Everything that changes and develops over time has stages from birth to fall. It is the same with the organization. The life cycle of an enterprise allows you to see the right moment to make changes. What are its stages?
What is the Enterprise Life Cycle?
The life cycle of an enterprise includes various organization development phases in time. As a rule, there are four stages: start-up, growth, maturity and decline. By learning about them, you are able to plan appropriate activities and tools so that your company not only survives on the market, but also constantly develops. Introducing changes and actions at the right time allows you to stand out from the competition. An experienced manager who knows how to distinguish individual stages is able to notice problems occurring in each phase of the cycle. With this understanding, it gives him a sense of perspective and helps him decide how to respond appropriately to crisis situations. The life cycle of the company also allows you to choose the right actions as part of a variety of strategies: brand strategy, product while determining the best style of managing our capital and human resources.
First phase: start your business
When you start your business, you introduce new products or services to the market. And you also accumulate capital and hire new employees. Moreover, it is characteristic to intensively seek financial aid in order to be able to develop in the future. Your sales are low, and so is the knowledge of your brand and goods. What activities should you focus on? First of all, focus on targeted marketing target audience. The company's life cycle is a test of time at the beginning. Due to low revenues and, at the same time, high investment expenditures, many organizations cannot cope and disappear from the market.
Organizational growth
The second phase is the stage of rapid sales growth. From here, the company has to raise funds for research and development. Organizations increase their resources, hire new employees, managers, develop a formal structure and create rules of operation within the organization. Leaders manage change and constantly generate new ideas. Planning is regular and systematic. At this stage, you need to introduce marketing activities that will distinguish your offer from the competition. Focus on the needs of consumers and provide them with what they need. This stage can be very short, for example in the case of fashionable clothes in a given season, but also as long as smartphones thanks to updates, technological innovations and product improvements.
Enterprise life cycle - maturity
Maturity is the stage in which the organization has gained a stable position. The life cycle of the enterprise in this phase is characterized by: large capital, high revenues and a slow decline in sales. The market is saturated, so new companies will have a problem to enter the market. Your company, however, must focus on marketing activities that will emphasize your uniqueness and distinguish your offer from industry competitors. At this stage, you can implement a variety of marketing strategies: compete with quality or price or other features.
Fall phase
Unfortunately, some companies will find themselves in decline. If you miss the right moment and do not introduce product innovations, you will disappear from the market. Remember that the competition never sleeps. In this phase, sales are steadily falling, resulting in maximum savings. Frequent activities will be mergers or diversification of products to return to the growth phase and continue to be competitive.
Can the life cycle of the enterprise be extended?
Of course! By improving production, introducing technological innovations, automation, new product applications, you can extend the life of your organization at a given stage. It is also worth trying to expand into new markets, which is especially visible in the growth phase.
It is impossible to clearly define how long each phase of the life cycle lasts, because they depend on many different factors:
- industry in which the company operates,
- the size of the organization,
- company budget,
- company management method,
- and even the legal form of the organization.
The life cycle of the enterprise based on finances
There are many different propositions for the stages of the life cycle. Some people distinguish four phases, others five or more, adding their own interpretations. The life cycle of an enterprise can be considered from the point of view of marketing, brand strategy or even financial needs. In the latter, three stages are distinguished:
- creating an organization - the company needs significant funds to appear on the market, both own contribution and help from investors, or support from EU programs,
- early development - the company still needs significant financial outlays. It obtains them thanks to, for example, investment funds,
- expansion - the organization is developing intensively, sales are growing and it has its own capital. However, funds are still needed, hence investing in the stock market is frequent.