Abstract:
One of the most practical and powerful tools for identifying and analyzing the problems of corporate growth is the concept of stages in corporate development. Numerous models have been developed for this purpose but very little emphasis has been placed on the financial aspects of growth. This is surprising as financial strategy plays an extremely important role in supporting growth. The object of this report was to develop a conceptual model of growth which concentrates on its financial implications. Based on this model, strategies could then be recommended for dealing with the financial problems associated with growth. In developing the model, the process of growth was analyzed and elements of existing models incorporated. Growth was conceptualized as a cycle through which the company progressed in four distinct stages - survival, growth, maturity and decline. The positioning of the company within these stages was determined by the relationships existing between sales, profits and cash flow. Financial strategy was based on planning for the crises that were anticipated as a company moved from one growth stage to the next. The report concludes with four case studies which illustrate the process of growth. These initial studies appear to support the financial implications of the model but further empirical research will be necessary to establish its limitations.
