Small Business Growth

Essay by pmakiwaUniversity, Master'sB-, December 2009

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IntroductionThis article focuses on small business growth. Kuratko etal, (2001) defines small business growth as a transition from an entrepreneurial firm to functional structure seeking economies of scale and efficiencies. The article describes the origin and evolution of new business; some theories of small business growth; strategies and structures to achieve profitable growth and market value and also focuses on challenges of entrepreneurial growth. A case study of Rulpat Private Limited is used in the article to show case some challenges of small business growth.

The transition from a surviving entrepreneur to a growing organization presents personal challenges to the founding entrepreneur as well as to the firm. Very few succeed in making the transition to a dynamic, growing, and successful organization. Some that do are forced to make the transition by leaving the founder behind (Penna, 200).

Theoretical foundations of small business growthSchumpeter has been instrumental in shaping the concept of entrepreneurial activity, identifying the existence of a transition from being entrepreneurial to a traditionally managed organization.

Drucker, (1999) also saw this transition, but focused on the managerial difficulties presented by growth. Focusing on the managerial activities associated with the firm provides insight regarding the size of the company, its evolution, and a very specific linkage to the behavior of the entrepreneurial individual.

Chandler's, (1962) seminal research into successful organizations looked at the relationship between an organization's intentions (strategy) and its structure. Underlying his work is the central assumption that organizations seek growth. His discovery that the organization's structure was the result of the organization's strategy was revolutionary. Organizations begin as entrepreneurial (having no structure). As a result of entrepreneurial strain, the organization implements a functional structure to gain efficiency. As it once again encounters pressures, the functional structure is modified to incorporate additional structures for vertical integration. Subsequent...