Growth of a business is essential for sustaining its viability, dynamism and value-enhancing capability. It reflects the ability of a company to earn higher profits and compete with the rivals in an effective manner. The three widely used measures of corporate growth are:-
- Increase in Sales
- Increase in Profits and
- Increase in Assets
A company can achieve its growth objectives by expanding the existing market for its product and entering into new markets. This can be done by a company in various ways:-
- It can open branch offices in various parts of the country as well as in other countries. Branch offices help in expanding the size of the market for a company's product by attracting more customers and widening the scope of its trading and manufacturing activities.
- It can enter into joint ventures with other companies. Joint ventures perform a useful role in assisting the companies in the process of their restructuring. It enables them to participate in new technology driven activities and achieve market penetration into newer areas.
- A firm can also acquire a running business and grow overnight through corporate combinations like mergers, acquisitions, amalgamations and takeovers.
Such combinations have been playing an important role in the external growth of a number of leading companies the world over due to breaking of trade barriers and globalisation of businesses.
The financial support needed by a business for its expansion can be met by raising funds through various instruments of stock market such as shares, bonds, mutual funds and initial public offerings. It can also raise capital by ploughing back its profits and through public deposits. The key to all expansion plans of a business involves evaluating the company's strengths and weaknesses in the light of the various business risks that it may have to face. These risks are inevitable in a business and cannot be eliminated completely but an entrepreneur can control them through proper preventive and corrective measures of risk management. Moreover, an entrepreneur, in order to successfully expand and grow its business on a sustained basis, must take into account the basic regulatory requirements of the country. This helps him to know about his rights, responsibilities and the challenges that he may come across in running his business.
Therefore, an entrepreneur must make a thoughtful analysis of all the possible options available to him for expanding his business by taking into account the inherent risks, the financial requirements and the surrounding regulatory framework.