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Dilemmas during the Growth Phase of a Company

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Dilemmas during the Growth Phase of a Company

14.04.2008 ob 12:45

Company growth is one of the most challenging phases in company operations. In principle, company growth is not an accidental phenomenon, but rather results of a decision by company owners and managers and a set of planned and implemented activities within as well as outside the company. However, a possibility that company growth is a result of coincidence can not be ruled out entirely, as such (rare) examples can be found in practice as well. In this case, owners or managers make a willing decision on the basis of a coincidental event, make plans and finally carry out an activity which leads to company growth.

The first and fundamental rule when deciding on the process of company growth is: do not opt for growth if you detect any problems in managing the current size of company operations. The rule is not only logical but it also makes sense. When we detect problems that cannot be dealt with promptly and remedied within the current structure of operations, we can or should expect an intensification of the existing and new problems related to the existing as well as new scope of operations.

There are numerous motives to decide on company growth, among others, an undisputed primary desire to expand the scope of operations and to enjoy the positive effects associated with it. However, regardless of the motive, the fact is that a decision to enter the planned company growth process is mainly an answer of owners, entrepreneurs or managers to certain different circumstances within or outside of the company.

In principle, company growth can be achieved in two basic ways:

  • on domestic and/or foreign markets with existing products (increasing the existing market share) or
  • on domestic and/or foreign markets with new products (creating a new share in a certain structure).

In each case, sales of existing and/or new products and the related demand increase. During the company growth process, entrepreneurs or managers come across two basic perspectives of successful operations:

1. analysing the situation and
2. foreseeing (planning) future events.

Basic dilemmas entrepreneurs need to face when making decisions are:

  • Dilemma of an existing product (service): whether to keep the same products or to try new or diversified products?
  • Capabilities of a company to follow technical and technological demands: will the company with the existing capabilities be able to ensure all the resources required for development?
  • Financial adequacy: does the company have sufficient financial resources available and is their structure appropriate for the purposes of the company. Has the company ensured sufficient sustainable capital and what is the structure of the capital?
  • New expertise and people: in the phase of growth, the need for new expertise and probably new personnel will appear.
  • Question of ownership: changes in the growing company often lead to dilemmas regarding the ownership structure.
  • Ensuring appropriate control elements: the growth phase undoubtedly results in the need for a different organisation of control mechanisms, information and data collection and processing, etc.

The growth phase is demanding not only from the technical and technological perspectives but also from the perspective of company management, controlling new circumstances, provision of resources, specialised expertise, and appropriate human resources as well as a reasonable amount and structure of all the required resources. It can therefore be concluded that company growth is the most challenging phase in a company’s operations. The most crucial and complex skills required to successfully implement the entire company growth process are expertise and duties of managers or entrepreneurs involved in managing the growing company.

Urška Č.

Summarized from: Obrtnik magazine, issue 04/2008, Uspešna internacionalizacija poslovanja, Rast podjetja – najzahtevnejša faza v delovanju podjetja, M. Rajter, BA (Econ)

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