Storey’s Three Comopnent Model

Moving on to the second part of the question looking at Storey’s , â€Å"Three Component Model† and how useful it is in identifying the key characteristics of successful growth businesses. Most of the small businesses do not grow beyond their classification as a micro firm, very few of the small firms rise to become a medium-size enterprise, and even fewer rise to become large companies in the future. Storey (1994) has identified three key components in the analysis of the growth of the small firms, they are influenced by the characteristics of the entrepreneur, the characteristics of the organization; and the types of strategy associated. Various different characteristics of each component can lead to a different type of growth within the SME. The characteristics of the entrepreneur are widely accepted as the vital ingredient that influences growth. For example, the personal goals of an entrepreneur are likely to influence why a business was started in the first place, as well as the strength of the firm’s growth orientation once it was established. Storey’s places less emphasis on personality per se and more on the personal characteristics which influence access to resources. These include * Motivation: This is likely to be the most indispensable and essential action or a commitment by the entrepreneur which makes a considerable difference in the growth of the enterprise. * Previous management experience: Earlier knowhow of organizing people and processes is important in maintaining growth. * Demographics of the entrepreneur: This is essentially with regard to the personality traits of the entrepreneur viz. Age and Education. These two traits can influence the growth of the firm, Entrepreneurs with higher educational qualifications are more likely to find high-tech and knowledge-based firms which in turn can be linked with higher growth rate of the firm. * Team management over individual management: Access to a wide range of resources, skills, experiences, advice and other resources is important to growth. A group of entrepreneurs are more liable to have the attributes wanted than just one person. Alongside these characteristics are more personal ones. Owners have a need to be independent and want to be their own managers. They believe that they can control and change the environment within which they work, to their benefit. They are often high achievers and are looking for recognition of their success. † (Burns, 2001). The characteristics of the enterprise also have an influence on its growth prospects: Ownership and Legal form: A limited company is more likely to grow than a sole trader or partner ship. Limited companies offer greater goodwill thereby attracting more customers and resources that it needs to accelerate its growth. It is also possible that as the companies develop they acquire a limited liability status so that the legal form is a result of growth. Firms Age: Younger firms tend to grow more and faster than the existing old firms, which reflects the need of the younger firm to attain a significant level of ‘critical mass’ to survive in the marketplace. Firms Size: Small firms find it very hard to grow to level of the bigger firms, as they lack the resources, skills and competitive edge. One of the main reasons being the entrepreneurs with a micro-firm do not wish to grow because of the reasons stated above. â€Å"Management devolution is essential for growth as it becomes impossible for the entrepreneur to manage on their own. Those firms that recruit experienced managers from larger firms are likely to be more successful. † (Storey, 1994). Storey’s review of area where management strategy may influence the growth of small firms includes: Introduction of new products: Companies cannot rely on a smaller product or service range for growth. They continuous innovation in the form of new products and services is a key to growth. This also includes modification of the existing products. Sharing of Equity: Willingness to share equity with external individuals or organizations was identified in small firms that actually achieved high rates of growth. Market position: Adopting defined niche markets is a key ingredient for the growth of the company