Exam 13: Preparing for and Evaluating the Challenges of Growth

Sometimes firms are compelled to grow to accommodate the growth of a key customer.

One of the most difficult challenges that businesses encounter as they grow is maintaining high levels of quality and customer service.

Most businesses need capital from time to time to invest in growth-enabling projects.

________ costs are the costs a company incurs as it makes sales.

Growth usually decreases rather than increases the challenges involved with cash flow management.

According to Penrose, entrepreneurial services generate new market, product, and service ideas.

The What Went Wrong feature in Chapter 13 focuses on Wesabe, a Web-based company that was launched in 2006 to help people manage their personal finances. According to Marc Hedlund, one of Wesabe's cofounders, the company failed for two primary reasons. First, it misunderstood its users. Second:

According to Chapter 13, business success doesn't always scale. What is meant by this statement?

Kelly Andrews owns a company that makes office furniture. Recently, a favorable article was written about Kelly's company in a business magazine, and as a result, Kelly has seen a spike in his orders. Although Kelly is grateful for the additional orders, he is worried about one thing. An increase in activity means that his firm must handle more service requests and paperwork and contend with more customers, stakeholders, and vendors. Kelly knows that if he doesn't handle this increased activity properly, the workmanship of his products could decline. The day-to-day challenge of firm growth that this example illustrates is:

Adverse selection means that as the number of employees a firm needs increases, it becomes increasingly difficult for it to find the right employees, place them in appropriate positions, and provide adequate supervision.

________ means that as the number of employees a firm needs increases, it becomes increasingly difficult for it to find the right employees, place them in appropriate positions, and provide adequate supervision.

The majority of businesses go through a discernable set of stages referred to as the organizational life cycle.

As a business moves beyond its early growth stage and its pace of growth accelerates, the need for structure and formalization decreases.

Valarie owns a company that makes specialized components for the auto industry. Her most important customer is a company that is growing at a rate of 25% per year. Valarie is working hard to grow her firm, because she knows that unless her company continually grows it will not be able to keep pace with the growth of its most important customer. This examples illustrates the reason for growth referred to as:

Market leadership occurs when a firm is one of the top ten firms in an industry or niche market in terms of sales volume.

What are the primary day-to-day challenges involved with growing a firm? Briefly describe each challenge.

Kendell Adams owns a software development company. When he first launched his firm, he was careful to hire employees who had the experience he was looking for, were good matches for the positions he had available, and could be properly supervised. As Kendell's firm has grown, and his need for employees has increased, he is finding that it is increasingly difficult to find employees who have the qualifications he is looking for, are good matches for the positions he has available, and fit within the supervisory framework he has developed. Kendell is dealing with an issue referred to as:

Economies of scope are generated when increasing production lowers the average cost of each unit produced.

According to the textbook, it is:

In the context of firm growth, gazelles are: