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SamplesBusinessThe Concept of Company's SuccessBuy essay
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Free Example of The Concept of Company's Success Essay

According to Van Praag (2003), the concept of company success is discussed in various fields of academic literature. It is interpreted in terms of economics, sociology, anthropology, psychology and other sciences, although there is no unanimity either in defining the concept itself or determining the most appropriate method of measuring it at the initial stages of a new undertaking. It was also discussed in the work of Watson et al. (2003).  

Cooper and Gimeno-Gascon (1992) concluded that one of the most popular subjects under discussion in the field of entrepreneurial activity is the study of factors pertinent to the success of a new venture. Scientific advancement requires getting the general consensus on the definition of performance or success in regard to new business ventures. However, no agreement has been reached yet, since the opinions differ. It can be seen in the works of Murphy et al. (1996), Stuart and Abetti (1987), Vesper (1996), Watson et al. (2003), Walker and Brown (2004), etc.

It is a challenging task to define the success of the company in any branch of activity, especially if it is referred to new business ventures in the context of small and medium-sized enterprises (SMEs). The newly-established companies have no background or history. Most of them have not got any performance indicators or measures of standard accounting yet. Notwithstanding the fact that there is increase in their sales, those firms may not be profitable during the first several years of operation. This idea was supported by Ghobadian and O’Regan (2006), Hillman and Keim (2001), Chandler and Hanks (1993), Mc Dougall et al. (1992), Brush and Vanderwelf (1992). Subject to the above-mentioned reasons, other scholars disputed the priority of performance indicators as well.

An alternative point of view is defining the concept of success by means of competitiveness and analysis of the early years of the enterprise. Man et al. (2002) and other authors emphasize the importance of using more than just a few financial measures in order to assess the potential advancement of a new firm and its development at a given time. A number of authors, Venkataraman and Ramanujam (1986) in particular, dissociate non-financial (operational) and financial performance. Harada in 2003, Gonzalez Benito and Santos Requejo in 2000, Robinson in 1999, Murphy et al. in 1996, Zahra and Covin in 1995, Willard et al. in 1992 and others adhered to the opinion that financial measures are to be considered the most credible performance measures. They used to be equated even with the concepts of economic performance and success.  However, most advanced sectors, high technology in particular, cannot show high yield or profitability in the initial periods of their activity, since at the start the investment of capital should be high. This idea was supported by McGee et al. (1995) and Bosma et al.

Thus, it was essential to broaden the concept of performance and that was first done by Stuart and Abetti (1987). They included non-financial indicators into the performance concept. Bamford et al. (2000) and Zahra and Bogner (2000) in their turn used the market share indicator, while McGee et al. (1995) proposed the indicators of product quality and new products introduction. From whence, Hart et al. (1995) concluded that it is not possible to measure the success of a new company on the grounds of merely conventional financial indicators.

  The special nature of a new company made it impossible to assess such kind of ventures during the first several years using only conventional measures which are appropriate for assessing only the performance of consolidated enterprises or large corporations. Thus, researchers had to develop new measures taking into account all the distinguishing features.

According to Chambers et al. (1988), subjective measures were used only in rare circumstances about two decades ago. Most of the researchers used to tend towards using objective measures and indicators of success. However, the scientific opinion veered completely round and the researchers are on their way to recognizing the credibility of subjective measures. They acknowledge that the success of new enterprises can be reliably assessed using this way of obtaining information. Three main reasons for preference of subjective measures over objective ones are the following. Firstly, the majority of small firms are not eager to show the objective details and information about their business at the initial stages. Secondly, interpretation of the accountancy data of small companies is rather problematic. Thirdly, the accountancy data are under the influence of the industry or certain sector the company belongs to. It should be noted, though, that the latter measures are too subjective and that complicates the comparisons between the companies. So, Reid and Smith (2000) along with other researchers criticized that type of measures.

Code: Sample20

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