It is the process through which the company increases in size or size, generally as a result of the increase in demand. This definition establishes a direct relationship between company growth and size, two aspects that constitute the object of study of the Economy of the Company as a scientific discipline.
There are different theories or approaches that try to explain the reasons why companies increase in size or grow:
- 1) The Theory of the Firm indicates that the increase in size and, therefore, the growth of the company, is explained based on obtaining economies of scale and an optimum minimum size.
- 2) From the sociological point of view, growth serves to increase the value or prestige of the company’s managers, for the creation of employment and for the improvement of organizational status.
- 3) From the economic perspective, growth means an increase in corporate profits, lower risk and greater market power.
Growth is an index of the company’s dynamic economic activity and measures its attitude to increase its field of commercial and technical possibilities. It can be measured by determining the absolute growth rate (growth of an element of the company in a given period, such as sales or employment) or the relative growth rate (degree of growth compared to competitors).
Business growth can be analyzed from the strategic perspective, so that in addition to being considered as an objective of the company (the increase in size), it can also be studied as a strategy or long-term action to be followed by the company .
Growth from a strategic perspective can take different forms:
- 1) According to the objective pursued, growth can be real (when its objective is to increase its market share) or stable (when its objective is to maintain its market share). In both cases, the company sees the need to grow or increase its size or size.
- 2) According to the structure, the growth can be internal (use of internal resources and capabilities) or external (use of resources and capabilities of other external companies). These two forms of growth can be compatible, so that the company can create using both its own resources and the resources of other companies with which it cooperates or integrates.
It is also important to differentiate between business or company growth and economic growth. The latter corresponds to the growth of a specific economic system, economic area (such as the European Union) or a specific country (macroeconomic perspective). In contrast, business growth refers to the growth of companies from a macroeconomic perspective.