Among the various considerations that need to be evaluated to grow a small scale business is by first determining the structure of the company. There are many benefits to decide on the correct structure of the business. Should the business serve the domestic lot only, or should the business be international? There is a need to answer the question of whether a few individuals will own the company or if people will own it (Hatcher, 2018). About this, the decision that is arrived at has a significant impact on the structure of the business to use. When the structure has been decided early, helps in increasing the efficiency of the business in the future.
Three Considerations on Organization Context
For this specific case, the type of structure selected is running a service company owned by people. The company will also be grown to an international level. For this specific decision, it is worth identifying that there are many benefits that the company can experience when people own it, and it is being scaled to a global company (Hatcher, 2018). On the other hand, there is a number of risks that the Company is made to be a subject to.
Evaluation of Opportunities for Growth Ansoff’s Growth Vector Matrix
To be in the position of portraying alternative corporate growth opportunities for the SME, Ansoff's growth vector matrix can be applied. The matrix is concerned with the presentation of the company present and potential products and markets. It is a valuable tool that can be used in considering the various methods that can be used in growing the already existing products as well as new products. Below is a representation of the Ansoff Matrix.
The matrix uses four growth strategies to help the management in their roles. One strategy that is included in the matrix is the of market penetration. In this specific strategy, the firm is aimed at achieving growth by the approach of using the existing products. The overall aim for this specific case, it will entail using the strategy of expanding the market share of the existing products. The second strategy that is incorporated in the Ashoff's vector matrix is by developing the market. In this approach, the aim will be seeking growth by targeting the existing products to new market segments. Thirdly, the SME growth will also be grown by the approach of focusing on the development of the product.
Principal Risk Factors for a Company That Is Being Grown to a Global Firm
One of the risks is that there is a challenge for the company to step out of the native market, and then having the ability to quantify the downside risk followed by implementing the most appropriate strategy in each of the new markets (Zwilling, 2016). Another risk is on the fact that it is much difficult for the managers of the business to be in the position of predicting sudden changes that take place due to large and frequent economic swings.
Another risk that can be a challenge to growing business is on the way exchange rates changes. The fact being that the business will be providing its services to the global scale, the currency fluctuations can make the business to cause significant losses. A large number of currency swings around managing of transactions, project futures and even the efforts of specifying terms of contracts made. This being the case, it is essential for the company to have already prepared strategies on how to deal with the risk of fluctuations of the currency. One of the strategies that can be used is learning how to lock in exchange rates, collecting transactions immediately, as well as paying the indigenous organizations purposing to hedge the risks.
When a company is growing to a global scale, there is also a risk of the business coming across various cultures that affect its role and responsibilities. It is worth noting that cultural traditions have the effect of dictating the roles of business. The argument here is that as businesses grow, their decision making is affected by the local culture. The local culture has also been found to affect how the company views its market share. To respond to this, as a leader in a growing company, it is essential to come up with the best strategy
Sources of Funds and Their Implication to the Business (LO2)
The reality is that there exist very many alternatives that can be a source of capital or finance for the company. To avoid adverse effects, it is vital for business management to decide on the right source as well as the right mix of finances. Notably, the activity of determining the right cause and the right combination of the origins of funds for the business is a challenge (Kimmons, 2019). To overcome this challenge, the strategy that needs to be applied is that of making use of the right professionals in making decisions regarding the source of financing for a business that wants to grow to global scale.
One of the best sources of funds for a company that is operating globally is through debenture. A debenture is an insuance of a loan between a lender and a company. Debentures are much related to the bonds by the state (Kimmons, 2019). The only difference is that any particular collateral does not secure them. The guarantee is the total gains of the company. Another source of fund for the company is the government grants. Some governments offer concessions to distance business (Kimmons,2019). Some states provide grants only to legitimate businesses that have the aim of expanding. Conventional loans are the other sources of finances for a company that is increasing. Conventional loans are provided for companies that are growing and expanding to new markets. The advantage associated with these types of loans is that they have little interest rates. The disadvantage they have is that they require collaterals as security.
Hatcher, S. (2018). Increasing business growth: Seven key considerations. Retrieved from https://www.growthbusiness.co.uk/increasing-business-growth-seven-key-considerations-2555161/
Zwilling, M. (2016). 6 Key Risk Factors When Scaling A Business To Global. Retrieved from https://www.forbes.com/sites/martinzwilling/2016/04/07/6-key-risk-factors-when-scaling-a-business-to-global/#4f84a1592a89
Kimmons, R. (2019). Sources of Finance Available to a Global Business. Retrieved from https://bizfluent.com/list-6365713-sources-finance-available-global-business.html
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