What Is The Key Success Factors Of Spinoff

Decent Essays

Spinoffs occur when employees from a parent company seek out opportunities or realize the necessity of spinoff in an economic environment. Spinoffs initiated by employees in higher managerial position tend to be more successful in the presence of economic opportunity. The absence of economic opportunity can be interpreted in many ways, for example as the absence of economic opportunity due to unfavourable market conditions or an unfavourable economy. In this paper I will explore the success of spinoffs in the absence of economic opportunity due to unfavourable market conditions while focusing on how the success of the spinoff affects the parent company.

Development of Spinoffs

Spinoffs (also known as spinouts) are a distinctive
…show more content…
Firstly, exogenous factors over which the business has little control over. Secondly, the growth of the markets into which it sells. The competitive intensity of the business and the average profitability of the industry in which it operates is the final category.

Exogenous factors are factors that influence the operations of the business but are out of the control of the business. These factors could range from political, social, economical, technological, environmental or legal influences. For example, a war in the Middle East will influence sales of oil to its suppliers and technological advances such as the introduction of a new gaming system would influence both the preferences of consumers and the ability of a company to delivery its products or services.

The growth of the market is essential for business that would like to ensure the longevity of their company. The growth of the market ensures that the businesses revenue stream will continue to grow ensuring the company’s profitability. In the post start-up phase it is imperative that a company strengthens it economic value, this is achieved with the increase of the business’ revenue and expansion to other markets be it global or
…show more content…
Older firms are more likely to produce successful spinoffs as the spinoff founders acquired the necessary capabilities from the parent firm in order to contribute towards the profits of the spinoff. The spinoff is able to use its industry specific knowledge to guide its way through tough market conditions until it successfully develops itself in a market that is related to that of the parent but deviates to a self-sufficient market. Northern California tends to have a higher rate of spinoffs as economic opportunity in Silicon Valley allows for easy entry of both laser and non-laser firms (Klepper & Sleeper, 2005,
Get Access