Enterprise Growth Strategies – CBSE Notes for Class 12 Entrepreneurship
1. Small enterprises are vulnerable to slightest changes in the environment.
2. Main forms of external expansion are: (a) Franchising; (b) Merger; (c) Acquisition.
3. Sustainability is important managerial function for an entrepreneur.
4. Franchising is an arrangement through which the manufacturer or sole distributor of a trade-marked product or service gives exclusive rights of local distribution to independent retailers in return for royalties and conformance to standardized operating procedures.
5. Creativity and innovation are vital for the growth and development of the enterprises.
6. There are four types of franchising product: Franchise business opportunity, Manufacturing franchise opportunity, Business franchise opportunity ventures, Business format franchise opportunity.
7. A merger is a combination of two companies into one larger company.
8. Enterprise must maintain pace with the changes for growth.
9. Types of mergers are 1. Conglomerate; 2. Vertical; 3. Market extension; 4. Horizontal;
5. Product extension.
10. Modernisation reduces cost of production.
11. Types of acquisition are friendly acquisition; Reverse acquisition; Back flip acquisition; Hostile acquisition.
12. Reasons for mergers and acquisitions : Synergy—operating synergy and financial synergy, Acquiring new technology, Improved profitability, Acquiring a competency, Entry into new markets, Access to funds,. Tax benefits.
13. Reasons for failure of merger and acquisitions are unrealistic price paid for target, Difficulties in cultural integration, Overstated synergies, Integration difficulties, Inconsistent strategy, Poor business fit, Inadequate due diligence, High leverage, Boardroom split, Regulatory issues.
14. Diversification normally relates to addition of similar products/services to the original one.
15. Value addition: Businesses add value to goods and services by modifying them in a particular way to create a new product of greater value to customers.
16. Types of added value: Quality, Environmental, Cause-related, Cultural.
17. Primary activities of Value Chain: 1. Inbound logistics; 2. Operations; 3. Outbound logistics; 4. Marketing and sales; 5. Services.
18. Support activities of Value Chain are 1. Procurement 2. Technology development
3. Human resource management 4. Firm infrastructure.
19. Expansion of an enterprise can be made possible by increasing volume of production or turnover.
20. Growth of an enterprise can be either through (a) internal expansion, or (b) external expansion.
21. Six requirements for value chain management: 1. Coordination and Collaboration; 2. Technology Investment, 3. Organisational Process, 4. Leadership, 5. Employee/Human Resources, 6. Organisational Culture and Attitudes.
Words That Matter
1. Franchising: Franchising is an arrangement through which the manufacturer or sole distributor of a trade marked product or service gives exclusive rights of local distribution to independent retailers in return for royalties and conformance to standardized operating procedures.
2. Diversification: Diversification relates to addition of similar products/services to the original one.
3. Franchisor: The owner or person offering the franchise is known as the franchisor.
4. Franchisee: The franchisee is the person who purchases the franchise and is given the opportunity to enter a new business with a better chance to success than if he or she were to start a new business from nothing.
5. Take over: Take over or Acquisition is enveloping in itself a range of acquisition transactions by a firm.
6. Merger: Merger is the combining of two firms into a single large firm.
7. Creativity: It means bringing something new into existence.
8. Innovation: It refers to performing a task in a new way.
9. Modernisation: Modernisation refers to use of new technology, new processor, new machines in the process of production.
10. Direct competition: It refers to the competitions in which various enterprises producing close substitutes try to increase the sale of their product.
11. Indirect competition: It is a type of competition in which the enterprises compete not only for price but other references about the product.
12. Diversification: It is a process of adding new products or markets to the existing, by an enterprise.
13. Internal Expansion: It is the gradual increase in the activities of the concern.
14. External Expansion: It is a business combination where two or more firms combine and expand their business activities.
15. Consolidation: In a consolidation, a new firm is created after the merger, and both the acquiring firm and the target firm stockholders receive stock in this firm.