Assignment 02: Entrepreneurship MGT602 Marks 20
The Conceptual Note:
Any entrepreneurial venture which gets a positive response from the market and has potential for growth generally chooses between "organic growth" and "external growth" as a strategy to grow. Both organic and external growth strategies have their merits and demerits and most of the organizations choose the one according to their goals and suitability. "Organic growth" is a strategy in which ventures expand internally by opening own branches and setting up own production facilities in those markets where they do find potential whereas in "external growth strategy" entrepreneurs grant the rights of their business to external partners in the shape of "franchising" or "licensing". Taking over some established brands and businesses is also called external growth strategy. It has also been observed that different businesses use a blend of organic and external growth strategies for growing in different markets.
The Case:
You started a pizza shop with the name of "Pizza Pakistan" in Peshawar in 2009 which was liked by the people and now sells like hot cakes. Your pizza shop is not only well known in Peshawar but also a large number of people living in most of the major cities of Pakistan are aware of it. You have conducted a survey in all major cities of Pakistan and found that people living there know your product and willing to have it. You have also been contacted by some sound parties from Faisalabad, Quetta and Hyderabad to become your franchisee.
The Requirement:
Keeping in view the above case and the note, you are required to make a decision that which growth strategy you will use to expand your business in new markets. Also justify your choice by giving solid arguments in favor of the strategy you will choose and against the strategy which you will not consider.
The Special Note: How can you avoid zero marks status?
Dear Students! You are encouraged to consult both online and offline sources with objective to enhance your understanding of the topic of the assignment. But consulting the sources does not mean that you start copy-paste the material from sources. If you do so you will certainly lose marks or your assignment will be graded zero on account of copying from a source. The workable strategy is to consult the source, enhance your knowledge and write in your own words. If the idea you are writing in your own words is not original then do give the references of the sources you have consulted in the end of your solution. Also do not seek help from any website or blog which offers assignment solution because such sources offer you substandard material which may spoil your future.
Solution:
The Case:
You started a pizza shop with the name of Pizza Pakistan in Peshawar in 2009 which was liked by the people and now sells like hot cakes. Your pizza shop is not only well known in Peshawar but also a large number of people living in most of the major cities of Pakistan are aware of it. You have conducted a survey in all major cities of Pakistan and found that people living there know your product and willing to have it. You have also been contacted by some sound parties from Faisalabad, Quetta and Hyderabad to become your franchisee.
Solution with Arguments:-
Pizza Pakistan has many plans to grow their business and increase sales and profits. However, there are certain methods Pizza Pakistan must use for implementing a growth strategy. The method Pizza Pakistan uses to expand its business is largely contingent upon its financial situation, the competition and even government regulation. Some common growth strategies in business include market penetration, market expansion, product expansion, diversification and acquisition.
Market Penetration
One growth strategy in business is market penetration. Pizza Pakistan uses a market penetration strategy when it decides to market existing products within the same market it has been using. The only way to grow using existing products and markets is to increase market share, according to the article "Growth Strategies" in Hand Book. Market share is the percent of unit and rupee sales Pizza Pakistan holds within a certain market vs. all other competitors. One way to increase market share is by lowering prices. For example, in markets where there is little differentiation among products, a lower price may help Pizza Pakistan increase its share of the market.
Market Expansion
A market expansion growth strategy, often called market development, entails selling current products in a new market. There several reasons why Pizza Pakistan may consider a market expansion strategy. First, the competition may be such that there is no room for growth within the current market. If a business does not find new markets for its products, it cannot increase sales or profits. Pizza Pakistan may also use a market expansion strategy if it finds new uses for its product. For example, a small soap distributor that sells to retail stores may discover that factory workers also use its product.
Product Expansion
Pizza Pakistan may also expand its product line or add new features to increase its sales and profits. When small companies employ a product expansion strategy, also known as product development, they continue selling within the existing market. A product expansion growth strategy often works well when technology starts to change. Pizza Pakistan may also be forced to
add new products as older ones become outmoded.
Diversification
Growth strategies in business also include diversification, where Pizza Pakistan will sell same products to new markets. This type of strategy can be very risky, according to gaebler.com. Pizza Pakistan will need to plan carefully when using a diversification growth strategy. Marketing research is essential because Pizza Pakistan will need to determine if consumers in the new market will potentially like the new products.
Acquisition
Growth strategies in business can also includes an acquisition. In acquisition, Pizza Pakistan purchases or licenses another Pizza Pakistan branch to expand its operations. Pizza Pakistan may use this type of strategy to expand its product line and enter new markets. An acquisition growth strategy can be risky, but not as risky as a diversification strategy. One reason is that the products and market are already established. Pizza Pakistan must know exactly what it wants to achieve when using an acquisition strategy, mainly because of the significant investment required to implement it.
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