Growth & Development in the Small Business
13 important questions on Growth & Development in the Small Business
Internal barriers that constrain SE growth
- Owner & Size related constraints
- Inadequacy of existing assets
- difficulties with team building
Character of entrepreneur
In SE, the owner has a major impact. Which approach shows this
The main external barrier that constrain SE devlopment
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Character of the entrepreneur
Three identities of SE owner are identified that a relation to why indiviuals start & run a business
- Artisan identity: owners role centres on intrinsic satisfaction of personal autonomy that running an org. enhails.
- Classical entrepreneur identity: owners role centres on earnings & profit.
- Managerial identity: owners priority is on getting recognition of others
Managers must learn to cope with unpredicted and rapid changing environment. 3 types of change situations
- Closed change: organization can predict events of timing and consequences
- Contained change: involve repitition of past events. Manager can take rational planning for control
- Open-ended change: change is unknowable & unpredictable
Managing growth has 5 points:
- Organizational learning: how SE copes with open ended change (can be done by complex learning, or simple learning if similar happened in the past)
- Managing finance: as organisation grows, enhance financial skills
- Developing marketing function: in early stages marketin is for owner, how to allocate when grow
- Broadening customer base: while coping with existing
- Decide when to introduce new management structure
Character of the entrepreneur
Personality influences on attitudes to
- risk: willingnes to use external finance
- personal autonomy: willingness to collaborate or use consultants
- strategic management skills
Next to character of entrepreneur, of firm and management theories, there could be added a fourth to storey's theory
- unpredictability has high impact on SE growth
- can cause major problems by lack of understanding
SE's owner-size related constraints to growth
- Organizational culture: personality & aspirations of owner, which shape constraining forces affecting a firm
- Finance: ignorance of sources of risk capital may be constraining growth
- Attracting quality people: SE cannot offer same salary and carreer path as LE.
- Marketing problem: SE rely on informal marketing, constrain when growing oversea
Characteristics of the firm
Lewis' life-cycle model, 5 stages
- Start-up (org. form: owner is business. Challenges: identity market & attract customers)
- Survival/development (org. form: simple structure. Challenges: consolidate customer base & establish financial foundations)
- growth (org. form: more formal. Challenges: managers willingness to lose control & attract good quality staff)
- maturity (org. form: lines of authority consolidated. Challenges: invest in marketing & control costs)
- decline (org. form: replacement of staff. Challenges: shrinkage operational activities)
Management strategies
Storey developed four key strategy factors for growing firms
- willingness to share equity with external individuals or organizations, frequently identified in fast growing SE
- Ability to identify market segments where they can built customer base
- Willingness to introduce new products
- owners willingness to delegate decision making (crucial to attract good people)
Difficulties with team building
- Owner has to ensure that all tasks are allocated well
- Subunits must work as a team, not as a group lacking of collective rationale
Characteristics of the firm
Younger firms grow more rapid, SE frow first then stabilize. Gibbs & Davis organizational approach:
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