibility necessary for modifying a formula that was a winner back home • Especially true for young high-growth companies expanding abroad in highly competitive market

  12. Duplication Challenges! For a company to utilize duplication they need to learn information on each market they are entering into • Local market conditions • Mass manufacturing • Mass Marketing • Competitors in each market with their own strengths and weaknesses • Currency risks • Regulatory differences • The best way to handle logistics

  13. Granulation Strategy: • gran·ule  [gran-yool] • n. a tiny grain or cell • gran·u·la·tion [gran-yuh-ley-shuhn] • n. A business strategy focusing on growing select cells within a company

  14. Granulation: SAP • 1972 - Founded in Germany in 1972, • releases R/1 • 1992 - SAP Scales up • Launches R/3, becomes global software juggernaut • 1996 - SAP Duplicates • Reorganizes into industry business units • 1999 – SAP Granulates • Began focusing on Web interfaces • 2003 - Launched NetWeaver

  15. Is Granulation the Right Strategy for You? • Has your company: • Exhausted growth through Scaling & Duplicating? • Identified a new technology that could be substituted for your own product? • Matured sufficiently to handle Granulation?

  16. Granulation: Evaluate & Monitor Obtain external knowledge Focus on your new industry

  17. Granulation: Learn from Customers, Partners, & Competitors • Strategic Alliances • Share the knowledge • Acquire smaller companies • Buy the knowledge

  18. Granulation: • Key Takeaway: • Know the industry you’re entering. http://www.youtube.com/watch?v=MeOkx0q1qFs

  19. The Original Strategies • Scaling: A company expands their business product development, new product lines, increasing distribution channels, to name a few. • Duplication: Using the company’s vision to expand geographically. • Granulation: Aggressively growing select areas of the company.

  20. Combining the Strategies • A company must select the growth strategy of best fit. • The scaling strategy is the easiest strategy to implement. • The company expands upon its core competencies, with the company’s original vision in mind. • The duplication strategy is more complex because companies must expand and adapt to a new geographical market. • Granulation is the most difficult strategy • Involves studying competitors, new markets and opportunities

  21. Combining the Strategies • Some companies apply all three growth strategies at once. • These are large companies that have different parts of their business in different stages of growth • A company may first try scaling until it reaches its upper limits to begin duplication and then eventually pursue granulation. • Example: Disney • Scaled by expanding product lines from original Mickey Mouse cartoon to other movie ventures, themed amusement parks, etc. • Duplicated by introducing amusement parks overseas i.e.: Disneyland Paris • Pursued granulation by growth of their television business sector (ABC)

  22. Combining the Strategies • Some successful companies implement all three growth strategies at once • Example: SAP • First attempted scaling when they developed the R/1, then R/2, and eventually the R/3, a program that helped companies integrate resource planning across functions and customer-suppliers. • Realized they had over engineered the R/3 and decided to introduce AcceleratedSAP. Used the duplication process based on their knowledge of software systems. • SAP uses granulation by sharing entrepreneurial knowledge in new business areas for new markets. • SAP

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