What Values Matter for the Business Growth - Term Paper Example

Introduction The aspect of value in the business growth involves the ability to expand and to innovate by taking risks. The value network can be accomplished by exploring opportunities, stretching and securing major aspects of competence in the business, maintaining investment, effectively executing strategies as well as reinvention through M&As. Attracting capital can also make a strong bargaining right to stabilize growth. For further business growth, the firms need to focus on important aspects that can help in value building. The latter assists a firm to respond to external challenges in a swift way. Value network in business growth Value network in the business that can bring about growth include such other approaches as maximization of the organizational value, ensuring greater returns especially to individuals who greatly participate in value addition and growth. Furthermore, coordination helps expand the markets, saves time, and reduces excessive instances whereby inventory is held Firm growth Definition: Firm growth may refer to a company’s rate of increasing in a broad form of the economy with the ability to increase revenues that are helpful to the industry for a period of time. One time surge in form of revenues cannot be considered as growth of a firm as this firm growth has to be demonstrated over longer periods of time Whenever the discussion about firm growth is started, attention is drawn to major issues such as the theoretical research besides empirical research on growth of the said firm. The said research further points out that expected rates of growth are quite independent, according to the Gibrat’s Law, from the size of the firm. Different factors have been proved to determine the dynamics of a firm. Firms should therefore play the major role in taking the forward step towards growth. More recent studies have pointed out that for industrial revolution to be facilitated, then learning more about firm growth should be given the center stage for better results. (Simon and Bonini, 1958). Firms should therefore invest more in these learning activities that have long lasting effect on the organization’s well being. Ericson and Pakes’s model further states that just staying in the business also proved to provide the firm with relevant information on what exactly they are capable of during their inactive moments. Given the amount seen from empirical work, the major point of concern should therefore be in dealing with some of the problems that arise from selection of samples and the subsequent processes of censoring these samples after exit of the firms. From that effect; there has been the said rise of two sets of arguments. The first technique tends to apply a model of selection that is standard especially when selecting the samples. In this specific technique, a specific look into the failures of the firm is carried out to assist in fostering forward march by treating the samples as a latent variables then connecting between the dots to produce a reliable level of understanding that is quite necessary for the growth of the firm. The second technique that arises from this argument tends to concentrate more on estimating the growth rates witnessed in two different sets of firms. These firms are in samples, the first one being the non-failing firms while the other set being the set tends to talk about all the firms combined, i.e. both the non-failing and the failing firms (Dunne et al.1989). The papers used in this work can be formally declared to take the approaches of Roberts, Dunne and Samuelson as they opted to tackle the problems that rise from censoring sample selections. It therefore tends to examine firm failures together with distribution means of the growth rates that are distributed and that also tend to distinguish the two different samples discussed above like the non failing and the combined forms of firms with different sets of success in performance. Firms should have keen eyed experts to deal with scrutinizing through every single detail that requires the attention of immediate handling. The proportional growth rate of a firm is dependent on size and age among many factors. Diminishing returns can relate to the rationale of relationships witnessed within the firm. Furthermore, this study talks about the consequences of formulating a model that is empirical with the aim of studying how the growth of the firm is affected by the size and age. Distinction has to be drawn therefore to determine the difference between observed rates of growth and the potential of the firm in question The Jovanovic model tends to assume many factors that are not fixed. Strictly adhering to fixed size and strength has its demerits such that the current information should not be over relied on to tell the destiny of the company as that would discourage any expansion plans that the company has. An annual survey carried out on a given number of Spanish firms under the manufacturing departments in the year 1990 whereby the firms were asked to participate immensely by commissioning their employees to take part in the forum. A total of 2,118 firms confirmed participation in the study done by Industry Ministry. The survey provided a common ground for carrying out similar studies in subsequent years with more firms given the opportunity to participate. The survey maintained similar characteristics in the years that followed whereby new firms were also incorporated (Goldberger, 1991) The methodology that was decided upon to bring out these aspects of important findings used multiple observations method to get to a conclusive finding. In the observation, two patterns emerge after viewing the estimates, i.e. the failure rate was observed to be declining in a way that is parallel to the increase in the current size of a firm. The findings were more particular to those firms still under the age of 5 years and equally to the firms that range between 26-50 years. In these sets of years, a downward trend was witnessed but not actually in a monotonic way. On the other hand, another finding under different field stated that the probability of a firm to have to choose the exit plan tends to decrease with age though this observation is more monotonic. The significant effects that exist in this context are in form of differences in rates of failures. These rates of failure put into consideration the year effects as well as the control variables that identify the firms that have a category of size quite different when compared to the results observed in previous years and the effects that the previous engagements have brought to the firm. Passive learning models show that there exists a boundary of failure or a growth rate that is critical for giving the firm an edge in decision making as to whether to stay afloat and keep on moving forward or to actually take a quick exit from the corporate world. (Pakes and Ericson, 1998) Conclusions from firm growth The conclusion that is derived from all these studies conducted and compiled under the understanding of the growth of a firm reflect through the importance of the age and size of the firm if much growth is to be achieved. The Jovanovic model of 1982 for example relies more on heterogeneity of a firm that is reflected on the differences in its mode of operation through market selection that in the long run stand to contribute to the growth or failure of the firm. The studies carried out came up with such findings as: the rates of failure tend to decline in line with the age and the size of the firm, that the mean rate of growth experienced in good firms will also tend to decline with age and size. These findings are quite relevant and will always be in cases whereby references need to be made to assist in dictating a way. Competitive advantage strategies Definition: A competitive advantage is defined as the kind of advantage that is gained by a firm over their competitors, mostly through offering greater value to the customers. The value of service can be increased either by lowering prices of commodities and services or just by simply giving out additional services and special benefits that complement higher instances of service delivery in a way that does not end up harming the success of the business. For the producers or even growers who have involved themselves with niche marketing in such ways as to play over the edge in front of the rest then finding a competitive advantage and nurturing it well can stand for great profits increase alongside business ventures that last for long possible times. There are various research findings still under the competitive advantage that are carried out to discuss the strategies to be considered important when constructing a competitive advantage that would stand above the rest. (Audretsch, 1995) The main body It is therefore mandatory to have first hand information on the importance of having a valid approach to developing a competitive advantage to gain quite an edge over major competition. The major question that a competitive advantage should be able to answer is the reason why a customer should choose to purchase goods from one operation and stay away from equally competitive retailers who have similar products. Answering this question can be difficult in certain terms, especially to those whose ventures can be seen to exist in markets that have less differentiated services. Building a successful majorly depends on a competitive edge that is strong enough to attract a whole lot of customers by gaining their loyalty pledge which will of course be extended over time (Evans, 1987) An example of such a highly competitive market is witnessed in those who do farming or ranching as their form of business is mostly just typically a price-driven market where most people have similar products and so the little attention of many customers must be fought for with good quality of services accompanied by good prices. In such forms of competitions, the people who emerge on top are actually those ones who provide the most cost-efficient products above the others but they must be keen to stay in line to avoid rendering their commodities worthless just to be able to please others. Most of these farmers or producers have mostly focused on keeping prices on the low while maintaining higher levels of volume of the said products. (Pakes and Ericson, 1998) A competitive advantage can often be obtained by a strategy of low pricing done by the firms involved or they can also possibly provide new products or more superior products that have more appeal as compared to similar products. For better results in competitive strategies, they must continuously be carried out over longer periods of time to yield desired results. So as to continue being effective and relevant, some key issues have to be taken into consideration to make a way forward. These factors include: Developing a patent: this patent gives businesses long term edge over competitors through availing exclusive rights, only to a company in which they are the only ones who can distribute or sell certain products. These patents may not always work for the benefit of the firms involved as the competing firms can often produce closely similar products and have sole patent rights over the product and end up really competing for the few slots of available customers. However, several companies have managed to establish themselves well through the idea of holding a few patents for the quite necessary or popular products Create a product that is Unique: By creating unique products, a firm gains a competitive advantage over the competitors but the magic only works if a follow up pattern is designed to check into the successes and failures of the products ability to appeal to the masses. A company may be tempted to follow the procedure of simply just trying to stay ahead for a short while yet it should be looking into the kinds of strategies that will stand out in the long run. The follow up strategies are the most important points considered as the aspects that will bring forth a competitive advantage. Strategies in addition of value Value addition is a very important aspect of business success. There are fundamental ideologies that value growers need to put into consideration if they are to move the company forward. Such ideologies include: having periods of consolidation so as to be able to study the market dynamics, to gather and realign the company’s own resources. Other reasons for the necessity of consolidation are to avoid becoming profit seekers, to redefine the strategies as they appear in the company’s development agenda. Another strategy that can be employed to facilitate value addition is to try and boost the global vision, the kind of leadership pattern, integration of partners into the business, checking and trying to understand the cultures and the climates involved. It is also important to check on the competence of resource, the global vision alongside the strategic reach. The strategy of business globalization This aspect in business involves various form of global involvement such as global sourcing. This aspect of global sourcing involves the procurement of services that increase the component of international presence of the business. (Shenkar and Luo 2004). The key drivers in the global sourcing include forms of advancements in technology as well as ICT, posting low costs for attracting global recognition. Such other factors as efficient systems of transportation and communicating continuously with the foreign suppliers. Furthermore, the additional aspects that can bring about reductions in the cost of doing business at a global market such as through reduction of trade barriers and tariffs. Technology should be flexible if firm growth id to be secured at global levels that can gain and retain international attention. Globalization has such benefits as increasing profitability, cost efficiency, increasing market speed as well as boosting corporate growth Definition of more terms Sustained value building is defined as the ability to achieve more elaborate breakeven returns. A supply chain management is also defined as a set of activities that are synchronized through bringing together suppliers, transporters, manufacturers and customers efficiently. Conclusion In conclusion, companies need to put in efforts that enable them gain an added advantage in competitive market spaces through some of the strategies discussed above. A competitive advantage will most definitely lead to firm growth that in the long run will boost the income and satisfaction of the consumers hence making everyone satisfied and in good spirits to work with a relative firm that considers all the approaches discussed. Bibliography Arellano, M. 1987. Computing Robust Standard Errors for Within-Groups Estimators: London, Oxford University Press Balkin, D. 2000,The Academy of Management Journa Vol. 43 No. 6, pp. 1118-29. Barney, J.2000. Firm resources and sustained competitive advantage. 1(2), 20-50 Bergh, D. 2010, New frontiers of the reputation-performance relationship: Journal of Management, 3(5), 12-23 Boyd, B. 2010. Reconsidering the reputation-performance relationship: Journal of Management. 2(3), 31-42 Dunne, P. 1994 Age, Size, Growth and Survival: New York, Mc Graw Hill. Eberl, M. 2005 Corporate reputation: European Journal of Marketing, 3 (1), 25-31 Ericson, R. 1995. Markov-Perfect Industry Dynamics: London, Routledge Evans, D. 1987. Tests of Alternative Theories of Firm Growth. London, Routledge Fryxell, G 1994. The Fortune corporate ‘reputation’ index: Journal of Management, Harvard Jooh L.1996.. Revisiting corporate reputation and firm performance link: Oxford Kim, W. 2005. Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant, Boston, Harvard Business Press Klassen, R. 1996. The impact of environmental management on firm performance, Management Science Maddala, G. 1998. Limited-Dependent and Qualitative Variables in Econometrics. Cambridge: Cambridge University Press. Read More