Strategy and Growth Cycles

This week’s readings had me wondering about sustained business growth, like GE’s double-digit percentage gains annually from Welch and then from Immelt after the Recession, as compared to Southwest Airline’s slower yet seemingly consistent growth after the initial boom. Particularly I am curious about those growth rates between industries, and our own expectations about how a company is to perform. Immelt created a strategy that was based on cohesion, looking toward the future for growth opportunities like health care technology and renewable energy, and dropping other subsidiaries like insurance. Southwest looked toward focusing their efforts on the customer, and how to make their airlines more appealing, more streamlined, and more desirable. When creating a strategy for a company, this seems to be where the industry analysis really kicks in.

As I got curious about growth, I found articles that echoed the articles. Both Forbes and Fortune remark that continuous growth is not realistic, but with constant analysis, trimming or pruning of no longer needed functions, and risk taking a business can quickly rebound from slumps. However, this 1984 Harvard Business Review article addresses my thoughts a little more directly. Here, Willian Fruhan, Jr. states that some companies are bound by financial forces from growing as much as they desire, but also asks the questions of when is growth desirable for a company? Unfortunately (for me), this article goes into too many details on stock market comparisons and reviewing the return on equity with inflation. But one thing that really struck me was looking at the huge spike in growth of Tandy Corporation, owner of Radio Shack, between the 70s and 80s. Currently there are about 100 open Radio Shacks in the United States, so this company has been seeing more than a slump.

So how would such a company have continued its growth since the 80s? Perhaps a more robust online presence, expansion of it’s dabbling in laptop computers, or exploration of becoming a one stop shop like Best Buy with gadgets and gadget service? No matter what path(s), Radio Shack did not seem to evaluate its position within the industry in the way it once did. Alternatively, Southwest Airlines continues to grow. The Motley Fool predicts high growth for Southwest Airlines during 2018 due to more strategic changes on their part. This includes replacing the older 737 stock, a lucky break on taxes due to the newest corporate tax changes, and the benefit of lower fuel prices. GE has also gotten some interesting reviews for the year, claiming that some new moves could help the company from a slump in recent years. In the end reading articles about successful strategies sometimes presents the perception that companies that constantly innovate and grow, which seems to last for a period of years, but clearly does not come without a struggle.