This paper discusses the potential threat caused by corporate growth. By investigating why companies grow, the author will complete a detailed determination of different reasons why the process of growth can result in serious damage to a company. In addition to this, the purpose is to show ways to minimise risks and establish sustainability within the growth process.
The author starts with a comprehensive literature review which begins with an overview of the changes on global business conditions as caused by technical improvements. A description of active and reactive reasons for corporate growth will follow. After that an outline of different growth strategies and a comparison of different types of enterprises with their specific risks will be given. In connection to that, the author will answer the question “What makes growth dangerous for a company; and how can a firm become prepared to deal with it?” To answer this question the author investigates different growth strategies, especially diversification at the example of implementing services.
Referring to the literature review the author will show three different case studies of growing firms in the second part of this report. In connection to that a discussion about how the theory can be adopted to these realistic cases will follow.
Table of contents
1. Introduction
2. Literature review
2.1 Macro environmental analysis
3. Reasons for corporate growth
3.1 Fig. 2: Developing cycle of a company (Bennett, 1989)
4. Growth strategies
5. The potential threat of corporate growth
6. Age, size and corporate growth
7. Case studies
7.1 Case study 1: Starbucks
7.2 Case study 2: Boeing
7.3 Case study 3: Bombardier
8. Discussion
9. Conclusion
Objectives and Scope
This report investigates the risks associated with corporate growth and identifies strategies for companies to navigate expansion while maintaining sustainability. It seeks to answer how firms can prepare for the dangers inherent in growth processes by analyzing theoretical frameworks and real-world corporate developments.
- The influence of global business conditions on corporate expansion.
- Categorization of growth drivers into active and reactive reasons.
- Evaluation of various growth strategies, including diversification and vertical integration.
- Analysis of risk categories (capability, market, and financial risks) during service-led growth.
- Examination of success and failure factors through specific corporate case studies.
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The potential threat of corporate growth
The author will now show the large variety of risks within corporate growth by reviewing recent literature.
Canals (2000) states that growth always involves risks, but the absence of growth might involve even higher risks. That is why not only companies which are listed on stock exchanges pursue the purpose of growing. Slywotzky (2004) also argues that businesses are facing a variety of risks which is bigger than ever before and reach from political risk to product liability and environmental risks. Considering international growth strategies the main areas of risk are currency fluctuations, unpredictability of foreign governmental policy, the diversity of business restraints and potential difficulties with local business partners (Abboushi, 2000). The significance of partnerships are also part of Wynarczyk and Watson´s (2005) research. They suggest that companies with partnership arrangements to members of their supply chain are able to establish higher and more sustainable growth rates by reducing the risk of business discords.
According to the earlier explained growth strategies it is Reed and Fronmueller’s (1990) belief that vertical integration is risk neutral and does not produce greater risks in comparison to non-vertically integrated firms. In case of diversification it is the turning to services which is attractive especially for companies with saturation of their core product markets but also implicates various risks (Sawhney, Balasubramanian & Krishnan, 2004). Sawhney, Balasubramanian and Krishnan (2004) argue that a systematic approach to create service-led growth can help managers of product companies to improve their chances of success. They further state that companies must start to redefine their markets in terms of customer activities and customer outcome instead of products and services. This proposition is supported by Peter Ducker (Sawhney, Balasubramanian & Krishnan, 2004) who says that it is always the utility which a customer buys and never a product.
Summary of Chapters
Introduction: Outlines the purpose of the paper, which is to discuss the potential threats of corporate growth and how to minimize associated risks.
Literature review: Examines global business environment changes and the transition towards increased competition through technology.
Reasons for corporate growth: Explores why companies grow, categorizing drivers into active and reactive growth within a development cycle.
Growth strategies: Discusses various conceptual frameworks for growth, including Ansoff’s matrix and alternative paths like vertical integration.
The potential threat of corporate growth: Analyzes the risks of expansion, specifically focusing on the challenges of migrating to service-led business models.
Age, size and corporate growth: Investigates how the size, age, and type of an enterprise affect its vulnerability during the growth process.
Case studies: Provides empirical evidence through the analysis of Starbucks, Boeing, and Bombardier.
Discussion: Connects the findings from the case studies back to the theoretical frameworks presented earlier in the paper.
Conclusion: Synthesizes the main findings, reiterating that while growth entails inevitable risks, strategic planning is essential for sustainability.
Keywords
Corporate growth, Risk management, Business strategies, Diversification, Vertical integration, Service-led growth, Starbucks, Boeing, Bombardier, Ansoff Matrix, Sustainable growth, Capability risk, Market risk, Financial risk, Corporate strategy.
Frequently Asked Questions
What is the core focus of this paper?
This paper examines the potential threats and risks that accompany corporate growth, exploring how businesses can navigate these challenges to remain sustainable.
What are the primary thematic areas covered?
The study covers drivers of growth (active vs. reactive), growth strategies such as diversification and vertical integration, and risk mitigation strategies in service-oriented transitions.
What is the main research objective?
The objective is to determine why growth can lead to corporate damage and to identify management practices and strategies that help minimize these risks.
Which scientific methods were applied?
The author employs a comprehensive literature review and comparative case study analysis to connect theoretical models with practical business scenarios.
What is covered in the main body of the work?
The main body investigates growth drivers, strategic frameworks like the Ansoff Matrix, risk categories for service transitions, and the influence of firm size and age on growth performance.
How would you characterize this paper using keywords?
Key terms include Corporate Growth, Risk Management, Strategic Planning, Diversification, and Sustainable Growth.
Why did the author choose Starbucks, Boeing, and Bombardier as case studies?
These companies represent diverse growth outcomes: Starbucks illustrates successful strategic growth, Boeing shows the dangers of explosive, poorly adapted growth, and Bombardier highlights successful diversification through related industries.
What does the "Service Risk Mitigation Matrix" entail?
This matrix, discussed in the paper, categorizes risks into capability, market, and financial risks, and suggests organizational and developmental strategies to manage the transition from product to service offerings.
- Quote paper
- Simon Hoese (Author), 2007, The potential threat of corporate growth, Munich, GRIN Verlag, https://www.grin.com/document/79604
