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  • Subject area(s): Marketing
  • Price: Free download
  • Published on: 14th September 2019
  • File format: Text
  • Number of pages: 2

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1) Challenges within the Establish Phase

During the Establishment Phase, a business faces the high costs associated with its setup. Money must be spent on securing business premises, fixtures and fittings, initial stock purchases and promotional costs. One of the greatest challenges that businesses may experience in this establishment phase is the difficulty in obtaining the necessary funds for the business' start up needs. Generating sufficient revenue to cover a businesses expense often takes some period of time. Banks are often reluctant to lend money to a business in this phase, due to the high risks associated with a new business venture. Business owners may not anticipate the extent of their financing needs, resulting in a difficulty in attracting and holding onto staff. Throughout this phase, business owners must anticipate the business's entire financing requirements, in order to establish a successfully operating business.

Along with financial challenges,  there is a great amount of responsibility placed on the business owner to make decisions that may impact the success of the business.

A business owner must find the right legal structure for the business, focusing on the liabilities, risks and general outcomes that are associated with each structure. Along with this, the business must choose the right size and location for the premises from which it will operate or produce its goods.This however, comes at a cost for some businesses, such as those in retail. The more central and attractive the location, the higher the rent.

A business owner must also generate an appropriate product with a distinctive advantage over any competition within its market. A owner's choice of marketing strategies plays a crucial role for the future progression of the business, as no business can succeed without customers. This is challenging for a business within an establishment phases as it has not yet made a presence in the market and care has to be taken to make sure that the product is marketed well. A lack of strategy, can result in a slow growth in sales, which has an impact on the success of the business.

2) Challenges with the Growth Phase

During the Growth Phase, a business moves into a period of rapid growth. Although business operations generally improve at this point, there is a great amount of pressure placed on the business to ensure that the quality of its service or production is maintained as output grows. Managing cash flow and the costs of the business is essential, in order to maintain the funding of operations and profitability.  

In generating growth it is important to take advantage of economies of scale. Economies of scale arise when unit costs fall as output rises. This scale lowers the unit costs of production for a business and feds through to the consumers in order to lower the price. Economies of scale is also evident in discount prices for purchasing stock in large quantities. If a business can take advantage of these economies, profitability will be enhanced.

The recruiting of skilled employees and delegating responsibilities is essential. However, this is one of the most challenging aspects of the growth phase. Problems in this area include a shortage of qualified staff or the high costs of hiring such staff, at a time where revenues are low. Without access to quality staff, the performance of a business may deteriorate, due to staff being overworked or having an inadequate number of workers to fulfil the customers orders.

3) Challenges with the Maturity Phase

During the Maturity Phase, the business has reached its peak level in the market and is unlikely to achieve substantial further growth, unless internal or external conditions change significantly. Staying responsive to change in consumer demands is difficult for businesses. By staying proactive instead of reactive within the market, consumer demands can be met. Identifying opportunities for innovation in products and services can also be challenging. By focusing on consumer's needs and wants, innovation is possible.

One of the greatest challenge within this phase is sustaining the motivation of management and staff and avoiding complacency. By focusing on the management staff and changing the dynamics of the business, motivation can be achieved. By also rationalising business operations and minimising costs, the financial performance the business is maximised.

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