New venture harvest strategies: an approach worth considering

Jones, Elizabeth (1990) New venture harvest strategies: an approach worth considering The University of Queensland:

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Author Jones, Elizabeth
Title of report New venture harvest strategies: an approach worth considering
Formatted title


Publication date 1990
Place of publication The University of Queensland
Total pages 60
Language eng
Subjects 1503 Business and Management
Formatted abstract
New Ventures are generally a large sector of an economy and create a substantial portion of its growth. Many such ventures, although started with innovative ideas, often do not grow and may join the ranks of business failures. One reason for such high failure rates could be that businesses remains the entrepreneur's for too long.

Treating businesses as Tradeable Commodities is considered to be far from the norm; especially for New Ventures. A Harvest Strategy is one of the terms used to describe the commercial perspective of businesses being treated as tradeable commodities. Other terms are profit realisation, capital realisation/gains, exit strategies and capitalisation. Harvest Strategies encompass all these terms including the partial and full realisation options, with the over-rider that realisation of a Harvest will not affect the longer-term viability of the business. The Harvest options included in this research are outright sale, partial sale Goint-ventures, mergers, licensing), management buyouts, employee stock ownership plans and public offerings.

The Harvest of a New Venture is a strategic decision based on longer-term growth and viability. It should be treated as such and therefore be well planned in advance. This research found that Harvest Strategies were rarely adopted in a strategic planning sense. They were often considered to be shorter-term plans and therefore ignored in the strategic planning cycle. They tended more to be used as a defensive or reactionary move.

A number of characteristics contributed to this common perspective. They included the lack of understanding of Harvest principles and the general lack of willingness to plan for an exit. The nature of the entrepreneur, his venture and emotive attachment, contributed to this state.

The adoption or consideration of Harvest Strategies implies certain benefits and side effects for the business and industry as a whole. The benefits may include the potential lowering of New Venture failure rates, more focused management and targeted goals. Contrasting the benefits, a fixation with Harvest Strategies may lead to a preoccupation with the short-term, rather than longer-term achievement.

This research commenced by reviewing the secondary data available on the topic or casually related to the topic. This review led to the establishment of five hypotheses that best describe the current situation relating to Harvest Strategies. Preliminary primary research was conducted to verify the Hypotheses, add to the secondary data base and compare the theoretical and practical models. The findings, although preliminary, illustrated that little variation existed between the secondary and primary data sets. The main findings were that:-
• Few New Venture sales are strategically planned in advance;
• The failure to consider or plan Harvest Strategies for New Ventures, may lead to sub-optimised returns;
• Few avenues exist to learn about Harvest Strategies;
• There is hesitancy within New Ventures to adopt Harvest Strategies. This hesitancy is often the result of unjustified or uncommercial thinking; and,
• Potentially, there is commercial conservatism towards New Ventures that consider or adopt a Harvest mentality.

Substantial work would be required to quantify the benefits of Harvest Strategy consideration or adoption. This work has as yet, not been undertaken throughout the marketplace. Only with such statistical evidence, could the concept of Harvest Strategies and their applicability to New Ventures, be strongly advocated as a valuable planning option.


Document type: Research Report
Collection: MBA reports
 
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Created: Wed, 05 Jan 2011, 10:30:44 EST by Ning Jing on behalf of The University of Queensland Library