DIMENSIONS OF BUSINESS GROWTH Potential for growth (Distinguishes between small business and entrepreneurial venture) Growth  Internal development and change  Interaction with environment GROWTH Innovation Strategy

DIMENSIONS OF BUSINESS GROWTH Organisational growth is multi-faceted, four perspectives: Financial Strategic Structural Organisational Henry Mintzberg (1979), The Structuring of Organisations.

Four Perspectives 1. Financial A commercial entity requires: Costs + Investments =Turnover = Profits

Four Perspectives 1. Financial (continued) A measure of the venture’s success: Increases in what the business owns  a. Assets b. Value of the business

Four Perspectives 2. Strategic growth The way in which the business Leverages its resources and capabilities. Develops its capabilities to exploit an opportunity or opportunities. Tangible and intangible assets it acquires to create sustainable competitive advantages.

Four Perspectives 3. Structural growth Changes in the organisation of the venture’s internal systems: Managerial roles and responsibilities Reporting relationships Communication links Resource control systems

Four Perspectives 4. Organisational growth Changes in organisation’s processes, culture and attitudes as it grows and develops Changes in entrepreneurs role and leadership style as the venture grows from small to a large firm

for the entrepreneurial venture Four Perspectives The dynamics of growth for the entrepreneurial venture Financial growth Resources Performance Strategic growth Asset accumulation Direction Organisational growth Structural growth Use of assets

Financial Analysis of Growth Investors and business communicate in a number of ways: A model of financial appraisal for the entrepreneurial venture Financial reports Balance sheet Profit and loss accounts Supplementary information Growth Income/Assets/Capital Trends over time Estimation of risks and return Indicator ratios Performance Financial status Stock market Benchmarking Expectations Industry norms

Strategic growth Growth and cost advantage Lower cost Experience Lower Curve cost reduction Lower price Increase in demand Increase in output

Structural growth As the venture grows, structural growth is both a response to the circumstances in which the organisation finds itself and a reaction to the opportunities with which it is presented.

Structural growth CONTINGENCY Theory This theory regards the structure of an organisation as dependent on five ‘contingencies’ or types of factors Organisation’s size Operational technology it uses to create value The strategy it adopts The environment it is in The way power is utilised within it

Organisational Growth The resource requirement approach The entrepreneurial venture requires Information (to develop an innovation) Capital (money) for investment and People to make the venture happen

Organisational Growth The resource acquisition approach Stage 1: Entrepreneur attracts all resources Resources

Organisational Growth The resource acquisition approach Stage 1: Entrepreneur attracts all resources Stage 2: Ad hoc delegation of resource acquisition Resources

Organisational Growth The resource acquisition approach Stage 1: Entrepreneur attracts all resources Stage 2: Ad hoc delegation of resource acquisition Stage 3: Delegation to management team Resources

Organisational Growth The resource acquisition approach Stage 1: Entrepreneur attracts all resources Stage 2: Ad hoc delegation of resource acquisition Stage 3: Delegation to management team Stage 4 Managed by specialists functions co-ordinated by entrepreneur Resources

Summary Organisational growth is multi-faceted, four perspectives: Financial Strategic Structural Organisational

References Wickham, PA (2001), Strategic entrepreneurship, Chapter 20, Prentice Hall Carter S and Jones-Evans D (2000), Enterprise and small business, Chapters 16, 17, 19, 22, 23, Prentice Hall.