Business growth and development.
What we have chosen to refer to as the descriptive approach to understanding small business growth stems from a flurry of the stage of development models that first appeared in the 1970s. The goal was for businesses to achieve financial and competitive success through organic expansion and new product development. This perspective is generally associated with large manufacturers, distributors, and retailers who can afford high overhead costs and are willing to risk failure in their attempts to grow. In some respects, this interpretation of “growth” is more applicable to mature firms that have accumulated substantial experience and expertise in an industry or sector.
For example, multinational companies or global enterprises such as Amazon have decades of operational and marketing experience in operating a vast array of products and services under different brands. Their success may not be easily explained by the incrementalism and specialization that characterize most contemporary international companies. A recent survey by Harvard Business Review found that only 12% of respondents could identify any significant pattern of “growth strategy” in the world of retail and wholesale. As many people continue focusing on the challenges of doing business, they should consider how market forces will drive the direction of change.
“Growth” or simply “Incrementalism.”
A central point of discussion among those who study entrepreneurial activity in the United States is whether it is appropriate to label growth simply “growth” or simply “incrementalism.” Both perspectives draw on similar data analysis methods and theoretical approaches. One of the earliest papers that described the concept was “Progress Toward Understanding Small Business Management” published in 1961. It introduced several key terms. First, small business refers to smaller, newer firms that have recently established themselves in a particular field and/or industry.
Second, growth refers to increasing revenues. Third, development refers to new activities that increase revenue and create more sales opportunities. Fourth, operation refers to activities designed to improve a company’s existing position. Fifth, market refers to potential customers who have limited information about a brand and are willing to pay more for its goods and services. Sixth, management refers to the activities and decisions of individuals who are responsible for the day-to-day operations of a business enterprise.
Finally, operation performance can be either progressive (e.g., increasing profits) or regressive (e.g., reducing expenses). These definitions develop based on observations made by early researchers, including Joseph Bohm, who pioneered the work on entrepreneurial behavior. They have since been expanding and refining, but remain somewhat consistent with one another. Regardless, they represent an important starting point. An extension of research in this area is called PESTEL analysis. According to proponents, it provides useful inputs for a variety of purposes beyond just evaluating the macroeconomic environment. And determining which factors impact firms’ performance. An article on the topic issue by the American Economic Association in 2001 entitled “PASTEL Analysis and Entrepreneurship” included suggestions on how to make the results meaningful.
By comparing countries around the globe, analysts can determine how changes in political, social, technological, and environmental. And legal environments affect local economies and how these influences interact with each other. PESTEL is also used widely by scholars’ interest in labor markets. Where it has been shown to help assess changes in demand. As well as price competition between buyers and sellers and pricing policies by government agencies.
One important area of knowledge
One important area of knowledge that remains unclear is exactly why this phenomenon matters. Many writers focus on negative characteristics such as “growth” or excessive capital investments. While ignoring positive ones such as innovation and entrepreneurship. Yet, when look at together, growth and expansion are link. And mutually reinforcing. Researchers have also observed that despite differences in size, firms that expand rapidly tend to generate much higher rates of employment, and income. And market share – especially relative to small companies. If a firm that expands too quickly produces excess profits for itself. It does not necessarily hinder further growth and expansion. Rather, it serves to reinforce the advantage of growing companies over other competitors. Thus, an expanding company. That grows out of an initial period of rapid expansion is still able to attract new talent. And establish strong relationships with consumers.
The bottom line is that entrepreneurs know when to invest – particularly during periods of structural adjustment and recession periods. When there is little uncertainty about how long it will take to find investment partners and raise capital. Small and medium companies may be better off pursuing growth. However, expansion can be costly in certain circumstances. Some economists argue that if companies are willing to invest in new areas. And locations, they can do so even during downturns. At the same time, others suggest that firms that seek strategic acquisitions in times of stagnation are likely to benefit from slower growth. Regardless. All growth requires careful consideration and planning – the successful entrepreneur might forgive for wondering. If he/she needs a calculator to figure out how fast to grow his/her company.
