Growth theory in small scale industry Essay
Company Profile The sown of success of Day Group of Companies were started in the year 2000, Oman with construction and Contracting. With an expanding scale of operations and business areas, specialized group companies manage its businesses across Education, Retail, Hospitality, Trading, Manpower systems and Healthcare sectors. Today, the group employs more than 2000 people to fuel its growth story. The Day Group has a strong focus on South India and in Oman as it enables the company to effectively manage all of aspects of the business with ease as all locations are within say physical reach.
It also allows it to benefit from similar consumer and regional trends. It also allows it to benefit from similar consumer and regional trends. Equally importantly, the group focuses strongly on cities as it offers it to reap a first mover advantage along with associated benefits such as lower cost structures, faster payback periods, ready and UN-fragmented consumer base and efficient brand building. In the year 2008, it diversified its business and entered into education and health care and retail. The group had gained recognition and become famous as the Day.
The group took a quantum leap and entered the manpower, construction and the businesses
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To become an “integrated global energy corporation” and offer competitive, best in class, premium quality products to satisfy day to day needs of consumers in India and across the world. We envision being an exemplary corporate entity in the region, growth theory in small scale industry By stipendiary expanding geographic presence, strategic diversification and increasing involvement with social development globally. Sister Concerns:- Day Arrived Hospital, Appalled, India Day Immix Lights and Electrical , Appalled Day Institute of Communication and Management Studies, Appalled Day Rear Travels, Appalled
Day Immix Lights & Electrical, Combaters Day BAGS Security Services (P) Ltd BACKGROUND TO THE STUDY:- At a first glance separating the problems faced and growth factors of small businesses in a systematic way seems a hopeless task. Small scale business varies widely in size and capacity for growth. The freedom of action, variation in organizational structures and different management styles make them an interesting model. For owners and managerial staffs of small business can help in assessing current challenges like for example to recruit and train second level managers to attain a planned growth.
Let us get into how to develop a small business framework. There are six growth phases and five crisis phases according to the Grinner’s Growth Model Theory (1972). (Greener Curve) Growth through creativity:- The owner dominates this phase with the main emphasis being on creating products and opening up markets. There is will be a serious effort from a true entrepreneur in the rapid growth of the company at this stage. The founders are usually more focused on technical and entrepreneurial activities than managerial activities – there will be considerable time spend on the making and selling of the products.
Grinner’s Revolution – Growth model of Organization, 1972) There is probably not many staff in this period, so informal communication works fine and rewards for long hours are probably through profitability. However, as more staff Join, production and/or service delivery expands, capital is injected or sought and the need for more formal communication channels grows rapidly. ( e. G. :- initially communication happens through direct talks and when it gets expanded the communication will be through emails and various channels). Grinner’s Theory,1972) According to leadership crisis, management problems begin to occur as the organization grows and cannot continue to be managed through the informal communication systems and simply by relying on employee loyalty and commitment. Consequently, the founders find themselves with unwanted management responsibilities. Growth through Direction:- This is the second phase, (Grinner’s Growth Theory, 1972) the newly appointed management behaviors will result in the sustained growth thus enabling growth to continue.
The company will start to develop more formal methods of communication, implement budgets and begin to separate management activities into discreet Functional organization structure, capital management, incentives and standardized process. According to the autonomy crisis, as growth continues, managers and supervisors need and often try to demand greater autonomy to make decisions. Growth through Delegation:- The key to this third phase of growth is Delegation (Grinner’s Growth Theory, 1972) and top management allowing functional and operational managers to make decisions and to manage the organization.
The main focus or aim of implementing a delegation strategy is to free-up top management to focus more on strategic equines development and allow middle management to react more rapidly to new products and market opportunities. Other things which are included are Profit centers, Financial Incentives and formal communications. This phase (Grinner’s Growth, 1972) is characterized by increased decentralization which drives lower level motivation and commitment. (Control Crisis).
Growth through Co-ordination:- In this phase, the growth continues with previously isolated business units reorganized into product groups or service units. These includes formation of product groups, thorough review of formal planning, centralization of support unction’s, cooperate staff oversees co-ordination and corporate capital expenditures (Larry E. Grinner’s Theory of Co-ordination, 1972) Investment is allocated centrally and managed according to the Return on Investment (ROI) and not Just on the basis of profits. The incentives are shared through company-wide profit share schemes aligned to corporate goals. Red Tape Crisis, 1972). Growth through Collaboration:- According to Greener Growth Theory, (1972) if the crisis of red tape is to be overcome, the organization must move to the next evolutionary period, the phase of collaboration. While the coordination phase was managed through formal systems and procedures, the collaboration phase emphasizes greatly on spontaneity in management action through teams and the skillful confrontation of interpersonal differences. Social control and self-discipline take over from formal control.
Greener is not certain what the next revolution will be, but he anticipates that it will center around the ‘psychological saturation’ of employees who grow emotionally and physically exhausted by the intensity of teamwork and the heavy pressure for innovative solutions. It is felt that to overcome and even avoid the various crises managers could attempt to move through the evolutionary periods more consistently with the sequencing -direction to coordination to collaboration to delegation-rather than the ordering depicted by Greener growth theory (1982). Crisis of Growth) Growth through Alliances:- According to Larry E Greener (1972), strategic alliances can provide growth quickly at a fraction of the cost of tackling the market alone or buying the growth via acquisition. In the past it was more cost-effective to own all aspects of the value chain – vertical integration was the business model of choice. According to Philippe Suasion’s endogenous growth theory (1998) in today’s marketplace, focus is critical. Owning the value chain may actually put an organization at a competitive disadvantage due to the lack of flexibility and financial commitment true vertical integration represents.
Selecting the right partners and nurturing these relationships can help your best. Key Management Factors:- According to Shah Amazons Lam’s Urban Growth Theory (201 1), several factors which can change according to the business growth and development are very much prominent in determining the ultimate success and failure. There are eight such factors out of which four relate to the company and four to the owner. Lam’s theory (201 1), the four which relate to the company are as follows:- 1 . Financial resources – including cash and borrowing power. . Personal resources – relating to numbers, depth and quality of people, particularly at the management and staff levels. 3. System resources – in terms of the degree of sophistication of both information and planning and control systems. 4. Business resources – including customer relations, market share, supplier relations, manufacturing and distribution processes, genealogy and reputation, all of which give the company a position in its industry and market. And balances four which relate to the owner according Lam’s theory (2011) are 1.
Owner’s goal for himself or herself and for the business. 2. Owner’s operational abilities in doing important Jobs such as marketing, inventing, producing and managing distribution. 3. Owner’s managerial ability and willingness to delegate responsibility and to manage the activities of others. 4. Owner’s strategic abilities for looking beyond the present and matching the strengths and weaknesses of the company with his or her goals. As the business moves from one stage to another, the importance of factors changes.
We might view the factors as alternating among three levels of importance. First, key variables that are absolutely essential for success and must receive high priority. Second, factors that are clearly necessary for the enterprise’s success and must receive some attention. Third, factors of little immediate concern to top management. If we categorize each of the eight factors listed previously, based on its importance at each stage of the company’s development, we get a clear picture of changing management demands. Shah Amazons Lam , 2011).
Justification for the study:- The Justification for the study is to re- evaluates the findings of Greener in the current day context. We, now live in a very much different world when compared to Grinner’s. So study in the modern world is essential to develop a small scale family business to entrepreneurship is a uphill task. Looking at this by Septuagenarian’s Entrepreneur’s Choice Theory (2013), owners who want such growth must ask themselves the following questions: 1) Do I have the quality and diversity of people need to manage a growing company? Do I have now, or will I have shortly, the systems in place to handle the needs of a larger, more diversified company? 3) Do I have the inclination and ability to delegate decision making to my managers? 4) Do I have enough cash and borrowing power along with the inclination to risk everything to pursue rapid growth? Similarly, according to C Septuagenarian’s theory (2013), the potential entrepreneur can see that starting a business requires an ability to have a good marketable idea, high energy, and a favorable cash flow forecast or a large sum of cash on hand.
These are less important, when well-developed people- Perhaps this is why some experienced people from large companies fail to make good as entrepreneurs or managers in small companies. They are used to delegating and are not good enough at doing. Varying Demands:- So the changing nature of managerial challenges becomes apparent. In the early stages, the owner’s ability to do the Job gives life to the business. Small businesses are built on the owner’s talents: the ability to sell, produce, invent or whatever. This factor is thus of the highest importance.
The owner’s ability to delegate however is on the bottom of the scale, since there are few if any employees to delegate to. According to K Rancidness’s book on Indian Family Business (2013), as the company grows, other people enter sales, production, or engineering and they first support, and then even supplant, the owner’s skills-?thus reducing the importance of this factor. At the same time, the owner must spend less time doing and more time managing. He or she must increase the amount of work done through other people, which mean delegating.
The inability of many founders to let go of doing and to begin managing and delegating the demise of many businesses. The owner contemplating a growth strategy must understand the change in personal activities such a decision entails and examine the managerial needs. Similarly, an entrepreneur contemplating starting a business should recognize the need to do all the selling, manufacturing, or engineering from the beginning, along with managing cash and planning the businesses course requirements that take much energy and commitment.
K Ranchmen’s(2013), says a second serious period for goal matching occurs in the Success Stage. Does the owner wish to commit his or her time and risk the accumulated equity of the business in order to grow or instead prefer to savor some of the benefits of success? All too often the owner wants both, but to expand the business rapidly while planning a new house on Switzerland for long vacations involves considerable risk.
To make a realistic decision on which direction to take, the owner needs to consider the personal and business demands of different strategies and to evaluate his or her managerial ability to meet these challenges. Finally, business resources are the stuff of which success is made; they involve building market share, customer relations, solid vendor sources, and a technological base, and are very important in the early stages. In later stages the loss off major customer, supplier, or technical source is more easily compensated for.
Thus, the relative importance of this factor is shown to be declining. Context & Significance for Organizations:- This scheme, according to Virginia E Chine’s Organization Development Theory (1988) can be used to evaluate all sorts of small business situations, even those that at first glance appear to be exceptions. Take the case of franchises. These enterprises begin the Existence Stage with a number of differences from most start- up situations. They often have the following advantages: A marketing plan developed from extensive research.
Sophisticated information and control systems in place. Operating procedures that are standardized and very well developed. Promotion and other start-up support such as brand identification. They also require relatively high start-up capital. Has a solid, differentiated product, the new venture can move rapidly through the Existence and Survival Stages-?where many new ventures will get into the early stages of Success. The costs to the franchisee for these beginning advantages are usually as follows: Limited growth due to territory restrictions.
Heavy dependence on the franchiser for continued economic health. Potential for later failure as the entity enters Stage Ill without the maturing experiences of Stages I and II. One way to grow with franchising is to acquire multiple units or territories. Managing several of these, of course, takes a different set of skills than managing one and it is here that the lack of survival experience can become damaging. The resources provided enable this entity to Jump through initial stages until the product comes to market, and attain next level.
At this point, the planned strategy for growth is often beyond the managerial capabilities of the founding owner and the outside UAPITA interests may dictate a management change. In such cases, the company moves rapidly into next level and, depending on the competence of the development, marketing, and production people, the company becomes a big success or an expensive failure. Although rarely is a factor more than one stage ahead of or behind the company as a whole, an imbalance of factors can create serious problems for the entrepreneur.
Indeed, one of the major challenges in a small company is the fact that both the problems faced and the skills necessary to deal with them change as the company grows. Thus, owners must anticipate and manage the factors as they become important to the company. A company’s development stage determines the managerial factors that must be dealt with. Its plans help determine which factors will eventually have to be faced. Knowing its development stage and future plans enables managers, consultants, and Investors to make more informed choices and to prepare themselves and their companies for later challenges.
While each enterprise is unique in many ways, all face similar problems and all are subject to great changes. That may well be why being an owner is so much fun and such a challenge. Advantages of Family Business There are benefits to a family business, but there are disadvantages that must be considered as well. Starting a family business is not for everyone. A family business offers the following advantages according to Rancidness’s book on Family One of the popular misconceptions about family businesses is Business (2013) that they are unable to adapt easily to increasing competitiveness and technological progress.
The reality is that family businesses frequently have the advantage of entrepreneurial spirit, flexibility, and opportunism. It is believed by K Ranchmen’s (2013) that family firms are “too soft” and rarely reach their potential. The reality is that family businesses actually outperform public companies. Oftentimes, the marketplace forces public companies to make short-term decisions, whereas a family business has the advantage of having more freedom to make its decisions. Family businesses can adapt to market fluctuations more easily because they can afford to be patient.
They have common goals, shared values and a Weber (2012) says family-owned businesses are often seen as ideal because family members form a “grounded and loyal foundation” for the company, and family embers tend to exhibit more dedication to their common goals. Having a certain level of intimacy among the owners of a business can help bring about familiarity with the company and having family members around provides a built-in support system that should ensure teamwork and solidarity. The culture off family business is very different from that of a company you will find on Wall Street.
Family businesses frequently take a very long-term point of view. They’ll make Investments that they don’t expect to pay off for oral 5 or years… Culture in a family business is more frequently based on very personal and emotional values. It’s stronger because there are deeper roots and closer connections to the history of the company. Family businesses according to Carl Weber (2012) are becoming more and more attractive to undergraduate business students who face a bleak Job and salary outlook for new grads.
These undergraduates are choosing to return to their family businesses directly after graduation instead of trying to find a Job in Corporate There is a common misconception that family businesses are less America. Professional and rigorous in their behavior because of the relational nature of the businesses. However, like all other businesses, family businesses face global competition and rapidly changing markets. This creates more pressure on those who join to make sure that they produce.
This emphasis on professionalism has made family businesses both more daunting and more attractive-?and has created new interest in them, from family members, outsiders, and business school students. Many family-owned businesses tend to be stable and optimistic, even when economic times are uncertain. They seem to be better able to weather economic difficulties and stabilize the economy than their infirmly counterparts. However, his is a function of the industry and the size of the business. In general, Carl Weber (2012) says family businesses feel that they are stronger because family members are involved in their activities.
Family owners believe that their family members can be trusted, will work hard and care more. This can help create competitive advantage in the marketplace. Family businesses may occur lower costs because of the greater willingness of family members to make financial sacrifices for the sake of the business. Accepting lower pay than they would get elsewhere to help the business in the longer term or deferring wages in a cash-flow rises are examples of family altruistic behavior. Family businesses, in general, have greater independence of action because they have less (or no) pressure from the Stock Market and less (or no) takeover risk.
Family businesses tend to be more resilient in hard times because they are willing to plow profits back into the business. Family businesses are less bureaucratic and less impersonal, which allows for greater flexibility and quicker decision making. Family businesses offer the possibility of great financial success. This can manifest itself in interesting ways. As the family of a media conglomerate once mentioned, the name I have has certainly helped me to get access to top executives of companies, persons who under other circumstances would have kept their doors shut.
So finally, according to K Ranchmen’s (2013) and Carl Weber (2012), family members have the chance to competitive advantage. One executive recalled how as a child he would take long walks with his father, during which they would visit stores to look at competitor’s products. Afterwards, his father would ask him which products he liked most, and this would lead to lengthy arguments about each product’s quality. This man felt that the expertise he gained during those informal outings proved invaluable later in life. METHODOLOGY:- The research strategy is to re-evaluate the findings of Grinner’s study in the modern day context.
The model for research method is an onion model. This is the model that sheds its light on the different types and methods available. It is called the onion model because it also has layers which are considered to be the different phases of research. Source: www. Soaks. AC. UK Meaning of Research:- Research is an academic activity it should be used in a technical sense. According to Clifford Woody (1948), research comprises defining and redefining problems and at last carefully testing the conclusions to determine whether they fit the formulating hypothesis.
Research is thus, an original contribution to the existing stock of knowledge making for its advancement. The term ‘research’ refers to the systematic method consisting of enunciating the problem, formulating hypothesis, collecting the data, analysis the facts and reaching certain conclusions. Objectives of Research:- The purpose of research is to discover answers to questions through the application of scientific procedures. The main aim of research is to find out the truth which is hidden and which has not been discovered as yet. Our purposes for the research are given below.
To gain familiarity with a phenomenon or to achieve new insights into it To portray accurately the characteristics of a particular situation or a group To determine the frequency with which something occurs or with which it is associated with something else To test a hypothesis of a casual relationship between variables Research Strategy:- Research inculcates scientific and inductive thinking and it promotes the development of logical habits of thinking of organization. The role of research strategy in several fields of business or to the economy as a whole has greatly increased in modern times.
Here in Day Group of Companies, new research strategies have to be development. The cost of needs has to be equated to probable revenues and this is a field where research is most needed. Decision making may not be a part of the research, but research certainly facilitates the decisions of the policy maker. Research has its special significance in solving various operational and planning problems of business and industry. For Day, market research is the investigation of he structure and development of a market for the purpose of formulating efficient policies for purchasing, production and sales.
Operational research refers to the application of logical and analytical techniques to the solution of business problems of Day Group of Companies as such. Research Methods:- concerned with qualitative phenomenon. I. E. Phenomenon relating to or involving quality. In this there are different types like motivational, attitude and opinion research etc. Qualitative research is especially important in the behavioral sciences where the aim is to discover the underlying motives of human behavior. Through such research we can analyze the various factors which will run the business to new heights.
It may be stated, however, that to apply for qualitative research in practice in relatively a difficult Job and therefore while doing such research, and one should seek guidance. We, Day group of Companies, in the first group of research include those methods which are concerned with the collection of data. These methods will be used where the data already available is not sufficient to arrive at the required solution. The second method consists of those statistical techniques which are used for establishing relationships between the data and the unknowns.
The third method consists of those methods which are used to evaluate the accuracy of the results obtained. The other types we used are – Library research like the analysis of historical data and documents, Field research – direct observation, participant observation and mass observation, Opinionate, Personal interview, Group Interview Telephonic Survey and Case Studies. Research Ethics:- It is well accepted that moral philosophy or ethical ideology influences an individual’s reasoning about moral issues (Forsyth, 1977) and consequent behavior.
Differences in moral philosophy or ethical ideology are contended to explain differences in ethical judgments (Becker, 1984) Ethical ideologies can be explained as a set of beliefs, values and attitudes, which may influence an individual’s Judgment and decision- making, when faced with difficult situations and ethical dilemmas. In the case of the study of small scale family business of Day group of companies, in the research conducted ethical behavior don’t have a significant part. Because this is conducted on a self business and Research terminology will be done to get an accurate, realistic and valid result.
Schlesinger and Forsyth (1977) suggest that individual variations in personal moral philosophies can be described most parsimoniously by taking into account the degree to which an individual is relativistic and/or idealistic. To describe extremes, some individuals idealistically assume that desirable consequences can always be obtained with the right action and those with less idealistic orientation admit that undesirable consequences will often be mixed in desirable ones (Forsyth, 1980).
Forsyth taxonomy indicates that individuals may adopt one of four different approaches to make ethical Judgments: situations, absolutism, subjectivism and exception’s. Inclusion in one of these groups is determined by whether a person espouses idealistic or non-idealistic values and believes moral rules are universal or relative (Forsyth, 1980:176). It also suggests that relativists and idealists both can be either low or high in relativism and idealism. Each one of the four approaches draws from a specific school of thought in philosophy of ethics.
For example, the high an ideology related to ethical skepticism (Forsyth, 1980). Skeptics believe that morality can be viewed in different ways and all kinds of skepticism criticize proponents of specific ethical principles. Ethical egoism, for example, is a skeptical ethical philosophy in which a pragmatic approach is taken to evaluate actions. The statements endorsed by exceptions are more compatible with teleological ethical philosophy (Forsyth, 1980). The teleological approach proposes that the morality of an action depends upon the consequences produced by it.
One is ethically bound to act in a way that produces well for the greatest number which is best represented by the utilitarian concept of greatest good for the greatest number. In this research study , each type of research options which are used are clearly given in the Research Methods division. These ideas and innovative thoughts given by staffs, from historical data, observations , questionnaires , interviews, one 2 one sittings, telephonic surveys and case studies will be implemented in the next year to make this group a strong entrepreneur company in the next financial year.