Strategies And Their Significance For Business Growth And The Success Of A New Business

Strategies and their Significance for Business Growth and the Success of New Businesses

Thesis Statement:

The intent of this paper is to unveil the meaning and value of growth strategies or models in new businesses as well as to provide an in-depth study of their significance as it pertain to new business growth success.

Introduction:

There is a fundamental difference from corporate management, which is focused on the plans of operation, and the venture-building process management that is customer or technology centric. The success or failure of a venture is dependent upon the ability of the entrepreneur to "identify emerging attractive markets and to seize on unmet, unserved customer needs."

Different Growth Stages in Venture Management

There are different stages of venture growth, which requires different approaches to management of the venture. The following are four stages with the accompanying factors and elements applicable to that stage of growth as described by Philip Kotler in his Marketing Management, 12th edition book:

Start Up: During this stage the product, market niche and business concept is defined.

Growth: During this stage it is hoped that the business will capture a market share, launch differentiated products, gain repeat customers, expand channels and avenues, expand the management team and train employees and start inventing the second stage of growth for the venture.

Expansion: During this stage of growth activity is inclusive of upgrade in differentiation and competitive strategies, building of management team and empowering of employees, broadening of lines, extending of geographic area coverage, injection of relentless growth attitude in team.

Maturity: During this stage the building of a balanced business system occurs as well as the reinvention of growth strategies. A responsive innovation system is established and the capability for flexibility and speed are established as well.

Theories of Venture Growth Models:

The work "Entrepreneurship in Organizations 0 The Aviall Studies Model for Corporate Growth" is a study based on "organizational re-engineering at Aviall Caledonian Engine Services, whose corporate structure was re-designed from a flow to a process form." In this study a 'model of entrepreneurial catastrophe was focused on in which the "properties of the model allow description of changes in behavior ranging from continuous and smooth to discontinuous and sudden (catastrophic) by allowing for divergence and hysteresis. The hypothesis was that (1) Individuals possess entrepreneurial characteristics naturally to some degree and these characteristics can be measured" and' (2) Culture will inhibit a individual's propensity to behave entrepreneurially the higher the degree of administration and bureaucracy; and (3) Catastrophe theory, and specifically the cusp catastrophe, provides a revealing model of entrepreneurial behavior." (Weaver, et al., 2000) This study focuses on the entrepreneur's role in an environment that is rapidly shifting and changing in the developing organization. The data indicated a strong tendency of the organization to be "administrative, bureaucratic, and hierarchical".

In the work "New Ventures and Total Competitiveness: A Conceptual Model, Empirical Results, and Case Study Examples" the research applied a "conceptual model of total competitiveness along with a diagnostic instrument" in the attempt to receive insight into the mechanisms that are key in accounting for success by the entrepreneur in new ventures in the early stages. Twelve dimensions are used to define "total competitiveness" which are "Strategy/Direction, Human Resource Policies, Intra-Business Unit Communications, Total Quality Management, Product/Service Development and Improvement, Marketing and Sales, Vendor Relationships, Process Improvements, Participative Management, Organization Structure, Business Unit Culture, and International Competition." (Slevin & Covin, 1995) This study purports and evidence implies that "new ventures go through a variety of difficult transitions as they go from early stage to middle stage firms in their development." Early stage is considered to be less than one million dollars in sales while middle stage is considered to be approximately five million dollars in sales. (Slevin & Covin, 1995) The idea of transitions and methods of understanding and managing those transitions in a specific ordered manner is a critical issue in new venture development. There is a need it seems for a conceptual model in identifying "key behavioral factors" that are vital in the unit performance of the business as well as a type of measure or diagnostic tool that could be a provision for researchers and those who found new ventures.

New businesses must be able to make adaptation expediently and in an effective manner in order to survive (Kustin, Marketing course, Spring 2006). The idea of 'total competitiveness' in essence is an implication of profitable current operations simultaneous with the ongoing repositioning key factors making them responsive to as well as anticipating the competition's actions. (Slevin & Covin, 1995) The theory is that as competition becomes more intense the companies begin development of new advantages and quickly in the attempt to ruin the advantages of the competitors, which serves to escalate and perpetuate competition and propels toward 'hypercompetition'. Hypercompetition refers to a stage in competition when "companies actively work to string together a series of temporary moves that undermine competitors in an endless cycle of jockeying for position. (p.29) Conclusions of the study of Slevin & Covin (1995) are stated to be that "one of the reasons new ventures are able to blossom early, is the fact that the very nature of their smallness permits adaptability and rapid response." Small organizations have as assets their flexibility and adaptability however they are vulnerable and transitions prove to be quite difficult. Founders of new ventures need help and researchers and educators of entrepreneurship need to make provision of various approaches and solutions to meet the challenge which can be accomplished with a focus on "practical conceptual models" and helping the new venture manager in the development of real solutions that are able to meet the challenge of transition in a fast growing new venture. Recommendations of this study are that "significant