Exam 13: Preparing for and Evaluating the Challenges of Growth

A firm's pace of growth is the rate at which it is growing compared to its main competitors.

According to Penrose, entrepreneurial services generate new market, product, and service ideas.

Kendell Adams owns a software development company. When he first launched his firm, he was careful to hire employees who had the experience he was looking for, were good matches for the positions he had available, and could be properly supervised. As Kendell's firm has grown, and his need for employees has increased, he is finding that it is increasingly difficult to find employees who have the qualifications he is looking for, are good matches for the positions he has available, and fit within the supervisory framework he has developed. Kendell is dealing with an issue referred to as ________.

Adverse selection means that as a firm grows and adds personnel, the new hires typically do not have the same ownership incentives as the original founders, so the new hires may not be as motivated as the founders to put in long hours or may even try to avoid hard work.

________ costs are costs that a company incurs whether it sells something or not. ________ costs are the costs a company incurs as it generates sales.

Market leadership occurs when a firm ________.

According to the basic model of firm growth articulated in Chapter 13, the ability to increase managerial services to facilitate growth is not friction free but is constrained and limited. Which of the following selections is not one of the factors that constrains or limits a firm's ability to increase its managerial services?

Which of the following is not an appropriate reason for firm growth?

When a firm's managerial resources are insufficient to take advantage of its new product and service opportunities, the subsequent bottleneck is referred to as the ________ problem.

One of the most difficult challenges that businesses encounter as they grow is maintaining high levels of quality and customer service.

Moral hazard means that as the number of employees a firm needs increases, it becomes increasingly difficult for it to find the right employees, place them in appropriate positions, and provide adequate supervision.

Kelly Andrews owns a company that makes office furniture. Recently, a favorable article was written about Kelly's company in a business magazine, and as a result, Kelly has seen a spike in his orders. Although Kelly is grateful for the additional orders, he is worried about one thing. An increase in activity means that his firm must handle more service requests and paperwork and contend with more customers, stakeholders, and vendors. Kelly knows that if he doesn't handle this increased activity properly, the workmanship of his products could decline. The day-to-day challenge of firm growth that this example illustrates is ________.

Business success doesn't always scale.

Katlyn Williams owns a company that makes specialized components for the aerospace industry. Her most important customer is a company that is growing at a rate of 33% per year. Katlyn is working hard to grow her firm, because she knows that unless her company continually grows it will not be able to keep pace with the growth of its most important customer. This example illustrates the reason for growth referred to as ________.

Do most firms want to grow or are they reluctant to grow? What are the advantages of growth?