Issues That The Company Faces In A Rapid Growth Strategy

Finance
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December 17, 2018
Business managers and executives have always believed that growth regarding size and profitability should be prioritized when making business decisions. While this is almost always true, it must be recognized that there are also times when a ‘non-growth’ strategy is the best way to move forward. The non-growth strategy allows the company to mitigate risks and build once it is sure that both the internal and external market conditions are suitable for growth. This approach is hinged on the idea that not all growth in size, translates into growth in profitability. Some of the major problems that could pose significant risks during a company’s expansion are (1) increase in complexity, (2) decreased cash flow, and (3) and susceptibility to external forces (Timmons & Spinelli, 2015). Concerning an increase in complexity, it is well-known that scaling a business would also need an increase in the number of sales (and a variety of products), workforce, and long-term assets. These factors mean that management strategy and ability to turn assets into cash should become more efficient, or else it could face problems in meeting both its short-term and long-term obligations. In simpler terms, the more the complexity increase due to scaling, the higher the working capital gap.
Another issue that the company faces in a rapid growth strategy is the overabundance of capital and opportunities. Choosing from a variety of suppliers and business partnerships could lead to further complexity and even an inability of the management to make efficient decisions. This is not yet saying the fact that an overabundance in capital must be met with more rigorous and effective methods of “accounting, inventory, purchasing, shipping, and invoicing” in order to prevent stagnancy in its cash flow (Timmons & Spinelli, 2015).
Lastly, scaling the business would also significantly increase the company’s susceptibility to external forces. Some examples of these external factors are recession, inflation, and threat of new entrants, among others. As stated in the previously, scaling a company entails an increase in its complexity. Moreover, since this could cause problems with internal management (i.e., crisis control), external factors easily compound this problem and erode its core competencies.
In line with all of these, it is apparent that scaling a company would need a solid business model, streamlined operations, and experienced leadership. Since the company is primarily built with the partnership of two indiv...