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Dear List,

I agree that many companies need to grow, but I also think that
this requires more investigation and can't be left as an
assumption.

For one, I am under the impression that small companies can handle
change better and have better communication.

I have seen where companies were small and offered unique services
in their area, but once they grew in size they standardized and
began offering the same product and services nationwide, taking
away their uniqueness and creativity. Without creativity and
flexibility..they no longer listened to the voice of the
Customer...so they are unable to change to satisfy the fickle
market. They had to service the nation and had to streamline,
where before they could offer custom product and services to their
community. We had a small drug store in town that earned
community loyalty when they displayed the local highschool
football team trophy in their window....several years later when
this drug store, now nationwide was asked to do that, they refused
saying that they had Corporate Made window displays and could not
deviate from that corporate mandate. Now we have milk prices and
a nice little dairy display, instead of the local high school
trophy.

And my other concern is in market saturation. Size can sometimes
create competition for customers within the same company. I think
Mc Donalds might be an example of this. So many francises were
given out that the McDonalds on one side of town took business
away from the one 2 miles down the road.

Then my other concern is for businesses that are cyclic. Auto
Industry is to some degree, but none so cyclic as Real Estate
Appraisals. When the interest rate is down and people are
refinancing, appraisal companies can't keep up..but as soon as the
market drops their business is saturated with too high of a head
count. During the time that they try and determine how to cut and
how much...money is going out of the window and quickly eats up
profits from the fat years.

So, although I agree that a company should look at growth
potential, I think that it will vary from industry to industry,
company to company. Caution and logic should enter this
investigation.

Another concern that I have is with quality. I think that
competition generates quality. Back when KMart dominated the 5
and 10 cent stores and had put Cunninghams and Woolworth and such
out of business they just relaxed with their quality. They no
longer grew in Product and Customer service although no one could
dispute their size. When WalMart came along, K Mart scrambled to
update their stores, their products and their service concepts.
That winning formulae that they were able to template across
America became their albatros. They were not prepared or capable
of quick change and competitive service.

No one was bigger than General Motors...but size, which at one
time was their stong point, became their handicap as they
struggled to cut fat in order to compete with small foreign
business. Their negative publicity centered around their
'rightsizing' did more harm to their Market than any thing else.
In fact they have still left a negative impact on the American
workforce. American companies can't get the loyalty they once
had. Many workers feel betrayed during the downsize years and no
longer plan to work for one company for 15 to 20 years.

I don't think that size necessarily determines success. Many of
the fortune 500 companies in the 1970's are no longer
around...what is that number???...less than 40% of them?

I was also under the impression that the most successful banks in
the last ten years have been the smaller ones. It will be
interesting to see what happens to these small successful banks
that have been buying bigger, but financially strapped
competitors.

Forgive me, I am the farthest thing from a Marketing
expert...these are unfounded assumptions and off-the-cuff opinions
that I am throwing around...don't even trust the data...but these
are my concerns with growth for growth sake.

Regarding the 'plant' thing. I prune all of my trees and bushes
every spring. I understand their need and desire to grow without
limitation....but....I don't like to see them compete for soil
nutrition and sunlight...I kinda think I know what is good for
them, but I am no garden expert either.

Thanks,
Rick Corcoran

Rick,
Terrific response.However you raised a question that must also be considered: If growth comes from customer support, why do so many organisations ignore it?

In my area of work there are too many occasions when it is the supplier who is determining what customers are going to have, not the customer determining what he/she wants. Unfortunately because I work so closely with the customers I am seeing that they have been brow beaten so often that they've forgotten how to demand quality. I think that there would be far fewer 'fickle' customers, and many more successful organisations, if they stopped treating their customers as idiots who don't know their own needs and got back to the days when the organisation was small enough to hear what the customers were saying.

And to add another gardening analogy: Out here in Australia we find that the best thing for growth is a darn good bushfire. Sure, there is a great deal of peripheral damage, but this can be rebuilt. Yes, lives can be lost and this is an unfortunate outcome when humans try to interfere with nature.

But let's parallel this with industry - trees don't grow simply by planting more of them. Same same with industry. More McDonalds don't make for better ones. Our country is flooded with McDonalds but their handburgers still taste terrible.

Similarly, pruning - while good for rose bushes which are generally small in size and pretty to look at - doesn't make for thick, lush vegetation. Only wild growth with the right mix of secondary growth and sunshine. Same same in business. Growth in business doesn't occur by holding tightly to only one or two products and 'pruning out' the, seemingly (in one person's opinion - ie, the gardener and not the viewer), ugly rest. It happens by growing wildly in an environment that is prepared to support it. Compare the wild roses to what is growing in many people's gardens.

Evolution will weed out those that don't have strong enough roots or the support of their environment. This is why out here the Woolworths, Franklins etc, while they may hold something like 60-70% of the market (as opposed to, I think, 30-40% of the US market) are only popular by virtue of the fact that they are there. It is the small businesses here that have the deepest roots and greatest environmental support, hence the rush by Woolworths etc to buy them all up.

Thanks for giving me the opportunity to build on the analogy.

Phil

-----Original Message-----
From: RICHARD CORCORAN [SMTP:CORCORANRE@EXCELINC.COM]
Sent: Wednesday, February 11, 1998 7:40 PM
To: MG-ED-DV@MAELSTROM.STJOHNS.EDU
Subject: Growth Potential

Dear List,

I agree that many companies need to grow, but I also think that
this requires more investigation and can't be left as an
assumption.

For one, I am under the impression that small companies can handle
change better and have better communication.
[] (snip)

A couple of comments on Phil's posting below.

In my experience companies don't get serious about customer support unless they have to - i.e., they start seeing serious competition in their markets. If a company has more market power that its customers, why bother with being customer oriented? While customer support can be an element of a firm's competitive advantage, the firm's competitive advantage can be derived from a large number of other areas such as low cost, fast or reliable delivery, and patent or copyright protection. Also, if a large firm supplies a large number of small, non-integrated firms, then the large firm has a power advantage.

The reason that customer support is gaining in popularity is that firms are facing more competition and this competition often uses customer support to differentiate their products. Also, with the much better communications technology that we enjoy today, large global firms can directly engage in world-wide customer support where thirty years ago they would have had to rely upon local third party retail or service firms to service their customers.

I really liked Phil's metaphor of a brush fire for the way that the capitalist system works. I've heard it said (but can't recall where) that the strength of capitalism lies in its willingness to allow firms to die. In the long run this is healthy, but in the short run it creates quite a lot of human misery.

An example: In the U.S. there are about a million fewer auto-workers than there were in the peak year of 1978 (counting auto-parts suppliers as well as the big auto companies.) These folks earned middle class wages for semi-skilled factory work. They adopted middle-class values and sent their kids to college. This was the greatest social experiment of this century (in my opinion.) No more. Instead of five domestic auto companies that functioned as an oligopoly (and could pass on wage increases to the consumers), we now have eight or nine global auto companies and intense industry competition. Wage increases can no longer be simply passed on to the consumer. In fact pressure to reduce wages is rather intense.

While consumers now enjoy cheaper cars (car prices have risen slower than the consumer price index over the last 15 years in the U.S.) and these former auto workers have by and large found new jobs, many of them will never again earn the kind of money that they enjoyed as auto workers. The human cost is enormous.

Martin W. Broin, Ph.D.
Assistant Professor of Management
Texas A&M International Univ.
Laredo, Texas, U.S.A.
Phone: (956) 326-2538
E-mail: broin@tamiu.edu


-----Original Message-----
From: Phil Rutherford [SMTP:robnphil@ozemail.com.au]
Sent: Wednesday, February 11, 1998 4:38 PM
To: 'Management Education and Development Discussion'
Subject: RE: Growth Potential

Rick,
Terrific response.However you raised a question that must also be considered: If growth comes from customer support, why do so many organisations ignore it?

In my area of work there are too many occasions when it is the supplier who is determining what customers are going to have, not the customer determining what he/she wants. Unfortunately because I work so closely with the customers I am seeing that they have been brow beaten so often that they've forgotten how to demand quality. I think that there would be far fewer 'fickle' customers, and many more successful organisations, if they stopped treating their customers as idiots who don't know their own needs and got back to the days when the organisation was small enough to hear what the customers were saying.

And to add another gardening analogy: Out here in Australia we find that the best thing for growth is a darn good bushfire. Sure, there is a great deal of peripheral damage, but this can be rebuilt. Yes, lives can be lost and this is an unfortunate outcome when humans try to interfere with nature.

But let's parallel this with industry - trees don't grow simply by planting more of them. Same same with industry. More McDonalds don't make for better ones. Our country is flooded with McDonalds but their handburgers still taste terrible.

Similarly, pruning - while good for rose bushes which are generally small in size and pretty to look at - doesn't make for thick, lush vegetation. Only wild growth with the right mix of secondary growth and sunshine. Same same in business. Growth in business doesn't occur by holding tightly to only one or two products and 'pruning out' the, seemingly (in one person's opinion - ie, the gardener and not the viewer), ugly rest. It happens by growing wildly in an environment that is prepared to support it. Compare the wild roses to what is growing in many people's gardens.

Evolution will weed out those that don't have strong enough roots or the support of their environment. This is why out here the Woolworths, Franklins etc, while they may hold something like 60-70% of the market (as opposed to, I think, 30-40% of the US market) are only popular by virtue of the fact that they are there. It is the small businesses here that have the deepest roots and greatest environmental support, hence the rush by Woolworths etc to buy them all up.

Thanks for giving me the opportunity to build on the analogy.

Phil

-snip