The Flipside of Business Growth

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BY TAHMID SADMAN

Growth is something that all businesses pursue. It is a pivotal factor which largely influences a business’ objectives, strategies and tactics and embodies to a large extent, its penultimate success. There is little doubt that business growth is imperative not only for profits or shareholder value but also for reputation and survival. This is why businesses, nowadays, are continually looking for avenues through which they can advance their growth agenda. These avenues can be many—cost cutting, diversification, innovation, etc.

However, at the end of the day almost everything has its flipsides, and organic business growth is no exception. Growth can trigger unwanted forces and pressures which can bog down a business or blow it off the course. But then again, they can aid businesses to learn from mistakes, considering the fact that if it survives the storm by virtue of a variety of factors such as strong loyalty and sufficient cash to fall back on or a dearth of competitors, the result will eventually be sustainable in the long run.

Nonetheless, it is better to be pro-active while addressing the negative impacts of business growth which can be:

  1. Operational pressures- Growth will increase operational pressure in many ways. Growth can come in the form of higher sales suggesting that firms may have to look for more suppliers, establish delivery times, look for bigger stores to handle increased merchandise and customer traffic, increase inventory handling capacity, introduce better systems for cash flow and supply management. These call for added costs. Firms need to be prudent; they must plan ahead and devise contingency plans. Yes, costs will be there but planning beforehand will help firms apply a coherent strategy.
  2. Competitive Pressures- Growth in a particular industry may spur the entry of firms, thus increasing competition and potentially resulting in decreased market share of a firm and lower profits.
  3. Hiring Pressure- Firms will require the talent to help them sustain or increase the growth. The job market has a dearth of quality graduates which suggests firms will have to introduce tailored training programs to equip existing as well as new employees with better technical know-how.
  4. Expectations Pressure- Growth may come from rapid sales which stems from positive perception regarding product quality or increased marketing activities. This increases expectations of the business. Hence, the firm must continuously focus on improving a variety of factors such as the customer experience, product quality and even corporate social responsibility to live up to its expectations.
  5. Security Pressures- Robust business growth will help diffuse the fame of a business which is likely to put it under the radar of hackers. Hackers can steal confidential information, drain financial resources or destroy documents/resources that are critical to an organization’s functioning. The attacks on Sony, Citigroup, which have cost the companies millions, warrants a renewed focus by businesses to prevent cybercrimes.
  6. Complacency- Complacency can put the final nail on a business’s coffin. Top management may become complacent due to business growth leaving it blind to any changes in the ecosystem that may wreak havoc in the business.

This is the darker side of what is usually a bright coin. The problems presented can, however, be mitigated through proper analysis of the business ecosystem, appropriate investments in human capital and the firm’s strengths, strategic partnerships, a strong organizational culture and far-sight. It is a therefore crucial for a business to be on its toes in order to ward off the unwanted effects of both external and internal pressures stemming from growth.

 

Tahmid Sadman is a junior at the Institute of Business Administration, University of Dhaka. For more information about Tahmid and GradInsights, the research service of GradConnect, drop us a message on our facebook page.



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