The enterprise must expand the management force fast enough to eliminate the inefficiencies that growth can produce and professionalize the company by the use of such tools as budgets, strategic planning, management by objectives and standard cost systems—and do this without stifling its entrepreneurial qualities.
There are eight factors that determine the company’s success or failure. They either relate to the enterprise or to the owner. Those that relate to the enterprise are:
1. Financial resources, including cash and borrowing power.
2. Personnel resources, relating to the number and quality of people.
3. Systems resources in terms of the degree of sophistication.
4. Resources, including customer relations, market share, supplier relations, manufacturing and distribution processes, technology and reputation.
The four factors that relate to the owner are as follows:
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 activities of others.
4. Owner’s strategic abilities for looking beyond the present and matching strengths and weaknesses of the company with his or her goals.
At this Stage the company has the advantages of size, financial resources and managerial talent. If it can preserve its entrepreneurial spirit, it will be a formidable force in the market. If not, it may enter a stage of ossification. Ossification is characterized by a lack of innovative decision making and the avoidance of risks. A sizable market share, buying power, and financial resources will keep the enterprise viable until a major change occurs in the environment. It is usually the company’s rapidly growing competitors that notice the environmental change first.