MGT602 Technical Article Theme 14

Author: Umar Shahzad, Lecturer Business Administration, Virtual University of Pakistan

Technical Articles Theme 14 · Title: Growth of Entrepreneurial Firms and Globalization · Videos: 166-177 · Topics Covered

166. Business growth Model (Part 1)
167. Greiner Growth model of business (Part 2)
168. Preparing for growth (part 1)
169. Preparing for growth through Acquisition and mergers (part 2)
170. Preparing for growth (part 3)
171. Issues and challenges of growing firms

Q172. How to close a venture?

173. Discussion: The link between entrepreneur’s personality and firm growth pace & style
174. Globalization and entrepreneurship
175. Opportunities and challenges in the globalized world
176. Strategies for going global
177. The digital age and its issues

Handling Business Growth

It’s important that an entrepreneur should not only be able to start the business but he should be able to handle the challenges of business growth. Some of the models and strategies commonly taught in entrepreneurship are following:

1. 1.

Once a business is started, it is important to understand the dynamics associated with the growth of a business. Therefore, understanding different business-growth models is also important for an entrepreneur. Such models and frameworks give a better thinking pattern to an entrepreneur. There are two famous models for the business growth. The first is “business growth model” that emphasizes existence, survival, success, growth/takeoff and resource maturity. The very first phase of the business growth model is existence in which the entrepreneur starts the process of acquiring and retaining the customers. Products and services are delivered and showcased to the new and existing customers. The next phase of the business growth model is survival. Young entrepreneurs often confuse this stage of survival with success. However, it is a stage between the existence and success of a business.

In the survival phase, the entrepreneur realizes that the business idea is workable for further progress of the business or not. At this stage, often, a slight increase in the product sales and revenue is observed for which the entrepreneur starts getting encouragement. Hence, often the business achieves a breakeven point at this stage or at least gets closer to it. The third stage is success at which the company becomes able to maintain good customers. Business starts having profit as its income exceeds the breakeven point. At this stage, the entrepreneur carefully needs to differentiate between the sales and the profit. Often, the entrepreneurs get excited that increased sale is a source of income and that might be confusing because it is necessary to exclude all expenditures from income to determine the actual profit of a venture. At this stage, the entrepreneur starts developing brand rapport. The business also becomes capable of facing the competition in the market at the success stage. The fourth phase after success is the take-off. At this stage, the entrepreneur starts thinking about the further growth of the business. The fifth stage of the business growth model is resource maturity. At this stage, the entrepreneur tries for better financial management, product and service diversification and hence all specialized activities are performed separately at this stage at the departmental level within the organizational unit. Research has shown that at this stage, the entrepreneur often starts compromising further growth and tends to maintain a steady stream of income.

1. 2.

This model was presented in the Harvard Business Review and presents the detail of potential challenges for entrepreneurs while having business growth. In this model, each growth phase is made up of a period of relatively stable growth, followed by a crisis. This model can be elaborated clearly through a graph which is given below.

This graph of the Greiner Growth model of business shows that over time, as the organizational size and business keeps growing, then a business has to face six phases and five challenges. As per this model, the business initially grows through creativity, then through proper direction, delegation, coordination, collaboration and alliances. However, each stage of such business growth is met with a crisis that a business has to deal with.

In this model, creativity is the very first phase of business growth. Cost reduction, existence and survival remain the focus of this phase. Usually, when an entrepreneur comes out of an incubation centre then he/she enters this phase of creativity. Usually, informal communication takes place at this stage between entrepreneurs and other stakeholders such as customers.

Phase 2 in this model is direction. You have to give proper direction to the people working with and under you. However, this stage also brings this crisis of leadership. A leader has to be able to work for the venture himself and has to provide an enabling environment to the people working under him.