Gabriela
Hartanto
LC02
/ 2301851471
Summary gslc week 11
Preparing
for and evaluating the challenge of growth
Sustained
growth is defined as growth in both revenues and profits over an extended
perios of time.Successfully growing a business is a function of preparation,good
management and an appreciation of the issues involved.The three primary things
that a business can do to prepare for growth are :
·
Appreciating the nature of business growth
·
Staying committed to a core strategy
·
Planning for growth
The six most common reasons that
firms grow in an effort to increase their profit ability and valuation are to :
1.
Capture economies of scale (which are generated
when increasing production lowers the average cost of each unit produced)
2.
Capture economies of scope (similar to economies
of scale,scope economies are advantages a firm generates through the range of
its operations)
3.
Achieve market leadership (which happens when a
firm holds the top or second position in its industry or the segment of an
industry in which it competes)
4.
Maintain influence,power, and survivability
(conditions through which a firm is able to affect the setting of an industry’s
standards as well having the scale and scope that will allow it to make a
mistake and continue operating )
5.
Accommodate the growth of key customers (which
is the ability to serve an important customer’s expanding demand for the firm’s
product or service)
6.
Maintain an ability to attract and retain
talented employees (the most desirable employees want to work for a firm in
which learning and growth opportunities will be readily available to them)
Firms are collections of productive resources that are
organized in an administrative framework.As a firm goes about its routine activities, it recognizes opportunities
to grow.The problem with this scenario
is that firm’s are not always prepared or able to grow, because of limited
“managerial capacity." A firm’s administrative framework consists of two kinds of services
that are important to firm growth.Entrepreneurial services generate new market, product, and service ideas,
while managerial services administer the routine functions of the firm and
facilitate the profitable execution of new opportunities.New product and service ideas
require substantial managerial services (or managerial capacity) to be
successfully implemented.This is a complex problem because if a firm has insufficient managerial
services to properly implement its new product and service ideas, it can’t grow.
Continuation From Previous SlideThe reason a firm can’t quickly increase its managerial services (to take
advantage of new product or service ideas) is that it is expensive to hire new
employees, it takes time for new hires to be socialized into the culture of a
firm, and it takes time for new employees to acquire firm-specific skills and
establish trusting relationships with other members of the firm.When a firm’s managerial
resources are insufficient to take advantage of its new product and service
opportunities, the subsequent bottleneck is referred to as the managerial
capacity problem. As a firm grows, it is faced
with the dual challenges of adverse selection and moral hazard.Adverse selection means that
as the number of employees a firm needs increases, it becomes increasingly
difficult for the firm to find the right employees, place them in appropriate
positions, and provide adequate supervision.Moral hazard means that as a firm grows and adds personnel, the new hires
typically do not have the same ownership incentives as the original founders,
so the new hires may not be as motivated as the founders to put in long hours
and may even try to avoid hard work.
#creativepreneurship
#Binus@Bandung
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