Importance of Business Growth for Entrepreneurs

The business growth model helps an organisation to expand its business in a competitive market. It also provides a road map so that the entrepreneur can expand the business and can earn profits. Hence, the concept of business growth is important for each entrepreneur. Moreover, it helps an entrepreneur to compete with its strong competitors and helps to increase the profit level of business. By applying this process, an entrepreneur can earn higher amount of revenue by either producing or selling large amount of outputs or by lowering the production cost. Hence, an entrepreneur can operate various business operations within a business cycle (Phelps, Adams & Bessant, 2007). In this report, different types of growth strategies will be discussed. This report will further discuss that whether those growth strategies are ideal for an enterprise or not. After analysing those growth strategies, this report will also discuss on some limitations of those growth strategies within a growing economies. At the end of this report, there will be a discussion based on the role of individual companies in this situation.

There are various reasons for which an entrepreneur wants to expand her small business into a large one. Making large amount of profit is one of the chief objectives of an entrepreneur (Mazzucato, 2015). However, there are also some other reasons, which should be mentioned in this context. It is seen that, small companies cannot survive in a competitive market, as it does not have enough business strategies to compete with its competitors. Hence, a perfect business strategy is required for every entrepreneur (Lockett, Wiklund, Davidsson & Girma, 2011). There are some large numbers of industries, which have successfully applied their own business strategies and have expanded their business all over the world (Ward, 2016).

According to some famous business entrepreneurs, business strategies are almost like a ladder. The entrepreneur will take less risk at the beginning of her business (Sadgrove, 2016). Hence, she will face a lower rate of business growth as well. This lowest stage of growth strategy is called intensive growth strategies (Muhos et al., 2014). Each stage of this strategy gives more opportunities to an entrepreneur to grow her business (Davidsson, Achtenhagen & Naldi, 2007). However, the probability of risk is also increased. Those stages of business strategies can be analysed in details.

In this context, the article of Delmar, Davidson and Gartner can be analysed. According to them, there are almost seven types of growth pattern of a firm. Those patterns are related with age and size of the firm and its affiliation (Delmar, Davidsson & Gartner, 2003). They argued that those patterns of firms to grow follow conflicting theories related to firm’s growth.

Reasons for Expanding Small Business

Wernerfelt in his journal showed that resources and products are same for a firm. Several products need the services of various resources (Hunt et al., 2017). On the other side, most of the resources are needed for products. By mentioning various activities of firm size of different product markets, is possible to specify the minimum required commitments of resources (Wernerfelt, 1984). On the other side, the firm can find out its optimal activities in product market by specifying a resource profile.

It can be seen that, the market condition influences a producer to produce new products for its new consumers. Hence, the entrepreneur can choose any one of the above mentioned intensive growth strategies. However, it should be kept in mind that each step bears both efforts and risks of an entrepreneur at the same time (Read et al., 2016). Favaro stated that companies with high growth low growth. There are various CEOs, who accepted that their business has achieved a mature stage. Hence, they have stopped to look for big growth. They have given up on organic growth and are making a big mistake (Favaro, Meer & Sharma, 2012). The acquisition helps a firm to save its cost. When corporate leaders give the activity of organic growth, an organisation can lose its focus.

Demir, Wennberg and McKelvie explained in their journal that growth of firms is an important topic to research on the strategic management of an organisation. To understand the growth of a firm, high-growth firms (HGFs) give some ideas. Some factors help a firm to grow high (Demir, Wennberg & McKelvie, 2017). These are human capital, human resource management, strategy, innovation and capabilities.

According to Greiner, history of firms can help an organisation to develop in future. As each firm passes through various stages of development, those phases are very important. Moreover, every phase starts with an evolution and ends with a revolution or management crisis. By analysing the history of growth strategy, the management can takes decision to prepare them for better future. In this context, five dimensions of to develop a business can be analysed (Grant, 2016). These are age of the firm, size of the firm, stages of evolution and revolution and growth rate of the industry (Greiner, 1972). After analysing those dimensions, five phases of development can be recognised to grow a business. 

The business growth strategy helps an organisation to increase its quantity by extending the scale of production. This can be happened by increasing the sale volume, share in the market, production value, number of employees and profit (Drucker, 2017). The business strategy can also enhance its quality by increasing the quality of the enterprise. This includes technological innovation, organisational innovation and the optimal efficiency related to investment and output. Barney stated that understanding of sources for getting sustained competitive advantage is an important area for conducting research for strategic management (Barney, 1991). Barney stated that firms achieve their internal strengths from various environmental weaknesses. Hence, maximum research on sources related to sustained competitive advantage has focused on opportunities and thread of a firm. It also has analysed the way to choose strategies.

Intensive Growth Strategies

This business growth strategy helps an entrepreneur to grow her business within a modern business environment. This physics of business strategy provides a road map to the entrepreneur. This business growth strategy helps an entrepreneur to explore her static and dynamic ways of business growth (Hatten, 2015). Sirmon, Hitt and Ireland stated that. The basic goal of a business is to create and maintain value. The resource-based view (RBV) states that resources of a firm lead value creation by developing competitive advantage (Sirmon, Hitt & Ireland, 2007). The main and important part of a business is to choose a correct business strategy. The entrepreneur can apply her business strategy by applying a formula. This formula is Business Growth = Mindsets + System + Process (Hess & Liedtka, 2012). Hence, this growth formula requires it’s all three elements, which are additive by nature. The concept of business growth requires something more than a good business strategy. This growth strategy requires its employees, managers and leaders to build the right mindset.

There are some limitations related to the growth strategy of an enterprise. The whole incidents can be divided broadly under two categories. These are external and internal affects (Achtenhagen, Naldi & Melin, 2010). Academic scholar and entrepreneur do not follow the same point of view to analyse the business growth. The chief factors are labour and capital shortage, market nature, capacity of the entrepreneur, nature of the industry and law of diminishing returns. Each factor has a great influence on an entrepreneur. Hence, in these circumstances, the entrepreneur will improve its risk management, specialise its company outputs and increase the vertical business strategy of her (Hill, Jones & Schilling, 2014).

To analyse the business growth model, a case study on Alibaba can be discussed. For an entrepreneur, it is very difficult to expand a small business into a large one, in a competitive business environment. Small business can be explained as will, aspiration and capacity of innovation of an individual. In this digital age, technology can help a company to expand its market. By applying this technology and some other business technologies, the company has expanded its business successfully (Lowrey, 2015). It creates credibility, strong finance services and rules of games.   

In conclusion, it can be said that every organisation requires a perfect business growth strategy. This growth strategy will help the entrepreneur to expand her business in the market and to compete with its strong competitors. However, this business growth strategy also has some limitations. Those limitations will reduce the outcomes of an organisation. It should be mentioned that each stage of business strategy brings some risks of the entrepreneur. However, a business strategy will be best if it provides well-planned road maps to the entrepreneur. It will help a company to perform at a higher level and earn more revenue.

Types of Growth Patterns

Reference:

Achtenhagen, L., Naldi, L., & Melin, L. 2010. “Business Growth”—Do Practitioners and Scholars Really Talk About the Same Thing? Entrepreneurship Theory and Practice,34(2): 289-316.

Barney, J. (1991). Firm Resources and Sustained Competitive Advantage. Journal of Management, 17(1): 99-120.

Davidsson, P., Achtenhagen, L., & Naldi, L. 2007. What Do We Know About Small Firm Growth? In S. Parker (Ed.), The Life Cycle of Entrepreneurial Ventures, Vol. 3. 361-398: Springer US.

Delmar, F., Davidsson, P., & Gartner, W. B. (2003). Arriving at the high-growth firm. Journal of business venturing, 18(2), 189-216.

Demir, R., Wennberg, K., & McKelvie, A. (2017). The strategic management of high-      growth firms: a review and theoretical conceptualization. Long Range Planning, 50(4), 431-456.

Drucker, P. F. (2017). The Theory of the Business (Harvard Business Review Classics). Harvard Business Press.

Favaro, K., Meer, D., & Sharma, S. (2012). Creating an Organic Growth Machine. Harvard Business Review, 90(5), 96–106.

Grant, R. M. (2016). Contemporary strategy analysis: Text and cases edition. John Wiley & Sons.

 Greiner, L. E. (1972). Evolution and revolution as organizations grow. Harvard Business Review, 50(4), 37–46.

Hatten, T. S. (2015). Small business management: Entrepreneurship and beyond. Nelson Education.

Hess, E. D., Liedtka, J. (2012) The Physics of Business Growth. Page 1-18. Stanford University Press, Stanford California.

Hill, C. W., Jones, G. R., & Schilling, M. A. (2014). Strategic management: theory: an integrated approach. Cengage Learning.

Hunt, H. D., West, J. R., Gibbs Jr, M. A., Griglione, B. M., Hudson, G. D. N., Basilico, A., … & Yusko, J. A. (2016). U.S. Patent No. 9,262,503. Washington, DC: U.S. Patent and Trademark Office.

Lockett, A., Wiklund, J., Davidsson, P. & Girma, S. (2011). Organic and acquisitive growth: re-examining, testing and extending Penrose’s growth theory. Journal of Management Studies, 48(1), 48-74.

 Lowrey, Y. (2015). Growing-by-Unleashing Grassroots Entrepreneurship and Alibaba Innovations. In Achieving Dynamism in an Anaemic Europe (pp. 231-250). Springer, Cham.

Mazzucato, M. (2015). The entrepreneurial state: Debunking public vs. private sector myths (Vol. 1). Anthem Press.

Muhos, M., Lee, T., Chang, S., & Kess, P. (2014). Growth strategies in early-stage technology-intensive firms. Yo F, Tony & Ho-Don J (eds) Handbook of East Asian entrepreneurship., Routlegde, 68-80.

Phelps, R., Adams, R., & Bessant, J. (2007). Life cycles of growing organizations: A review with implications for knowledge and learning. International Journal of Management Reviews, 9(1), 1–30.

Read, S., Sarasvathy, S., Dew, N., & Wiltbank, R. (2016). Effectual entrepreneurship. Taylor & Francis.

Sadgrove, K. (2016). The complete guide to business risk management. Routledge.

Sirmon, D. G., Hitt, M. A., & Ireland, R. D. (2007). Managing firm resources in dynamic environments to create value: Looking inside the black box. Academy of management review, 32(1), 273-292.

Ward, J. (2016). Keeping the family business healthy: How to plan for continuing growth, profitability, and family leadership. Springer.

Wernerfelt, B. (1984). A resource?based view of the firm. Strategic management journal, 5(2), 171-180.