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GROWTH AS AN OBJECTIVE Session 4 Levie and Hay 2000:

Few small companies enjoy growth Why? They have a limited product range and they are often uncompetitive. Developing new ideas costs money – little profit is generally retained. External funds required – new shareholders, dilution of ownership. Levie and Hay 2000:

What happens if... You currently operate at 80% capacity and you get a large order for product or service which represent 50% of your annual capacity...do you accept it? Levie and Hay 2000:

How do you manage it? Need more finance (fixed and current assets) – which may mean more debt. Need to change the way you do business. Business model becomes more complex – you may need more specialist resources. Levie and Hay 2000:

Internal/External Barriers to Growth External - Mainly seen as intense competition – not access to finance, labour or equipment. Internal – Management capability to manage growth and an unwillingness to relinquish control in exchange for equity. Levie and Hay 2000:

Common Strategy Identify and hold a small niche market and to practice financial and managerial self-sufficiency. Low barriers to entry make this a very risky strategy. While business owners place greater weight on external barriers, Levie and Hay (2000) argue that ‘control’ is the bigger issue. Levie and Hay 2000:

Is control the only form of management? Entrepreneurs that focuses on the control of – rather than use of - assets have adopted a models of capitalism that equate ownership with control and with administrative thinking. They see control as the only form of management. High growth companies make greater use of external resources than low-growth companies. That is, asset use is more characteristic of high growth companies than those who focus on ownership and control. Levie and Hay 2000:

Is there a better way of doing things ? All businesses need some form of organisation – but there is no ‘one best way’ to organise a business and businesses (even small ones) must change in response to changing market conditions. Growth is achieved by obtaining a bigger share of the market or a greater volume of business. This might be through exploiting market growth, increasing market share; developing new products or entering new markets. Levie and Hay 2000:

Open Systems Approach A system is a thing with interrelated parts – each part affecting the other – each dependent upon the whole. A system must be understood in its entirety, not by looking at its parts (e.g. the dissected frog). Open systems depend upon their environment to feed and support their existence. The system is one of input, throughput and output. Levie and Hay 2000:

Open Systems Technical Core (3) Adaptation (2) Maintenance Support Accounting; Personnel; Facilities Management Executive decision making; Strategic planning, R & D; PR INPUTSOUTPUTS (Katz and Kahn’s open systems model) (1) Purchasing (1) Marketing Levie and Hay 2000:

Contingency theory Assumed an essentially bureaucratic model of management around which contingencies could be adjusted. Contextual Factors Organisational Structure Performance Levie and Hay 2000:

Opportunities A chance to do something – it may be a new opportunity, an opportunity to do the same thing, but differently. A new product – a new means to satisfy a new need or to solve a problem. A new way of adding value to an existing product. A new service – may be a combination of a new product and service - Levie and Hay 2000:

Opportunities New means of production – a new way of adding value to an existing product. The new technology may not be an opportunity in itself, but offers a new way server the market. A new distribution route – may be a new way of getting the product to the market or a new way of working with intermediaries. Improved Service - providing a traditional service better. Adding service elements that meet customers needs. Levie and Hay 2000:

Opportunity Relationship Building – building strong trading relationships based on trust. Clients would find it hard to abandon the relationship and probably reluctant to do so. It is important to be open minded about the ways in which an opportunity might be exploited. Levie and Hay 2000: