W2_L1_comp3219CompanyLifecycle2023(1) (1)
Page 1: Introduction
Course Title: COMP3219 Engineering Management and Law
Lecturer: Vahid Yazdanpanah
Date: October 2024
Based on slides by Andy Gravell and Chidubem Ideatuegwu
Page 2: What is a Company?
Definition of a Company
An institution aimed at generating profit.
Most medium-sized or larger businesses qualify as companies.
Registration and Shares
Companies register at Companies House, searchable online.
Companies may issue shares representing fractions of the firm.
Public company's shares traded on stock exchanges.
Other business structures include partnerships, sole traders, private companies.
Legal Context
Legal implications discussed later.
Mandatory publication of accounts, varying in detail between public and private companies.
Public can buy shares based on financial disclosures.
Universities establish through a Royal Charter.
Page 3: Lifecycle of a Business
Stages of Business Lifecycle
Startup
Rapid Growth
Maturity
Decline
Rebirth
Death
Notation may vary by source.
Page 4: Business Lifecycle Stages
Startup
Founders begin and seek funding (business angels, venture capitalists).
Must present a business model and plan for investment.
Rapid Growth
Model works; need for more assets and staff arises.
Cash flow issues may surface; potential IPO for capital.
Maturity
Growth stabilizes; profits are optimized.
Shareholders expect dividends during this phase.
Decline
Focus on cutting costs and planning for innovation.
Dividends may be reduced or eliminated.
Rebirth
Companies innovate or transition into new lines.
Death
Possible outcomes: acquisition, merger, bankruptcy, liquidation.
Page 5: Why Start a Company?
Impact of Engineers and Technology
Significant societal changes through engineering.
Organizations facilitate efficiency and development of new ideas.
Entrepreneurship vs. Intrapreneurship
Entrepreneurship: starting your own company; more control and potential wealth.
Intrapreneurship: creating a small business within an existing company; less risk with moderated rewards.
Page 6: Future Collaboration Opportunities
ECS Collaboration
Engagement opportunities for idea commercialization.
Attend events and trainings for potential growth.
Page 7: Accidental Entrepreneurs
Definition
Entrepreneurs who stumble upon business ideas unintentionally.
Example: Drew Houston (Dropbox) started coding on a bus after forgetting his thumb drive.
Discussion topic: Are business ideas inherent in the environment or created by individuals?
Page 8: Starling Bank
Founded by Anne Boden in January 2014.
Background of Anne Boden
Studied Chemistry and Computer Science, graduated in 1981.
Former COO of Allied Irish Banks.
Licensing and Leadership
Received banking license in July 2016; stepped down in 2023.
Page 9: Women in Computers and Engineering
Lynn Conway
Co-inventor of very large-scale integration (VLSI).
Contributions radically advanced chip design technology.
Also recognized as a trans woman.
Page 10: Founding of Nokia
Fredrik Idestam's Background
Master's in mining, initially sought a career in the Finnish Board of Mines.
Founding of Nokia
Established Nokia Paper Mill in 1865 after recognizing paper demand versus rag availability.
Won bronze at 1867 Paris Exhibition; success attributed to aggressive marketing.
Page 11: Nokia's Growth and Change
Partnership and Expansion
Idestam and banker Leo Mechelin collaborated resulting in expansion.
Competition Challenges
Decline led to shifts in company focus, including electricity generation.
Post-WWI, Nokia merged, transforming into a conglomerate with telecom interests.
Modernization under CEO Jorma Ollila
Divested non-core businesses and focused on telecommunications.
Page 12: Questions to Reflect On
Current operations of Nokia?
Who manufactures Nokia phones now?
Reasons for Nokia's success in rebirth stages?
Duration as market leader: approximately 15 years.
Page 13: Theories of Growth and Decline
Introduction to theories exploring business growth and decline dynamics.
Page 14: Gibrat’s Law
Conceptual Discussion
Can businesses reliably anticipate growth?
Uncertainty surrounds firm growth outcomes.
Page 15: Understanding Gibrat’s Law
Key Premises
Business growth happens due to random shocks with no steady predictors.
Growth rates are not influenced by initial company size.
Page 16: Further Studies and Observations
Larger firms tend to align with Gibrat’s Law better.
Smaller startups show inverse relationships between size and growth rates.
Age impacts growth predictability; younger firms have more volatile rates.
Page 17: Counterpoints to Gibrat’s Law
Growth patterns are inconsistent; not all firms experience the same shocks.
Page 18: Edith Penrose’s Growth Theory (1)
Resource Efficiency and Management
Firms grow through effective resources usage and operational learning.
Managers gain efficiency through experience, fostering growth.
Page 19: Edith Penrose’s Growth Theory (2)
Growth Limitations
Operating costs can hinder growth if not managed properly.
An optimal growth rate exists; excessive growth can increase costs disproportionately.
Page 20: Why Firms Seek Growth
Milton Friedman’s Perspective
Core purpose: Increase shareholder wealth through dividends and stock price enhancement.
Growth provides opportunities for increased employee engagement and morale.
Page 21: Robin Marris’s Managerial Capitalism Theory (1)
Manager-Shareholder Dynamics
Managers pursue growth for personal gains; shareholders desire dividends.
Balancing reinvestment strategies while satisfying shareholder expectations is crucial.
Page 22: Robin Marris’s Managerial Capitalism Theory (2)
Achieving Balance
Managers must find optimal growth strategies that satisfy shareholder returns while promoting firm growth.
Page 23: Role of the State in Business
Regulation, stability, and public services impact business operations.
Addressing market failures: states intervene to correct inefficiencies and ensure public interests.
Page 24: Five Stage Model of Business Decline
Weitzell & Jonsson: Discussion on acceptable organizational performance and how to approach change during crises.