Strategy illustration Strategy theory

Growth and decline of businesses

Businesses grow in a number of ways - e.g. by increasing sales and profits, employing more staff, operating from more outlets, producing on a larger scale, etc. Growth is one of the most difficult aspects of a business to manage. The problem for many young people setting up in business is that they may try to overstretch themselves too quickly. Having achieved success in a particular business line in a relatively short period of time an entrepreneur may see themselves as being the 'next Richard Branson'.

They may then fall into the trap of overstretching themselves or 'overtrading'. The problem with overtrading is that if you try and produce too much you can only continue to be successful if your goods sell, and also bring in quick cash payment. Unfortunately, in the real world you will find that times arise when debtors are slow in paying up and creditors demand repayment. Like a souffle exposed to a blast of cold air, many businesses that have risen too quickly collapse.

One aspect of a company like Richard Branson's Virgin is that although it may appear to grow rapidly, it will only go for expansion once it is secure in its existing markets. There is an important lesson to be learnt here.

Growing the business

With very few exceptions, every big company began as a small company, often with just one or two enterprising individuals at its head. Michael Marks arrived in this country from Russia in the nineteenth century speaking very little English. He set up as a door-to-door hawker of buttons, needles, ribbons and other small items. He progressed to selling from market stalls, setting up in partnership with Tom Spencer. Today Marks and Spencer is the best known brand name in the United Kingdom.

'Growing the business' is an important aspect of business development. A careful balance must be achieved so that on the one hand you don't overstretch yourself and on the other you don't fossilise to be taken over by more enterprising enterprises.

Supporting Documents

These downloads will help to put strategy theory into context using real world examples from real businesses.

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