Building A Business From Start Up To Growth
Every business concern has one major goal and that is to grow beyond their start up point. Business organisation go through different stages also know known as transitional stages in attempt to satisfy societal demands and remain a going concern. Each stage of the transition requires different entrepreneurial approach, attitude and psychology. However, these transitional stages are represented by the organisational life cycle.
The organisational lie cycle is the process involving the birth of a firm, its growth and diversification, how entrepreneurs nurture their firms, its growth and diversification, how entrepreneurs nurture their firms to become multinational or global organisations. Given, the rate at which most firms to become necessary to pay adequate attention on how best to manage a firm from conception to mature organisation.
The Organisation Life Cycle (Building A Business)
The organisation life cycle as a process that explains the life cycle of a firm has a well established pattern of conception, growth, maturity, decline and possible exit. The life cycle as normally graphically represented, explains what a firm can experience in the long run but more important is how entrepreneurs perceive their roles in each of the stages of the cycle transition.
The length of the cycle varies among firms, ranging from a few years to several decades. The duration of each stage may be different among industries, some take years to pass through the introductory stage, while other are accepted in a few years. Certainly not all firms go through all stages, some may exist in the introductory stage, other firm may not enter with their brand until the market is in the growth or maturity stage. In virtually all cases, however, decline and possible abandonment are inevitable because;
(1) The need for the firm’s existence may disappear
(2) A competitive firm may offer a better or less expensive product to fill the same need or
(3) A competitor does a superior marketing job.
The Entrepreneurs Perspective (Building A Business)
How the entrepreneur perceives and understands the role he has to play in each of the stages in the transition process is very important to the sustained survival of the firm. Hanks has presented a modified life cycle which describes transition stages for entrepreneurial firms. In the model, the life cycle is identified with five stages for entrepreneur start up, expansion, consolidation, revival and decline. The elements of the model are easily expressed using three variables which are;
- Product/market and
In practice as the firm progresses from one stage to the other conditions changes which demands that the perception of the entrepreneur should change in line with the current conditions and indeed calls for different decisions in developing products and markets, organising the firm and managing growth. The different stages of organisation life cycle are further explained.
Start Up Stage
The start up stage which is the inception stage usually experience inconsistent growth, in that the market is not fully exploited, the products and or services are relatively new and as such the customers are fully aware of their values. As a result the entrepreneur’s expectations are not met at this stage. In most cases at the start up stage the entrepreneur takes to a definite market, a single product.
At this stage the decision of the entrepreneur is the organisation is difficult to separation from the ideals and thinking of the entrepreneur.
Expansion Stage In Building A Business
The expansion stage is the second stage in the transition process. This stage creates the need for the introduction of functional unit and delegation of authority to some specialist employees. The ideals and thinking of the entrepreneur is somehow consummated by the creative and innovative ideas of the intrepreneurs (employees) whose activities help to extend the organisational vision as articulated by the entrepreneur. Given the intreprenuer activities, the expansion stage is characterized by rapid growth in sales volume, new market penetration as well as new product development to satisfy the different markets.
The expansion stage calls for management or administrative turning point in that more product lines and market calls for a new vision and role for the entrepreneur. In other for entrepreneur to cope, he needs a new leadership perspective so as to properly coordinate the new functional areas and their associated entrepreneur activities. Simply the entrepreneur becomes a strategic planner at the expansion stage.
Consolidation Stage In Building A Business
As a firm new market and increases its product and services lines, it naturally faces intense competition in the industry with growth increasing at a decreasing rate. At this point most firms quit, some others merge and yet very few firms consolidate and remain profitable. Consolidation occurs differently for every organisation. Manufacturers may trim back operations, reduce product lines or retreat from marginality profitable market.
Service firms reduce staff, streamlines distribution systems and withdrew from high – risk markets. In all cases, organisations, tend to shift authority downward as middle and high level staff are reduced to improve efficiency. The entrepreneurial idea behind consolidation is to ensure that only average profitable product lines and markets are served.
Organisation constantly design strategies that ensures their sustained existence. Each time an organisation initiates a new process, develops a new technology or product, provides a new service or improves the qualities of existing products or services, invariably the organisation is reviving. In this light, Hanks calls the revival stage rekindling organisational growth.
In order to achieve rapid growth, innovation is essential and because the organisation needs to incubate new ideas, greater responsibility is given to division manager for independent development. In effect, organisation executives attempt to revive a spirit of entrepreneurship in their operational managers by empowering then with authority for self direction. As result, organisations are restructured through product, geographic or customer divisions and the functional hierarchy is subordinated to divisional leadership. To the extent that innovative products and services emerge, the organisation can experience a revival in growth. If repeated consistently, innovation results in a pattern of upward growth as has been illustrated in the various business plan.
The decline stage witnesses drastic fall in sales volume as buyers begin to desert the product or services in great numbers especially if revival strategies are short lived or ineffective. Profit which has been declining gradually since the expansion stage new disappears totally with the loss of profit, the entrepreneur may decide to abandon the product or service and the channel advertisement fund to research and development activities.
However, successful entrepreneurs would not like to complete the life cycle especially they would want to avoid the decline stage as much as their capabilities, competence and environment can accommodate them. They would like to bring to bear their innovative acumen in order to end at least at the revival stages.