Project On Growth Of Business Organizations

Growth strategies Growth is something for which most companies strive, regardless of their size. Small firms want to get big, big firms want to get bigger. Indeed, companies have to grow at least a bit every year in order to accommodate the increased expenses that develop over time. With the passage of time, salaries increase and the costs of employment benefits rise as well. Even if no other company expenses rise, these two cost areas almost always increase over time. It is not always possible to pass along these increased costs to customers and clients in the form of higher prices. Consequently, growth must occur if the business wishes to keep up. Growth of an enterprise should always be multidimensional. For example, growth on the production sideshould be supplemented by growth on technological and marketing sides. Organizational growth, however, means different things to different organizations. There are many parameters a company may use to measure its growth. Since the ultimate goal of most companies is profitability, most companies will measure their growth in terms of net profit, revenue, and other financial data. Other business owners may use one of the following criteria for assessing their growth: sales, number of employees, physical expansion, success of a product line, or increased market share. Ultimately, success and growth will be gauged by how well a firm does relative to the goals it has set for itself.

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Business life cycle A business goes through stages of development similar to the cycle of life for the human race. Each stage of the business life cycle may not occur in chronological order. Some businesses will be "built to flip"; quickly going from start-up to exit. Others will choose to avoid expansion and stay in the established stage. The Seven Stages of Business Life cycle are: 1. Seed Stage: The seed stage of the business life cycle is when the business is just a thought or an idea. This is the very conception or birth of a new business. At this stage of the business the focus is on matching the business opportunity with the skills, experience and passions. Other focal points include: deciding on a business ownership structure, finding professional advisors, and business planning. 2. Start-Up Stage: The business is born and now exists legally. Products or services are in production and you have your first customers. Start-ups requires establishing a customer base and market presence along with tracking and conserving cash flow. 3. Growth Stage: The business has made it through the toddler years and is now a child. Revenues and customers are increasing with many new opportunities and issues. Profits are strong, but competition is surfacing. Growth life cycle businesses are focused on running the business in a more formal fashion to deal with the increased sales and customers. Better accounting and management systems will have to be set-up. New employees will have to be hired to deal with the influx of business. 4. Established Stage: The business has now matured into a thriving company with a place in the market and loyal customers. Sales growth is not explosive but manageable. Business life has become more routine. An established life cycle company will be focused on improvement and productivity. To compete 2

in an established market, you will require better business practices along with automation and outsourcing to improve productivity.

5. Expansion Stage: This life cycle is characterized by a new period of growth into new markets and distribution channels. This stage is often the choice of the small business owner to gain a larger market share and find new revenue and profit channels. Add new products or services to existing markets or expand existing business into new markets and customer types. 6. Decline Stage: Changes in the economy, society, or market conditions can decrease sales and profits. This may quickly end many small companies. Search for new opportunities and business ventures. Cutting costs and finding ways to sustain cash flow are vital for the declining stage. 7. Exit Stage:This is the big opportunity for your business to cash out on all the effort and years of hard work. Or it can mean shutting down the business. Get a proper valuation on the company. Look at business operations, management and competitive barriers to make the company worth more to the buyer. Set-up legal buy-sell agreements along with a business transition plan.

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Need for growth strategies in a business organization 1)

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Survival: A firm has to grow in order to survive in the competitive business world. A growing firm has a capacity to accept business risks and uncertainties. It can also face any adverse situation effectively. A firm has to reach to the optimum size and growth. So growth is needed for survival. Secured position in the market: To establish secured position is one reason for the growth of an enterprise. A firm having a large market share enjoys better security in marketing its products, the product range can also be expanded. Thus, growth strategies are needed as a protection against period of adversity. 4

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Benefits of Government policies: Government offers various facilities and concessions to business enterprises. Businessmen can take the benefit of such policies by expanding their activities. For example, Government may offer tax concessions or finance at lower rates of interest. Financial benefits: The owners of an enterprise may take interest in growth because growth offers financial benefits. For example, increase in production ultimately results in increase in profits. The managers and other employees may get higher wages and other monetary benefits from such growth. Goodwill amd Market Reputation: A business enterprise always wants that there in goodwill and market reputatipn of the enterprise. For this, the enterprise must grow and reach the masses. Thus,growth is needed for goodwill and market reputation. Make organization self sufficient:To make the enterprise self sufficient and ensure its regular working over a long period. The programs like backward integration , forward integration, expansion, take over of other organization,etc have to be undertaken by the company.

Factors affecting growth 1)

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Availability of resources: One of the preconditions for the growth of business is the availability of resources both physical and natural. If the resources fall short, the growth process of the business will be adversely affected. Availability of adequate funds, tax incentives, etc facilitate growth. The enterprise may come in difficulty when such factors are not favourable. Ability to face competition: Competition is a factor, which limits the growth of business. A business that has the ability to face competition can achieve smooth growth. Quality products, lower cost of production, consumer loyalty, etc are useful for facing market competitioneffectively. 5

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Progressive management: Management of a company should always be flexible. Progressive management always plans to expand the size of the business and growth plans. Such managements are always prepared to finance the business growth. Attitude of management: The management should have genuine desire to face th challenges of growth. The attitude of management needs to be positive and favourable for the growth and expansion. Product/Service: Product plays an important role in the growth process. Quality of product, regular and continous supply of product, reasonable price, satisfactory after sales service brand image, consuner loyalty, effective marketing are the favourable points relating to the product. These help to create market demand and facilitate large scale production. Flexibility: The company should be flexible enough to adopt changes immediately. For example, technological application, use of good raw materials, modern methods of production etc. The company should implement these changes in the organization.

Reasons for no growth in business 1) Lack of time: Due to lack of time the company’s management is not

able to handle the business properly and because of this the company may suffer losses. It means the company is thinking for expansion without giving any attention to the current business activities. 2) Lack of focus: The lack of focus in business can sink the organization.

If the organization is thinking in too many directions instead of focusing on 6

the current business the company may suffer losses due to this. 3) Lack of support: If the company’s directors are carrying out all the

activities on their own without the help of experts then the company may not grow properly. There should be specialization in business. 4) Lack of creative "space": If the management is not able to bring

creativity in business then the company will not be able to face the competition.The company should plan, strategize and think creatively. 5) Wasting resources on time and energy-busters: The

company may show stagnant or no growth if it has entered into the business which is not of its interest. There will also be waste of time and other resources. 6) Focusing on "cheap" instead of cost-effective: If the company is giving more importance to cost rather than quality then it may suffer losses because customers want good quality at reasonable price.The company should put value, quality and ROI above cost.

7) Frittering away billable hours: The company should not waste

time in looking only after the management but it should also invest time in overall business activities. By doing this the company is wasting time--thus money. 8) Inefficient administrative foundations: If the company fails to systemize, automate and streamline the business processes then it may go into losses. It should be able to implement latest changes in the business. 9) Squandering core strengths: The company should first find out

its strengths and weakness then try to overcome the problems and focus on business growth, and revenue generation.

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10) Not investing in the right support: The company should place the right people at the right job. They should be skilled, committed, thinking, creative professionals who value in the business and help it grow.

Indicators of growing organization 1) Net worth: The net worth refers to the total of the paid-up capital

and reserves and surpluses available with an enterprise. It is often used as an indicator of growth. Increase in net worth indicates growth. However, net worth is not a satisfactory measure of comparison between different firms. For example, firms having identical net worth may have different growth rates. 2) Total assets: Total assets can be used for measuring the growth of a

firm. This indicator is extensively used for inter firm comparisons as regards size. However, it is difficult to conclude that an enterprise is growing only because its total asseta are increasing. 8

3) Volume of output: The volume of output produced within a

specific period can be used in order to find out the growing tendency of an enterprise. An increase in the volume of production indicates the growth of an enterprise. This test will prove to be unsuitable when the output of an enterprise is of heterogenous nature. It is much better as compared to others. 4) Volume of sales: Increase in the volume and value of sales over a

specific period can be used for measuring the growth of an enterprise. Increase in volume of sales is a better indicator of growth as compared to increase in the volume of output as increase in output has no significance if there is no corresponding increase in sales. 5) Porfit earned: Increase in porfit earning capacity is normally due

to more production and turnover. A company earning more profit can be said to be growing. However it is not a good indicator of growth as increase in profit may be due to various reasons such as increase in efficiency, productivity or price rise of the products of the company.

Ways of Growing the Business 1) Penetrate your existing market. The first thing that comes

to mind when thinking of growing the business is getting new customers. But the customers that are already there are the best bet for increasing the sales; it’s easier and more cost-effective to get people who are already buying from the company to buy more than to find new customers and persuade them to buy from the company. 2) Ask for referrals. Getting new customers is another approach to

growing the business. One of the easiest way to do this is to ask the current customers for referrals. Doing a great job and just assuming that the customers are passing the word about the business isn’t going to do

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much to increase the customer base; the company has to actively seek referrals. 3) Innovate your product or service. Discovering and

promoting new uses for the products or services is a great way to both get existing customers to buy more and attract new customers. 4) Extend your market reach. There are several ways of growing

the business by making product or service available to a new pool of customers. The most obvious is to open stores in new locations, such as opening a store or kiosk in a new town. New locations can also be virtual, such as a website with an online store. Another approach is to extend the reach through advertising. Once a new market is identified, it might advertise in select media that targets that market. 5) Participate in trade shows. Trade shows can be a great way of

growing the business. Because trade shows draw people who are already interested in the type of product or service offer, they can powerfully improve bottom line. The trick is to select the trade shows participate in carefully, seeking the right match for the product or service.

6) Conquer a niche market. Remember the analogy of the big fish

in the small pond? That’s essentially how this strategy for growing business works. The niche market is the pond; a narrowly defined group of customers. Think of them as a subset whose needs are not being met and concentrate on meeting those unmet needs. 7) Contain your costs. Surprised? Bear in mind that when we’re

talking about growing the business, we’re actually talking about growing the business’s bottom line. And the difference between pre-tax and post-tax money can make this a very effective growth strategy. There are two main approaches to cutting costs; liquidating your “loser” products and improving your inventory turnover.

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8) Diversify your products or services. The key to

successfully growing the business through diversification is similarity. The focus ison the related needs of already established market or on market segments with similar needs and characteristics. 9) Franchising. The stories of entrepreneurs who have become both

well known and well heeled due to franchising their small businesses are legion – and not just stories. If the business is successful and can develop a system that ensures that others can duplicate your success, franchising may be the fast track for growing your business. 10) Exporting. Expanding into international markets can also be a powerful boost to the business’s bottom line. Like franchising, this is a way of growing your business that requires quite a commitment of time and resources, but can be extremely rewarding.

Methods of Growth Joint Venture/Alliance. This strategy is particularly effective for smaller firms with limited resources. Such partnerships can help small business secure the resources they need to grapple with rapid changes in demand, supply, competition, and other factors. Forming joint ventures or alliances gives all companies involved the flexibility to move on to different projects upon completion of the first, or restructure 11

agreements to continue working together. Subcontracting, which allows firms to concentrate on those aspects of their business that they do best, is sometimes defined as a type of alliance arrangement. Joint ventures and other business alliances can inject partners with new ideas, access to new technologies, new approaches, and new markets, all of which can help the involved businesses to grow. Indeed, establishing joint ventures with overseas firms has been hailed as one of the most potentially rewarding ways for companies to expand their operations. Finally, some firms realize growth by acquiring other companies. Diversification (New Products/New Market) Diversification is a high-risk growth strategy, largely because both the products and the market are unproven territory for the entrepreneur. Though trailblazing emerging products and markets can be exhilarating, it can also be terrifying given the fact that neither you nor anyone else can rely on prior experience for reassurance. But if innovation is one of the company's defining characteristics, a diversification strategy will eventually become second nature. To achieve growth, the company will have to be realistic about the risks it face and crystal clear about what has to be achieved. Market Development (Existing Products/New Market) A more common scenario is one in which a small business owner attempts to develop a new market for their existing products and services. The new market can be geographical (e.g. foreign export) or an untapped segment of a domestic market. It's even possible to develop a new market for existing products by adjusting the product's packaging or expanding the product's distribution channels. In any event, a market development growth strategy requires a working knowledge of existing markets and the ability to gaps in the marketplace that can be exploited to your advantage. Product Development (New Products/Existing Market) A growth strategy based on product development is the mirror image of a market development strategy. Instead of pioneering a new market with existing products, you attempt to roll out a new product(s) in a market with which you are already familiar. Many small business owners are more comfortable working in this kind of scenario because they already possess an awareness of prevailing market conditions. However, a product development strategy can be just as challenging as a market development strategy because it often requires

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the business to develop new abilities and continuously adapt the products until they achieve marketplace success. Market Penetration (Existing Products/Existing Markets) Businesses that find themselves in a situation that involves neither new markets nor new products are forced to grow through a market penetration strategy, a strategy that is designed to give the business a greater percentage of market share. This type of strategy usually seeks to gain a competitive edge through pricing, marketing, or other initiatives. Additionally, market penetration can be achieved by increasing customer usage through loyalty programs and incentives targeting your existing customer base. Mergers and Acquisitions A merger is a combination of two or more businesses into one business. Laws in India use the term 'amalgamation' for merger. The Income Tax Act,1961 [Section 2(1A)]defines amalgamation as the merger of one or more companies with another or the merger of two or more companies to form a new company, in such a way that all assets and liabilities of the amalgamating companies become assets and liabilities of the amalgamated company and shareholders not less than nine-tenths in value of the shares in the amalgamating company or companies become shareholders of the amalgamated company. An acquisition may be defined as an act of acquiring effective control by one company over assets or management of another company without any combination of companies. Thus, in an acquisition two or more companies may remain independent, separate legal entities, but there may be a change in control of the companies. Horizontal and vertical Integration Horizontal integration occurs when two firms in the same industry join together who produce the same product and are at the same stage of the production process (e.g. the Nestle takeover of Rowntree). The new, larger business is likely to be more powerful, have a larger market share, and achieve higher sales revenue and profits. However, the new business may become complacent and inefficient and find that it suffers from diseconomies of scale and / or falling profits.Vertical integration occurs when two firms combine who are in the same industry, but at a different stage of the production process. Forward vertical integration. 13

Occurs where a company merges with, or takes-over, another company which is closer to the retail stage (i.e. nearer to the consumer). An example of this would be a car manufacturer taking-over a range of car showrooms. Forward Vertical integration is often the result of a desire to secure an adequate number of market outlets and to raise their standard. Backward vertical integration. Occurs where a company merges with, or takes-over, another company which is closer to the source of the raw material (e.g. a car manufacturer taking-over a supplier of car components). Backward Vertical integration is often the result of a company being able to exercise much greater control over the quantity and quality of it supplies, as well as securing its supplies at a lower cost. Conglomerate. This occurs where two firms merge which are in different industries and produce different goods - in other words, it is pure diversification. The major advantage to the new, larger firm is that it has diversified its product range and spread its risks. Lateral. This occurs where two firms combine which are similar in some way, but are not in the same industry (e.g. Cadbury-Schweppes). Here, both companies produced products which were sold to similar market segments (confectionery and soft drinks). Often, the firms can benefit from the management and marketing techniques employed by the other.

Conclusion

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Organization is a living organism that can be energized to affect every and any thing related to it. The secret to keeping an organization alive and youthful is to keep it operating at its maximum capacity and to keep increasing that capacity by constantly upgrading the building blocks of organization (job positions, activities, and systems), and then coordinating and integrating the subunits that make up that building block. In addition, organization is maximized when top management develops a vision and mission, including clear objectives and business values, which are well communicated by top management to the staff, and well executed by the employees in the company. Organizational growth, then, may well require as much planning, effort, and work as did starting a company in the first place. stablishing and improving standard practices is often a key element of organizational growth as well. Organisation must implement changes in order to be cost efficient, innovative, decrease customer complaints and increase sales. Change will always be a factor for organizations wanting to increase their prolonged existence and prosperity in volatile markets.

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Bibliography The information contained in this project has been taken from various sources. www.google.com (search engine),wikipedia, www.investorswords.com www.web-enable.com and various books. The information is true in the best of our knowledge.

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