Challenges Faced by New Ventures in the Growth Process: An Analysis

This essay delves into the significant challenges new ventures encounter while navigating the growth process. It highlights key issues such as adapting to market volatility and consumer preferences, emphasizing the need for continuous market research and product adjustments, using examples like McDonald's and Zara. The essay also addresses the importance of effective planning, particularly in the face of technological advancements and changing market conditions, and the necessity of contingency plans to mitigate risks. Financial management is discussed as a critical element, including managing cash flow, securing investments, and addressing credit management challenges, with examples of social networking websites. Problem-solving, management, and legal compliance are also highlighted, with emphasis on adhering to government regulations and industry standards. The conclusion stresses the importance of strategic planning and formulation to overcome these obstacles and ensure sustainable growth.

Entrepreneurship
“The main challenges that new ventures
face when seeking to manage the growth
process”

INTRODUCTION
In the organisational life cycle, growth is the crucial time faced by an organisation. With
an aim to increase market share and escalate profitability, it caters towards bringing
improvements in form of making certain changes. Growth is the signal of company's better
utilization of its core competencies and resources. It goes through different stages of evolution
that drives different forms of advancements towards it. It is found that while undergoing this
process, organisations face number of challenges in a varied manner.
Adaptability with Market
Growth of the organisation has been largely threatened by the changing and fluctuating
market conditions (Drucker, 2014). It is found that in the present era, the major hindrance in the
development of the organisation in terms of sales and profits is the volatility in market
conditions. Consumer's tastes and choices are changing with a very fast pace and hence, it
requires making alterations in the products and services offered by organisation to maintain the
growth in a consistent manner. At the time of establishment, organisation seeks to manage the
change with proper market research to get overview of the current practices and changes
(Kirzner, 2015). For instance, the major organisation like McDonald's has faced this issue when
it introduced its franchisee in different countries as it was opposed by the groups having
inclination towards healthy practices. Further, along with this, it had to offer range of products
with different specifications to satisfy the large number of people around the globe.
There are many other organisations who have faced the similar challenge such as leading
clothing and accessories retailer, Zara has faced restrictions and protest while opening its stores
in some countries due to its few product line (Karlan and Valdivia, 2011). This has hindered the
opening of its stores in some regions of the world due to their religious norms and ethics. For
instance, the leather or wool used in accessories and clothing was not accepted by the consumers
of some countries.
Further, Morrisons, the chain of supermarket has faced lot of issues while offering its
products and services in the market (Bridge and O'Neill, 2012). In food products like frozen
items, consumers were restricting them for using these products due to preservatives and
artificial colours in them. Hence, it has made the organisation to make research and development
as well as offer food items free from these harmful components.
Planning
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Advancement in technology and frequent changes in market conditions require effective
planning to establish prominent position in the market. Planning is the process of making
structured way to proceed for managing company's operations. For a new venture, it is an
essential part as in lack of it, company leads to failure and loss in a significant manner. There are
many organisations which in-spite of large investments have failed in their operations due to
improper assessments and strategic formulations (Kuratko, 2016). It is one of the major
challenges faced by organisation as new ventures do not have adequate experience and
awareness about the market conditions. Hence, due to conventional approaches, the plans are
unable to derive the desired goals and targets.
Managing growth process requires the implementation of certain set of activities that
results in the accomplishment of the set goals and objectives (George and Bock, 2011). It
includes identifying internal strengths and weaknesses with respect to the market conditions and
in comparison to the rival organisations. Further, it is imperative to make an assessment of
opportunities available to organisation so that it can be availed in a better manner and also
identify the threats as well as risks possibly encountered by the organisation. There are many
organisations who have failed due to lack of planning such as sixdegrees.com, a social marketing
website.
The crucial reason that limits the growth of the organisation is the absence of contingency
plan prepared by the organisation (Welter, 2011). In the present time, when market conditions
are continuously changing with respect to the alterations occurring in customer's choices and
preferences. In that regard, there are some plans prepared to prevent the organisation from losses
incurred due to unexpected issues and problems.
Financial Management
Finance is the crucial part of the organisational working. It is the central part of the
management around all the other operations revolve (Baum, Frese and Baron, 2014). Financial
management is the cumbersome task for senior authorities of the organisation as it is connected
to all the functioning. A properly managed cash flow in the organisation is required to have the
working in a lucrative manner. As the company grows, there is expansion in all the dimensions
such as stock used by the organisation, human resources working in different departments,
intermediaries working in it including suppliers and associated business groups, sourcing money
and finances from different places such as financial institutions, shareholders, banks and other
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related etc. Appropriate Decisions are required to be taken so that profits can be maximized to an
optimum level (Karlan and Valdivia, 2011).
The crucial task associated with the management in the organisation is credit
management. At the initial stages while undergoing growth, new ventures are unable to provide
satisfactory returns to investments of their shareholders in the anticipation of escalated profit
margins (Karlan and Valdivia, 2011). For instance, established social networking website at their
initial years is accused of being partial towards few partners like Zynga and disfavouring the
other shareholders in providing profit shares to them. Apart from that, cash constraints has been
the crucial reason for limiting growth of an organisation and obstacles in the development
process. Similarly, over-trading done by new ventures at time of growth period, the success
becomes fatal in nature.
Further, each new business requires an adequate amount of investment to keep its
working in a stable condition. At the initial stages, it faces challenges convincing its financiers
about their strategy and future plans. Hence, at many instances, due to lack of enough money,
organisations are unable to grow to a significant extent.
Problem solving
There are slew of problems faced by the organisation while bringing growth and
appropriate utilization of resources (McDonald’s and its challenges worldwide: a market-by-
market look, 2015). Further, it is found that organisations due to less experience are very
vulnerable to the fluctuations occurred both internally and externally. It is required to resolve the
issues faced by the organisation in departments such as adapting cross culture behaviour and
their acceptance, inculcation of new technology, better methods and working styles and many
other related. It has been always the crucial issue for new ventures while managing growth.
Management
Management plays a vital role in organisational working that aims to allocate the
resources in a proper and effective manner. It is the inculcation of several activities such as
managing human resources, sourcing money, planning and strategy formulating, managing risk
and many others (George and Bock, 2011). For instance, new ventures are required to provide
training and development sessions to the employees to bring adaptability with the new
technology and advancement in the working styles.
Legal Compliance
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One of the crucial challenges faced by any organisation is the requirement of abide the
laws and regulations laid by the government and other legislative organisations of the host
countries (Neck and Greene, 2011). These regulations are in different aspects related to
consumer protection, employees related issues, compliance with the trade norms and other
related. This is the major aspect by which a new venture faces challenge in its growth process.
Number of clauses and laws related to the concerned operations of the organisation affect their
working. For instance, any food company such as McDonald's, Burger King and other related are
required to abide the food safety norms. There are certain standards of compositions and
ingredients provided by food monitoring authorities which are required to be maintained by the
organisations. There are certain instances found such as transnational food and beverage
company, Nestle S. A. has encountered the claims against the compositions used by it in its
product line and had to arrest the manufacturing (Santos, 2012). This has hindered the growth of
this business organisation in new geographical locations. Further, automotive companies before
the inception of their manufacturing have to undergo different stages of verification in which
specifications of their vehicles are tested against the standards provided by environmental
organisations, human safety organisations and other related.
CONCLUSION
New Ventures while establishing its prominent position in the market face number of
challenges. These challenges hinder their growth and upliftment in a significant manner. From
the study, it can be articulated that major challenges faced by new ventures are related to making
compliance with the legal norms and clauses, bringing adaptability with the volatile market
conditions, changing needs and wants of customers, managing credit and finances along with
appropriate resource allocation, planning and management as well as problem solving etc. The
points are evidenced through some examples and implication part. Hence, it is verified that there
is the requirement of effective planning and strategic formulation to deal with such issues.
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REFERENCES
Books and Journals
Baum, J. R., Frese, M. and Baron, R. A., 2014. The psychology of entrepreneurship. Psychology
Press.
Bridge, S. and O'Neill, K., 2012. Understanding enterprise: Entrepreneurship and small
business. Palgrave Macmillan.
Drucker, P., 2014. Innovation and entrepreneurship. Routledge.
George, G. and Bock, A. J., 2011. The business model in practice and its implications for
entrepreneurship research. Entrepreneurship theory and practice. 35(1). pp.83-111.
Karlan, D. and Valdivia, M., 2011. Teaching entrepreneurship: Impact of business training on
microfinance clients and institutions. Review of Economics and Statistics. 93(2). pp.510-
527.
Kirzner, I. M., 2015. Competition and entrepreneurship. University of Chicago press.
Kuratko, D., 2016. Entrepreneurship: Theory, process, and practice. Cengage Learning.
Neck, H. M. and Greene, P. G., 2011. Entrepreneurship education: known worlds and new
frontiers. Journal of Small Business Management. 49(1). pp.55-70.
Santos, F. M., 2012. A positive theory of social entrepreneurship. Journal of business
ethics. 111(3). pp.335-351.
Welter, F., 2011. Contextualizing entrepreneurship—conceptual challenges and ways
forward. Entrepreneurship Theory and Practice. 35(1). pp.165-184.
Online
McDonald’s and its challenges worldwide: a market-by-market look. 2015. [Online]. Available
through: <http://www.ft.com/cms/s/0/f8ac22fc-a7c1-11e4-8e78-
00144feab7de.html#slide0>. [Accessed on 13th June, 2016].
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