3.9.1

Question 1

Grenier’s model of growth considers

Answer 1

some of the issues a business might face as it grows in scale.
The model can help managers predict and plan for different issues as the business grows.

Question 2

What are the 6 phases of growth according to Grenier?

Answer 2

creativity, direction, delegation, coordination, collaboration, alliances

Question 3

Phase 1 - creativity

Answer 3

• Informal business practices
• Business driven by creativity and all employees understand the impact they have on the business
• Rules are not clear.

Question 4

Phase 2 - direction

Answer 4

• Leadership crisis - as the business grows some tasks may get missed or jobs will be duplicated.
• At some point, clear direction is needed along with leadership.

Question 5

Phase 3 - delegation

Answer 5

• Autonomy crisis - as the business grows, there is a need for more delegation as managers desire autonomy to make their own decisions and respond to localised issues.

Question 6

Phase 4 - coordination

Answer 6

• Crisis of control - as the business continues to grow, directors may feel that they are losing control of some aspects of the business and they worry about strategic direction.

Question 7

Phase 5 - collaboration

Answer 7

• Red tape crisis - as the leaders put in place systems and mechanisms of control, bureaucracy leads to
  inefficiencies and a distraction from the core business activities.

Question 8

Phase 6 - alliances

Answer 8

• Growth crisis - as the business reaches its potential for internal growth it may look for growth through external collaboration. This brings with it a new set of dilemmas.

Question 9

Grenier’s model demonstrates the

Answer 9

conflicting forces managers will face as a business grows. Mainly there are fluctuations between controlling the business and providing autonomy to maximise employee potential and adapt to specific needs.

Question 10

Impact of growth on marketing

Answer 10

As businesses grow they will launch new products and move into new markets. Marketing must ensure that the business understands the needs of its new customers and effectively promotes the new ventures.

Question 11

Impact of growth on operations

Answer 11

• Operations will look to maximise capacity and put in place systems to manage increased production and sales
• Operations may also need to find additional capacity to cope with expansion.

Question 12

Impact of growth on finance

Answer 12

• As businesses grow cash flow is essential.
• Finance should identify the capital investment required to finance growth and find suitable sources of financing.

Question 13

Impact of growth on HR

Answer 13

As businesses grow, so will the workforce.
HR will recruit and train the new employees.

Question 14

4 methods of external growth

Answer 14

• merger
• takeover
• joint venture
• franchise

Question 15

What is a takeover?

Answer 15

also known as acquisition, which may be hostile or voluntary
- One business will acquire another along with its assets
- If hostile, the takeover is riskier for the acquiring business.

Question 16

What is joint venture?

Answer 16

• two businesses come together to work on a particular project such as a product launch.
• Information and expertise will be shared but the businesses will remain separate, removing the problems of integrating two businesses.

Question 17

What is a merger?

Answer 17

• two businesses come together for mutual benefit
• This may be to share strengths or with the purpose of business survival
• The business will seek synergies through the merger.

Question 18

What is a franchise?

Answer 18

growth through selling the rights of the business (name, product, assets) to a third party (franchisee) who will run the business independently following the business model. The franchisee will pay a % of revenue. Requires little effort or investment but requires close monitoring.

Question 19

Where growth occurs through a takeover/acquisition there is more likely to be

Answer 19

resistance from employees, customers and shareholders if they believe their own interests may be damaged - such as loss of jobs.

Question 20

Level of control of methods of growth from most control to least

Answer 20

takeover
franchise
merger
joint venture

Question 21

A number of options are available to a business looking to

Answer 21

externally grow through a takeover, merger or joint venture

Question 22

Types of growth:

Answer 22

• backwards vertical
• horizontal
• forwards vertical
• conglomerate

Question 23

What is horizontal growth?

Answer 23

merging with a business at the same level of the supply chain e.g. another
Christmas tree wholesaler

Question 24

What is forwards vertical growth?

Answer 24

taking over a customer e.g. a retailer that sells Christmas trees

Question 25

What is backwards vertical growth?

Answer 25

taking over a supplier such as a tree farm

Question 26

What is a conglomerate?

Answer 26

taking over an unused
business in a different market such as a jewellery retailer