Referring to the concepts and theories of the organizational life cycle, discuss critically
why quality control is one of the most difficult challenges involved with rapid growth of a
firm. You are expected to:
1. Reflect different aspects of entrepreneurship and growth process
2. Reflect on quality control and its relevance to a growing firm
3. Use examples to illustrate your points of views appropriately.
LESSON–10 - ALTERNATIVE GROWTH STRATEGIES FOR SMALL BUSINESS
Sonia Sabharwal
Date created: 31 August 2006
Date accessed: 02 March 2011
http://www.streetdirectory.com/travel_guide/16693/outsourcing/do_you_compromise_qu
ality_with_outsourcing.html
http://www.walterhottinga.com/organization-development/greiner-evolution-revolution-
growth-model-for-organizations/
http://www.ils.unc.edu/daniel/131/cco4/Greiner.pdf
http://www.tameer.org.pk/images/The_Five_Stages_Of_Small_Business_Growth.pdf
With Greiner’s model in mind, quality control is especially important during the growth
through delegation stage. At this stage
BMW admits quality control problems
By Steve Farrell -
General news
01 September 2008 16:05
Adrian Roderick, the firm’s UK general manager, said the two faults were just the latest problems to arise following a sales
boost. “They’re the two we’ve had to deal with most recently,” he said.
Roderick blamed the problems on the firm’s struggle to build 15-20% more bikes each year for four years to meet the surge in
demand. “We were growing so fast we were sort of tripping over ourselves,” he said. ”We’re well over 40% up on four years
ago. With any product, when you suddenly increase volumes quite quickly you are prone to things going adrift.”
http://www.motorcyclenews.com/MCN/News/newsresults/mcn/2008/september/1-7/sep0108-
bmw-admit-quality-problems/
Firms can struggle to meet with demand rises and quality can suffer as a result of this.
Motorcycle news states “The German motorcycle manufacturer, which has a strong reputation for reliability
and quality, has failed to maintain standards while struggling to meet a rise in demand of over 40%, according to
bosses.
Quality Control :
Quality control
Quality control is the more traditional way that businesses have used to manage
quality. Quality control is concerned with checking and reviewing work that has been
done. But is this the best way for a business to manage quality?
Under traditional quality control, inspection of products and services (checking to make
sure that what's being produced is meeting the required standard) takes place during and
at the end of the operations process.
As a result of the above problems, many businesses have focused their efforts on
improving quality by implementing quality management techniques - which emphasise the
role of quality assurance. As Deming (a "quality guru") wrote:
"Inspection with the aim of finding the bad ones and throwing them out is too late,
ineffective, costly. Quality comes not from inspection but from improvement of the
process."
Pasted from <http://tutor2u.net/business/production/quality_control.htm>
Cash flow info
RBC Royal Bank
Expanding a business - Financing Growth
http://www.rbcroyalbank.com/busexpanding/financinggrowth/be_cashflow.html
Organic growth
Quality
To successfully grow any enterprise, there needs to be a quality product. Organic growth
relies on repeat business from satisfied customers. Customers will rarely buy a product a
second time if the first experience isn't top notch. Quality control and customer service are
critical to gaining a sufficient sales volume to grow a company.
Quality in a growing company starts with the first contact a customer has with the
corporation all the way to the delivery of the final product. Whether it's a website or an in-
person sales presentation, the initial contact with potential clients must be top notch.
Product quality, customer service and product support need to continue the standard of
excellence that the marketing and sales departments begin. With all four pillars growing in
sync, organic growth is inevitable.
Read more: What Is Organic Growth Strategy? | eHow.com http://www.ehow.com/about_5106387_organic-growth-
strategy.html#ixzz1FkBokrCW
Kelcey Lehrich,
05.03.2011
Rapid Growth Has Its Perils, Toyota Learns
By MICHELINE MAYNARD and HIROKO TABUCHI
DETROIT — Toyota executives set an ambitious goal in 2002 to own 15 percent of the global
auto industry by 2010, meaning it would surpass General Motors as the world’s largest
carmaker. To get there, it would have to grow by 50 percent. It would have to build new
plants in the United States, China, and elsewhere in Asia, and introduce dozens of new
models.
Toyota managed to win bragging rights as the world’s biggest car company. But that focus
on rapid growth appears to have come at a cost to its reputation for quality, creating an
opportunity for others to potentially take back market share they lost to Toyota.
Toyota said Thursday that it was extending the recall to Europe, and that "the models and
exact number of potentially affected vehicles is under investigation. It added that "details of
corrective action and implementation will be communicated directly to customers with
vehicles potentially affected."
The company said it had already made the necessary changes to its production lines, so
there would be no need to halt output in Europe. Some 75,000 vehicles will also be recalled
in China.
On Tuesday, after prodding by the Transportation Department, Toyota announced it was
temporarily stopping production and sales of eight models that make up more than half of
its annual sales in the United States, after two major recalls since November, while it tries to
fix a problem with their accelerator pedals.
“There was always a question about how fast they could go,” James P. Womack, an author
and expert on Toyota’s manufacturing methods, said of the automaker’s growth. “I’m sure
they regret that they stomped on the gas so hard.”Mr. Womack said Toyota was also paying
for taking its eye off the message that has been central to its marketing. “When your whole
deal was quality, every mistake is a big deal,” he said.
Transportation Department officials in the United States said Wednesday that they had
advised the automaker to act quickly. “The reason Toyota decided to do the recall and to
stop manufacturing is that we asked them to,” Raymond LaHood, the transportation
secretary, said. In an interview with WGN radio in Chicago, Mr. LaHood added, “We were
the ones that really met with Toyota, our department, our safety folks, and told them,
‘You’ve got to do the recall.’ ”
Japanese media raised fears that Toyota’s problems might damage the reputation of other
Japanese companies. “The discrediting of Toyota could even destroy the world’s trust in
Japanese manufacturing, which relies on its reputation for high quality,” warned the Tokyo
Shimbun, a daily newspaper.
But fears about lasting damage to Toyota may be overblown, given the short attention span
of consumers, said Jeffrey K. Liker, a professor of engineering at the University of
Michigan and the author of the best-selling book “The Toyota Way.” “This is an unfortunate
series of events that aren’t a good reflection of the health of the company,” he said.
“But if they aren’t selling cars, nothing else matters.” Toyota announced a similar halt to
sales and production in Canada, where it has two assembly plants in Ontario. It is
considering the same steps in Europe, although it has not yet come up with a plan.
Late Wednesday, Toyota added 1.1 million more vehicles to its November recall, which
already was the largest in its history. Halting production and sales of the eight models in
North America represents the latest setback for Toyota’s president, Akio Toyoda, who has
been buffeted by problems since taking the job seven months ago.
He has already apologized for the company’s losses, its bland cars and its overconfidence.
Last fall, Mr. Toyoda said the automaker was “grasping for salvation.” At the time, it seemed
an overstatement. Despite its red ink, Toyota still has ample cash, and it gained market
share in 2009 in the United States, where it ranks as the second-biggest player behind G.M.
On Monday, before Toyota announced the sales and production shutdowns, the company
said it expected its global sales to grow by 6 percent in 2010, to about 8.27 million vehicles.
But as it has gained sales, Toyota has moved away from some of the business practices it
adopted in its years of slow but steady growth. One example is its decision to buy parts from
companies around the world, rather than from a small group of Japanese suppliers that
have been longtime partners. For example, the pedals in the vehicles affected by the
production and sales stoppages come from a supplier’s Canadian plant.
The move to expand its supplier network was necessary to save money, given cost pressures
on Toyota and other manufacturers, said Ulrike Schaede, professor of Japanese business at
theUniversity of California, San Diego. But the shift also makes it harder for Toyota to
control quality. “At one level, it’s the right thing to do,” Professor Schaede said. “At another,
what you pay is what you get.”
In Japan, “many of us weren’t surprised over the big recalls,” said Masahiro Fukuda,
manager of research at Fourin, a global automotive research company based in Nagoya,
Japan. “We were more surprised that it took Toyota so long.”
For Toyota, the timing of this problem is working somewhat in its favor. The production and
sales halts are coming at one of the slowest times of the year, allowing the company to
begin repairs before the car market picks up in the spring. On Wednesday, Mr. LaHood said
engineers at the Transportation Department were working closely with the company to find
solutions.
Mr. Womack said an open question is whether consumers will be patient with the company,
because they could choose from a variety of well-built cars from many other companies.
“They’re trying to regain their image of quality at a time when everyone has gotten so much
better,” he said. “If everyone else is building almost-perfect vehicles, you have to make
absolutely perfect products.” Mr. Womack said he was still rooting for Toyota to fix its
problems. “I’m saddened to see a company known for building good things make some
unnecessary mistakes,” he said.
The New York Times
Rapid Growth Has Dented Toyota’s Reputation
Date accessed:25 Feb. 11
Date created: January 28, 2010
http://www.nytimes.com/2010/01/28/business/28toyota.html
Toyota blames rapid growth for quality problems
TOKYO — The president of Toyota Motor acknowledged Thursday its rapid global growth
was partly behind an increase in quality problems in recent years.
The company has improved quality controls and is sticking to its sales targets, including
those in North America, despite worries about a credit crunch and a slowdown in the auto
market, said the president, Katsuaki Watanabe.
Speaking at the Japan National Press Club, Watanabe said the reasons behind the defects
were varied, involving development, design, production, suppliers and maintenance. But
Watanabe said that at least some of the problems, including time pressures and shortage of
experts, stemmed from the company's huge growth in recent years. "That is not zero," he
said, referring to quality problems rooted in Toyota's expansion.
Watanabe has generally been frank about acknowledging challenges facing the company as
it enters markets and builds plants. Still, his comments highlight a sense of a crisis at Toyota,
which is trying to maintain its sterling reputation for quality as it seeks to expand globally,
especially in emerging markets like Brazil, China and Russia.
"The fact that Toyota is growing globally suddenly shouldn't be used as an excuse,"
Watanabe said. Last year, Toyota overtook General Motors as the world's No. 1 automaker
in global vehicle production, although GM still retains the top spot in global vehicle sales.
Toyota made a record 9,497,754 vehicles worldwide in 2007, up 5.3 percent from the
previous year, compared with 9.284 million for GM. But Toyota sold fewer vehicles at 9.366
million, compared with 9,369,524 for General Motors. GM has been the world's top seller
for 77 years. Watanabe said he had ordered a six-month delay in some products to tackle
quality controls after the problems surfaced. He did not give details.
Toyota has gone over, one by one, each problem, tracking root causes, analyzing and
coming up with ways to prevent a recurrence, Watanabe said. He even referred to "big
company disease" caused by arrogance among its ranks. Since 2006, when the alarming rise
in recalls began to surface, Watanabe has apologized repeatedly at news conferences in
Japan.
He also said he was aware of the concerns about falling U.S. auto sales amid a slowdown in
the American economy. This year is expected to be the slowest in a decade for the U.S. auto
industry. But automakers are still predicting that sales will pick up in the second half thanks
to the U.S. government's economic stimulus package and pent-up demand.
Watanabe brushed off the worries. Overall American auto sales this year are likely to remain
about the same as last year, and Toyota is expecting its regional sales to rise this year, he
said. Toyota is expecting U.S. sales to climb 1 percent from 2007 to 2.64 million vehicles in
2008. "I feel U.S. economic fundamentals are strong," Watanabe said.
The new York times
Toyota blames rapid growth for quality problems
http://www.nytimes.com/2008/03/13/business/worldbusiness/13iht-
toyota.1.11032892.html
GROWING TOO FASTThis is a common malady that strikes ambitious and talented
entrepreneurs who have built a thriving business that meets a strong demand for a specific
set of goods and/or services. Success is wonderful, of course, but rapid growth can
sometimes overwhelm the ill-prepared business owner. "Companies growing at hyper-
speed sometimes pay a steep price for their success," confirmedIngram'scontributor Bonar
Menninger. "According to management experts, controlling fast-track growth and the
problems that come with it can be one of the most daunting tasks an entrepreneur will
face." This problem most often strikes on the operational end of a business. Demand for a
product will outpace production capacity, for example. In such instances, the business often
finds that its physical needs have outgrown its present facilities but that its lease agreement
or other unanticipated factors hinder its ability to address the problem. "You may sign a
five-year lease for a building, and 18 months later you're busting at the seams," one
executive told Menninger. "We had to move three times in five years. When we signed our
latest lease, we signed a three-year deal. It's a little more expensive, but we can bail if we
have to." In other cases, a business may undergo a period of feverish expansion into
previously untapped markets, only to find that securing a meaningful share of that market
brings them unacceptably low profit margins. Effective research and long range planning can
do a lot to relieve the problems often associated with rapid business expansion.
RECORDKEEPING AND OTHER INFRASTRUCTURE NEEDSIt is essential for small businesses
that are undergoing expansion to establish or update systems for monitoring cash flow,
tracking inventories and deliveries, managing finances, tracking human resources
information, and myriad other aspects of the rapidly expanding business operation. As one
business owner toldNation's Business,"if you double the size of the company, the number of
bills you have goes up by a factor of six." Many software programs currently available in the
marketplace can help small businesses implement systems designed to address these
recordkeeping requirements. In addition, growing enterprises often have to invest in more
sophisticated communication systems in order to provide adequate support to various
business operations.
PERSONNEL ISSUES Growing companies will almost always have to hire new personnel to
meet the demands associated with new production, new marketing campaigns, new
recordkeeping and administrative requirements, etc. Careful hiring practices are always
essential, but they are even more so when a business is engaged in a sensitive period of
expansion. As one consultant toldIngram's,"too often, companies spend all their energy on
marketing and production plans and ignore developing similar roadmaps for their personnel
needs."
Business expansion also brings with it increased opportunities for staff members who were
a part of the business in its early days. The entrepreneur who recognizes these
opportunities and delegates responsibilities appropriately can go far toward satisfying the
desires of employees who want to grow in both personal and professional capacities. But
small business owners also need to recognize that business growth often triggers the
departure of workers who are either unable or unwilling to adjust to the changing business
environment. Indeed, some employees prefer the more relaxed, family-type atmosphere
that is prevalent at many small business establishments to the more business-like
environment that often accompanies periods of growth. Entrepreneurs who pursue a course
of ambitious expansion may find that some of their most valuable and well-liked employees
decide to instead take a different path with their lives. In addition, Nelton pointed out that
"some employees may not be able to grow with the company. You may have to let them go,
despite their intense loyalty and the fact that they have been with the company since its
inception. This will be painful."
CUSTOMER SERVICE - Good customer service is often a significant factor in small business
success, but ironically it is also one of the first things that tends to fall by the wayside when
business growth takes on a hectic flavor. "When the workload increases tremendously,
there's a feeling of being overwhelmed," one small business owner admitted to Menninger.
"And sometimes you have a hard time getting back to clients in a timely fashion. So the very
customer service that caused your growth in the first place becomes difficult to sustain."
Under such scenarios, businesses not only have greater difficulty retaining existing clients,
but also become less effective at securing new business. A key to minimizing such
developments is to maintain adequate staffing levels to ensure that customers receive the
attention and service they demand (and deserve).
METAMORPHOSIS OF COMPANY CULTUREAs companies grow, entrepreneurs often find it
increasingly difficult for them to keep the business grounded on the bedrock values that
were instituted in its early days. Owners are ultimately the people that are most responsible
for communicating those values to employees. But as staff size increases, markets grow, and
deadlines proliferate, that responsibility gradually falls by the wayside and the company
culture becomes one that is far different from the one that was in place—and enjoyed—just
a few short years ago. Entrepreneurs need to make sure that they stay attentive to their
obligations and role in shaping company culture.
CHANGING ROLE OF OWNER"In the early years, from the time you start a business until it
stabilizes, your role [as small business owner] is probably handson," said Nelton. "You have
few employees; you're doing lots of things yourself. But when a company experiences its
first real surge of growth, it's time for you to change what you do. You need to become a
CEO—that is, the leader, the strategic thinker, and the planner—and to delegate day-to-day
operations to others." Moreover, as businesses grow in size they often encounter problems
that increasingly require the experience and knowledge of outside people. Entrepreneurs
guiding growing businesses have to be willing to solicit the expertise of accounting and legal
experts where necessary, and they have to recognize their shortcomings in other areas that
assume increased importance with business expansion.
CHOOSING NOT TO GROW
Finally, some small business owners choose not to expand their operations even though
they have ample opportunity to do so. "For many small business people, the greatest
satisfactions in owning a business, which often include working closely with customers and
employees, inevitably diminish as the business grows and the owner's role changes,"
indicatedNation's Businesscontributor Michael Barrier. "Many entrepreneurs would rather
limit growth than give up those satisfactions." Other successful small business owners,
meanwhile, simply prefer to avoid the headaches that inevitably occur with increases in
staff size, etc. And many small business owners choose to maintain their operations at a
certain level because it enables them to devote time to family and other interests that
would otherwise be allocated to expansion efforts.
Entrepreneurs looking to limit the pace of their business's growth need to consider the
ramifications of various expansion options. For example, a small business owner may decide
that he or she needs an infusion of capital. But entrepreneurs who decide to secure that
capital by making a public stock offering are in essence relinquishing any claim on pursuing a
course of slow growth. After all, stockholders expect to see growth in the value of their
stock, and that growth is predicated on upward trends in market share, sales revenue, and
other factors. Robert Tomasko, author ofGo for Growth,indicated that business owners
should make certain that they and their staffs are poised to handle the pressure associated
with pleasing stockholders. He pointed out that while stock offerings are an excellent way of
underlining ambitious growth plans, they can put nightmarish pressure on small business
owners who place greater emphasis on a relaxed business environment, improving existing
products or services, travel, and/or time with family.
Analysts rush to point out, however, that the entrepreneur who chooses to pursue a
philosophy of limited or slow growth is not necessarily adopting a course of management in
which he or she allows the business to slowly atrophy. "Limiting growth doesn't mean
refusing to change," said Barrier. "In fact, the right changes can be crucial for profitability. A
store's product mix may change radically over the years even if the store itself remains the
same size." Indeed, the vast majority of companies have introduced significant technological
innovations into their internal operations in recent years, whether they are in the midst of
tremendous growth or operating at the same basic size from year to year.
Finally, the methodologies that small business owners can employ to limit expansion vary
from industry to industry. Management experts point out, for instance, that small service
businesses (carpentry outfits, dressmakers, housepainters, swimming pool cleaning services,
etc.) can often restrict growth by simply turning down new business, provided that they
have a sufficiently reliable stable of clients already in place. Other small businesses can limit
growth by raising the prices on their goods and services. This method of reining in growth
needs to be studied carefully before implementation, because the firm does not want to
lose too much business. But analysts contend that for many niche industries, this option not
only limits growth but increases profits on the company's existing workload.
Experts warn, however, that strategies of limited expansion are not practical in many of
today's highly competitive industry sectors. As one executive in the high-technology industry
pointed out toNation's Business,fast-growing companies in high-tech typically obliterate
companies that do not grow as quickly: "They'll get big, their manufacturing costs will drop,
they'll have three times as many R&D [research and development] people fighting against
you." Other businesses that operate in industries in which a dominant company is eating up
big chunks of market share likewise can not afford to pursue policies of limited growth.
Quite the opposite, in fact; such small businesses often have to aggressively investigate
possible new areas of expansion in order to survive.
Read more:Business Expansion - type, Methods of growth, Expansion issues, Choosing not
to growhttp://www.referenceforbusiness.com/small/Bo-Co/Business-
Expansion.html#ixzz1FO6haZaj
Read more: Quality Control - type, benefits, Demings fourteen points, The scope of japanese
influence, Benchmarking, Supplier partnering, Continuous improvement, Other quality
buzzwords http://www.referenceforbusiness.com/small/Qu-Sm/Quality-
Control.html#ixzz1FS4DYrGH
http://www.referenceforbusiness.com/small/Qu-Sm/Quality-Control.html
http://www.accountingformanagement.com/introduction_to_managerial_accounting.htm
http://webcache.googleusercontent.com/search?
q=cache:A2rLCgvwrG4J:www.businessweek.com/smallbiz/content/aug2010/sb20100823_
584240.htm+case+study+quality+control+and+business+growth&cd=5&hl=en&ct=clnk&gl
=uk&source=www.google.co.uk
Cash flow management
Cash flow management is vital when preparing for growth and maintaining growth. As firms
expand, it is typical for firms to require more working capital for the day to day running of
the business.
Also as demand for output increases, input needs to increase in order to meet this demand,
hence the need for adequate capital to supply these inputs. Although it is customary for a
business in the growth stage to produce more products, it is important that the firm does
not tie up capital in stock and inventories. Otherwise, if stock is not sold in an appropriate
time period, this can prevent the firm from paying its overheads, which can lead to further
cash flow problems. In addition, sometimes the firm may not be in control of the inflow, for
example if debtors refuse to pay on time this can also cause cash flow problems
additionally. Thus it is important for the business to have regular cash flow.
During the growth stage, production costs increase in order to supply the increased
demand; however in the beginning of the growth stage, sales revenue may not come
immediately and funds may need to be made available i.e. overdraft, in order to pay
expenses.
