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.