Growth as a Business Objective

Growth as a Business Objective

1. Benefits

   • By growing, a business has other alternatives to fall back on, a growth strategy might secure the future prospects of a business
   • Having a growth strategy can enhance a businesses competitive position in the market. Through a growth strategy competition can be eliminated. This is particularly true if the business has a strong corporate image, has a USP, or is a market leader.
   • Pursuing a growth strategy can minimise the chances of business failure. Risk can be spread. For example, if there is a downturn in one market it can rely on other markets to support
   • A growth strategy can encourage management to analyse all possibilities before focusing on a specific course of action. This helps to ensure that management make a better informed decision and that resources are used effectively
   • Having a growth strategy should motivate workers as it is more likely to give them greater job security. As a result employees are more likely to be motivated. It is unlikely that a business will pursue a growth objective if the business is struggling to survive as resources and finance are required to pursue growth
   • By pursuing a growth strategy, competition is eliminated, allowing business to increase market share, profits and competitive advantage
   • Growth can improve image as job creation will occur. Through growth, employment opportunities can be created thus improving corporate image and competitiveness
   • By growing, business could benefit from economies of scale, giving them increased purchasing power- allowing them to buy more for less, reduced cost for the business, can pass cost reduction onto customers, increased profit, retain profit to develop business

2. Disadvantages

   • A growth strategy can lead to dis-economies of scale- problems controlling, and coordinating activities, poor/slow communication could lead to missed opportunities/slow decision making. These missed opportunities could have helped a business improve competitiveness
   • A growth strategy can fail if it takes place too quickly
   • Growth may not be possible especially in the current economic climate (recession)- business may lack the resources required (human and financial). it is difficult to secure debt finance without collateral
   • Constraints in the external environment can prevent growth (think PESTLE)
   • If growth is too extensive this may reduce competition- Government may stop possible strategies for growth if it is seen as anti-competitive