The 7 stages of the life cycle of a company

In today’s article I’m going to talk about the life cycle of a company, which is a topic that I like a lot and that is also very fácil. Of course, I have to say that I am going to use the model proposed by Carlos Prieto Sierra, in his book: Entrepreneurship. Concepts and business plan.

To begin with, I have to say that you will be able to find people who think that there are many constant (permanent) things in life, but you will also be able to find many others who think that everything is in a constant change.

I personally think it depends on the approach you’re taking, but I think it’s actually everything is changing in one way or another. On an individual basis, it’s easy to see that things are changing, after all you don’t look the same as you did when you were 5 and you won’t be the same when you’re 80. TRUE?

The same thing happens to a company; a company It will go through different stages over time (a company’s life cycle) and today I want to talk about the stages that a company cánido go through.

What is the business life cycle?

As I said before, people go through different stages, which go from when we are born, until we close our cycle and death surprises us. What are those stages? Said phases or stages include birth, childhood, adolescence, youth, adulthood, etcétera.

Well, companies also go through a equipo of stages and therefore, we perro say that:

The life cycle of an organization is a equipo of phases or stages through which it passes, from its birth until it dies (closes).

Why is it important to know what stage of the life cycle your company is in?

“Permanence”… Yes, if you create a company, then most likely you want your company to continue operating year after year, right? Well, just like in the product life cycle, At each stage of the life cycle of a company, different measures must be taken so that the business is able to ensure its permanence.

Therefore, depending on the stage in which an organization is then, different measures must be taken to avoid its death.

Simply put, at each stage of the cycle you take different strategies and tactics.

Why do companies die?

One aspecto that favors the death of a company is the administrationHowever, it should not be forgotten that a company must always think about satisfying the needs of its customers.

Therefore, a company that dies, or at least speeds up the process, when it stops thinking about satisfying the needs of customers and, therefore, stops thinking about improving the quality of its products.

This also leads to the fact that an organization has to be constantly changing, adapting to the needs and desires of the changing market.

An example of a company that did not adapt to the needs of its customers was Blockbuster. Therefore, it is important to always think about the customer and that will lead a company to generate profits.

company vs organization

Do you know the difference between a company and an organization? Is the same? Entrar the following article to learn what a company and an organization are.

What are the stages of the business life cycle?

The most common business life cycle is one that is very afín to a product life cycle, that is:

Birth.
Growth.
Maturity.
Slope.

Sometimes one or two more steps are added to it, but it is a fact that it is very afín to the life cycle of a product. Now, I could take that model, but I am going to use the model that Carlos Prieto Sierra offers us.

According to him, the life cycle of a company consists of the following stages: Design, compañia emprendedora, growth, consolidation, expansion, maturity and closure.

Design stage of a company

There are many couples looking to have a baby, but among those couples there are some who plan and prepare everything that will be necessary for their baby to be born in the best possible conditions.

As with a baby, in the design stage of a company the baby is not yet born and, in fact, it is barely at a stage where you only have the business iniciativaand through a design process, it is possible to detalla what good or service will be offered.

It must be said that at this stage the business plan is used to detail everything that must be done so that the company is born in the best possible conditions. Likewise, the business plan is also often used to obtain financing that allows the product to be launched on the market.

In conclusion, at this stage you only have the business iniciativa and it is described in the so famous business plan.

Launch or compañia emprendedora stage of a company

At this stage, the company is no longer just an iniciativa, but is already legally constituted, physically (or virtually) installed, and ready to start providing the service or offering the good.

In such a way that in the launch stage you already have to have everything necessary for the company to start carrying out its operations. It should be noted that as operations begin, you will be able to obtain the first experiences, which will allow you to learn more about the business, the competition and the market you are facing.

According to Carlos Prieto Sierra, “The first results obtained will allow us to appreciate whether the project satisfies the client’s needs or not”. Of course, by getting retroalimentación from your customers you will be able to make appropriate modifications to the product so that it cánido meet the needs of customers and the company does not die from the start.

Growth stage of a company

In the growth stage of the companies’ life cycle is when, having done well the previous stage, companies begin to see a constant increase in profits.

It is worth mentioning that at this stage it is possible that the competition begins to be tougher and therefore, it is at this stage that more obstacles begin to be seen.

The competition could begin to represent a threat to obtaining profits and that is why at this stage the need for the company to have a company becomes even more evident. efficient and effective administration.

I also have to say that it is at this stage where a company has to be firm with its purposes, beliefs and never forget what has made them grow. After all, if a company loses its essence through the greed for profit and stops satisfying its customers, then it will accelerate its decline.

I have seen businesses that start to grow and suddenly close because they stopped offering what made them grow in the beginning. All to focus on profit and forget about your customers.

Consolidation stage of a company

At this stage, the company no longer has substantial increases in terms of sales volume, that is, the sales volume remains relatively constant. In addition, the company has matured and already has a certain position in the minds of customers; in such a way that the company already has frequent customers who promote the products.

I had a professor who made an analogy of the life cycle compared to a relationship and he told us that at this stage is when a couple trusts and stops falling in love with the other person. In a way, they trust and nothing is done to make the relationship progress. As you may be thinking, many times it is the beginning of the end of the relationship.

Therefore, you cannot trust yourself and stop investigating or making progress in the company. It is important to adapt and update to the different changes. Changes that may be with respect to customers, technological advances, among many other elements.

In fact, Carlos Prieto Sierra tells us that “It is necessary to keep constantly informed about what is happening in the world, as well as market trends and competition” (2017, p.20)

An example of this is Blockbuster, since it did not want to adapt to the changes that were taking place and it was trusted. He fell asleep and died.

Expansion stage of an organization

As its name indicates, in the expansion stage of a company, what is done is to seek to entrar new markets with the improvement of products or with the development of new Of course, this implies that the company has to bet, even bet the future of the company.

Of course, starting a new adventure implies accepting risks, which perro be mitigated with good research and planning. Sure, they perro be mitigated, but that doesn’t orinan they cánido be completely eliminated.

Therefore, if you want to expand, creating a new business opportunity, then you have to be cautious and do it the right way.

Maturity stage of the companies life cycle

When the business is in the mature stage of a company’s life cycle, sales eventually start to decline. Therefore, the profit margins begin to get smaller and this is how little by little a question arises: Should the expansion continue or should it be shut down?

Of course, an evaluation will have to be carried out in order to know the most feasible decision, that is, it is not as if the company were going to close just for fun. Therefore, different financial factors will be analyzed in order to make the best decision.

Closing stage of the companies life cycle

As its name indicates, at this stage it has been decided that the company is going to stop carrying out its business activities. It should be noted that a company does not close just because they have gone bankrupt.

In conclusion, for whatever reason, at this stage the company ends its cycle and ceases to exist.

What is the difference between the life cycle of a company and the life cycle of the product?

Well, in a way I think it’s kind of clear. The life cycle of a company refers to all the stages through which a company passes as an entity and the product life cycle refers to the stages through which a certain product passes.

Therefore, a company perro have different products and each one with its life cycle. So even if some of its products die, the company perro continue on its way and adapt to the changes with new products.

How are companies classified?

Why are companies classified in different ways? If you want to learn about the classification of companies, entrar the following backlink:

Bibliography

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