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"Which strategies should SMEs adopt for growth?"

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Introduction

UNIVERSITY OF LUTON LUTON BUSINESS SCHOOL MSc ENTREPRENEURSHIP AND BUSINESS MANAGEMENT ENTREPRENEURIAL ENVIRONMENT SECOND COURSEWORK "WHICH STRATEGIES SHOULD SMEs ADOPT FOR GROWTH?" MODULE CO-ORDINATOR: PROFESSOR JOHN PHEBY It is a fact that, recently, there has been written more about small business growth than in any other aspect of small businesses as far as the development and management is concerned. A main reason for this is the rising importance of small firms to the economic development and the generation of places for employment. Whilst growth may be judged by some as an indicator of business success, it can also introduce several problems to managers often focusing on the need to relate expansion to either the available resources or those which can be efficiently used. Reviewing the literature it can be easily noticed the fact that business growth is mostly defined in terms of employment. Statistics upon this measure of growth have also showed that just a minority of the fast growing businesses has significantly contributed to employment generation. In other words the contribution to employment generation was very disproportionate. Although the generation of employment is a respected and appropriate criterion for growth we can see that managers or owners of small firms are more considered about the development of profits, sales and other net assets. Because of there is a vast variety of different factors that can influence the growth of the business there has not been ...read more.

Middle

When the firm reaches the stage of success and profitability throw stabilization and growth it is likely to face a crisis of control within the company and so it has immediate need of co-ordination. It is a fact though that too much control will cause lack of emergence to the business and the growth will be starting to stabilize. After that the oncoming crisis is that of the bureaucracy pushing the small firms to collaborate with other external bodies. By this way it is easily understood that looking at the stages of each business life cycle researchers can in a more reliable way its growth prospects. However it is unlikely for a logical development path of a small business to be as considered in advance. In real life the businesses might grow and move back at any time of their life for a uncountable number of reasons. Entrepreneurs, though, must be taking into account such models of growth life cycle in order to be able to notice organizational problems and apply new ways of leading the business towards growth. It is very important for a business that want to grow to make sure that the changes within the business will be periodically structured in a way that allows the owners/managers to manage the firm strategically. Strategic management is therefore an other major aspect of growth in the small businesses. ...read more.

Conclusion

The financial management capabilities are crucial facilitator of growth for a small business. The firm must pay attention to the fixed capital needs in order to be able to acquire requisite equipment, plant or premises. It must also have the ability to recognize the benefits of innovative sources of finance such as business angels and consider the appropriate balance of both internal and external funds. In the early stages of development the application and understanding of the marketing concept is very important for the future well being and growth of the organization. The firm's formulation of marketing activity effectively facilitates sustainable growth too. Small businesses have to identify, understand and satisfy the needs of their customer groups. Because of the highly competitive environment small businesses are seeking efficient improvements within their organization in terms of service providers so as to maintain a competitive edge within their markets. In addition to that SMEs need to improve continuously their existing products in order to protect their customer bases and maintain levels of activity to facilitate any future expansion. As small businesses grow the culture/structure prove to be inadequate to facilitate pace of development. This is an emergency bell for allocation of formal responsibilities and to differentiate the structure and the culture according to the dominant activities of the organization. In other words it is important for SMEs to decide when is the time to introduce new managers and modify their organizational structure to facilitate growth. ...read more.

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