Business growth

5 Key excerpts on "Business growth"

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  eBook - ePub

  Growing a Business

  Strategies for leaders and entrepreneurs

  • Rupert Merson(Author)
  • 2016(Publication Date)
  • Economist Books

    (Publisher)

  3

  Growth enablers and drivers

  THE NEXT TWO CHAPTERS consider why some businesses grow and some do not. This chapter looks at the forces that trigger, and the circumstances that foster, growth. It starts inside the organisation with things that are within the control of those who run it, moves on to the life cycles of products, markets and industries, and concludes with aspects of the economic and commercial environment that affect the growth of a business.

  A must or a maybe?

  Is Business growth a matter of choice? Or does a business have no choice other than to grow?

  With big listed companies the position seems clear. Investors invest in shares in the hope that they will increase in value. CEOs of listed companies receive regular updates on the share price: during the day, after press announcements, on the way home in the car, when the market opens. Analysts assess the success of a business in terms of its performance against plan, its earnings, the credibility of its strategy and the success of management in implementing it, but ultimately what matters is the growth in its share price. Share prices are influenced by many factors, both external and internal, but they also reflect the growth of the business itself in terms of its ability to generate sustainable profit and the value of its underlying assets, intangible as well as tangible. Many directors of listed companies are under no illusion, therefore, that they have no alternative other than to grow their businesses.

  In private businesses the position is more complicated. In the early stages of business development few would disagree with the assertion that the business has to grow or die. There is a critical mass that needs to be reached before the business can be considered to be self-sustaining. It will need to be consistently cash positive (generating more cash than it is consuming). To achieve this it will need to have successfully developed a product or service or two for which it has found a sustainable market. And it will need to be led by a team of people that is sufficiently self-sustaining to withstand the occasional resignation.

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  eBook - PDF

  Entrepreneurship For Dummies

  • Kathleen Allen(Author)
  • 2022(Publication Date)
  • For Dummies

    (Publisher)

  300 PART 4 Growing a Company A good growth plan includes your goals, the strategies to reach those goals, and the tactics you will use to execute those strategies. In this chapter, you learn some effective growth strategies. You also learn more about how to scale your opera- tions so that they match your growth trajectory. Let’s get started. Identifying Factors That Affect Growth When designing an effective growth plan, you first must understand all the factors that affect your company’s ability to grow. They start with: » Your intentions about your business. You may be surprised to discover that business owners don’t always want to grow to the next Disney or Amazon. Sometimes they’re perfectly happy running their little shop just the way they are, thank you. But probe a little deeper, you may find that the decision not to grow is rooted in fear. With a small business, you can pretty much control everything; but when your business grows rapidly, you need to rely on other people. For some entrepreneurs, delegating authority for their businesses to others is hard, like handing your child over to the care of someone else. Before your business can grow, you must want it to grow; it doesn’t normally happen by itself. » Your ability to pull together the right team for growth. No matter how much you believe in your growth strategy, you can’t do it alone. You need a team of people as committed to your business as you are. Conveying your vision of company growth and convincing everyone to buy into it is critical to the successful execution of your growth plan. » What your target market looks like. How much your company can grow is a function of the size of your market and the buying power of your customers. If your market is small and not showing signs of growth, achieving high levels of growth may be unachievable. On the other hand, if your product or service has global potential, substantial growth is definitely within the realm of possibility if you plan for it.

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  eBook - ePub

  Strategy for Success in Asia

  Mastering Business in Asia

  • Andrew Delios, Kulwant Singh(Authors)
  • 2012(Publication Date)
  • Wiley

    (Publisher)

  Even when presented with this idea of optimum growth rates, few leaders will decline growth opportunities. Shareholders, creditors, market analysts, and employees are likely to demand that growth opportunities are seized. Most of these stakeholders will reject the notion that growth can be bad for firm performance or that firms can grow too quickly. Leaders should react to these objections by focusing on the key outcome that most stakeholders prioritize, firm profitability. Leaders should emphasize the costs of growth, and the returns that will be earned from incurring these costs, to evaluate whether a particular growth opportunity should be pursued or abandoned.

  Strategies for growth

  Firms have five main options for growing, as shown in Figure 4.3 . The primary growth option, and the one that firms should explore first, is core expansion. This simply requires a firm to do more of what it is currently doing, by selling more of its existing products or services in existing markets, or by starting closely related ventures within its existing business. Although firms are usually most capable of growing through core expansion, this may be a difficult strategy if it is focused on capturing market share from rivals or on exploiting opportunities that it has been unable to exploit in the past.

  Figure 4.3 Growth Strategies

  Leaders should also recognize that in all but the most mature of industries, there are opportunities for creating new markets and new segments, usually through the creation of new value for customers. For some firms, core expansion may represent a less exciting or motivating growth strategy, as it may involve few new initiatives relative to other growth strategies. Core expansion does have the advantage of allowing incremental, controlled growth, while posing the fewest competency, resource, and organizational demands.

  “In all but the most mature of industries, there are opportunities for creating new markets and new segments, usually through the creation of new value for customers.”

  Horizontal growth is similar to core expansion, but involves the identification of new markets to which the firm sells its existing products and services. The key idea is for a firm to replicate successful operations in new markets. Horizontal expansion mitigates the challenges of growth, as it allows firms to maintain their existing product focus. A common form of horizontal growth is international expansion, with Asia being a particularly popular target since the 1980s. Nevertheless, as we discuss in Chapter 5, firms should avoid over-expansion in a short period, particularly to distant, different, and international markets.

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  Entrepreneurial Marketing for SMEs

  • Luca Cacciolatti, Soo Hee Lee(Authors)
  • 2015(Publication Date)
  • Palgrave Macmillan

    (Publisher)

  5 Growth Strategies within an SME Context

  The importance of growth to an SME consists in the ability of the company to survive major changes in its environment. This is the reason why companies in general, and SMEs in particular, should not point their strategies simply to survival, but should instead opt for business strategies aimed at enhancing growth.

  An example can be drawn from physics: there is a difference between velocity and acceleration. A body can be moving on a certain imaginary route in a space at a specific velocity. However, a change in the conditions of space in which the body is moving (e.g., an increase in attrition) slows down the body. In order not to be slowed down (and eventually stopped), the body needs to increase the velocity of its march; therefore, it requires acceleration, i.e. the increase (positive growth) of velocity.

  Growing firms are winners in the marathon of market competition. Although some firms might have a very low turnover (e.g., micro firms), those companies that experience high growth are in a much better situation than firms with high turnover that do not grow or experience a business decline (negative growth).

  Although Business growth is important to firms’ future development, we should not assume that all small business owners pursue growth, or that they are necessarily capable of doing so. In fact, despite the view that ‘growth of individual firms is the normal and desired development pattern’ [63] , in fact, some SMEs find several difficulties in achieving growth [121, 131] .

  These difficulties are often related to the business owner’s objectives[36, 121] and the SME’s external environment [109] , and they are highly affected by the owner’s variable receptivity to marketing. Some small business owners might simply show little receptivity for marketing and might not feel the need for growth/expansion. Sometimes, negative experiences while attempting a business expansion, such as a serious drop in profits/revenue, might ultimately put the small business owner off from trying again [69]

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  Business Economics and Managerial Decision Making

  • Trefor Jones(Author)
  • 2004(Publication Date)
  • Wiley

    (Publisher)

  THE DEVELOPMENT OF THE FIRM The economic models of the growth of the ¢rm assume that a ¢rm can diversify its operations when the growth in demand for its products slows or ceases and that the unused resources generated within the ¢rm, particularly management, will be recognized and used in an e¡ective way. Economic models tend to abstract from such issues as the quality of management and other resources available to the ¢rm. These issues have been addressed by business strategists. They have developed theories of the ¢rm to help explain why some ¢rms achieve higher growth rates than others. The discipline has striven to develop a strategic theory of the ¢rm, as reviewed by Phelan and Lewin (2000), who argued that the subject needs a strategic theory of the ¢rm to inform decisions about the appropriate activities and boundaries of the ¢rm. Firms have a number of choices in terms of growth strategies, which can be charac- terized as follows: 1 Whether to choose a strategy of internal or external growth. 2 Whether to diversify the company by producing new products and serving new markets or entering new geographical markets (particularly, overseas). 3 In addition, the ¢rm may move to extend into another part of a vertically linked production chain or it may move into completely unrelated activities. 320 PART V g STRATEGIC DECISIONS Internal growth is where the company uses its existing capabilities, resources and ¢nances to expand the business. The growth is entirely endogenous, but may be supported by external ¢nance. The alternative external route is to grow by acquisition of existing companies. These issues will be discussed in the Chapters 16^19. CHAPTER SUMMARY In this chapter we reviewed various theories of growth including those of Baumol, Marris and Penrose. They all suggest that the key objective of ¢rms is growth.

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