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Growing too fast vs too slow
- 1. GROWING TOO FAST VS GROWING TOO SLOW – WHAT IS MORE DANGEROUS? NATASHA WILLIAMSON AND ANNIE MCCONNELL
- 2. WHAT IS GROWTH? ▸MOST BUSINESSES PRIMARY OBJECTIVE IS TO MAKE PROFIT AND INCREASE THE WEALTH OF THE OWNER THROUGH THE SALE OF GOODS AND SERVICES. ▸GROWTH IN A BUSINESS CAN LEAD TO HIGHER PROFITS, BUT IF THIS GROWTH IS NOT MANAGED PROPERLY, IT CAN LEAD TO A NEGATIVE IMPACT ON THE BUSINESS. ▸ORGANIC GROWTH CAN BE GENERATED BY INTRODUCING A NEW PRODUCT OR SERVICE, INCREASING SALES PRICE - MAY LEAD TO A DECREASE IN SALES, AS CUSTOMERS CHOOSE A CHEAPER ALTERNATIVE OR INCREASING SHARE OF THE MARKET THROUGH PRODUCT DIFFERENTIATION.
- 3. ADVANTAGES OF FAST GROWTH ▸INCREASED SALES REVENUE ▸LOWER COST PER UNIT ▸CAN INCREASE SHARE CAPITAL ▸CAN INCREASE MARKET SHARE MORE QUICKLY THAN SLOW GROWTH ▸ SHORTFALL IN WORKING CAPITAL ▸ LACK OF AVAILABLE RESOURCES SUCH AS LABOUR AND DIRECT MATERIALS ▸ UNABLE TO MEET GROWING DEMAND ▸ HARDER TO MANAGE BUSINESS ▸ QUALITY OF PRODUCTS MAY DECREASE ▸ RISK OF INSOLVENCY DISADVANTAGES OF FAST GROWTH
- 4. ADVANTAGES OF SLOW GROWTH ▸ NOT AS EXPENSIVE AS RAPID GROWTH ▸ CASH FLOW IS USUALLY HEALTHIER THAN IT IS DURING RAPID GROWTH ▸ MANAGING THE BUSINESS IS EASIER ▸ QUALITY OF PRODUCTS LIKELY TO REMAIN CONSTANT ▸ GREATER OPPORTUNITY TO PROVIDE A PERSONAL SERVICE ▸ IS A SAFE OPTION- LIKELY TO ATTRACT LONG TERM INVESTORS ▸ AGGRESSIVE COMPETITORS MAY LEAVE YOU BEHIND ▸ DO NOT BENEFIT FROM ECONOMIES OF SCALE AS QUICKLY ▸ LESS POTENTIAL FOR PROFIT IN THE SHORT TERM DISADVANTAGES OF SLOW GROWTH
- 5. ▸ONLY START TO EXPAND ONCE YOU’VE ATTRACTED SUSTAINABLE DEMAND ▸LOOK TO GROW YOUR BUSINESS IN LINE WITH DEMAND ▸ONLY INVEST WHERE NECESSARY, CONTRACT OUT PRODUCTION AND USE CONSULTANT ADVICE ▸IF COST OF SALES HAVE INCREASED WHEN YOU EXPAND, BUT SALES REVENUE IS GROWING MUCH SLOWER, IT’S A SIGN YOU’RE GROWING TOO FAST. HOW TO MANAGE GROWTH IN SIM VENTURE
- 6. MULTIPLE CHOICE QUESTIONS 1. WHICH ONE OF THE FOLLOWING STATEMENTS IS FALSE? A.FAST GROWING BUSINESSES ARE LIKELY TO ATTRACT LESS LONG TERM INVESTORS THAN SLOW GROWING BUSINESSES DUE TO GREATER RISK. B.CASH FLOW IN SLOW GROWING BUSINESSES IS USUALLY MORE HEALTHY THAN FAST GROWING BUSINESSES. C.SLOW GROWTH IS NOT AS EXPENSIVE AS FAST GROWTH. D.MANAGEMENT IS EASIER IN FAST GROWING BUSINESSES THAN IN SLOW ONES. 2. WHICH OF THE FOLLOWING IS A CHARACTERISTIC OF SLOW GROWTH A.NOT AS EXPENSIVE AS FAST GROWTH B.BUSINESS IS HARDER TO MANAGE C.RAPID INCREASE IN SALES D.QUALITY OF PRODUCTS WILL DECREASE 3. WHAT IS A SIGN THAT YOUR COMPANY IS GROWING TOO FAST? A.INCREASED PROFIT B.COSTS ARE GROWING FASTER THAN SALES C.YOUR BUSINESS IS EASIER TO MANAGE D.THERE IS A LOWER COST PER UNIT