Exam answer3 Essay Example | Topics and Well Written Essays - 750 words

Exam answer3 - Essay Example e the following: local resource munificence, current and future competition for scarce resources, sectoral trends, social, legal and political conditions. Government regulation and taxation, interest rates and exchange rates are also examples of external forces that influence the growth of the firm. The stage models of development provide the best theories explaining the growth of the business and perhaps that’s why it is preferred by most practitioners. However, the stage models have a number of limitations which at times make discourage its use. Firstly, the model is too general, making its applicability a challenge to firm owners. For instance, it is difficult to determine what, how and why states change from one to another. Further, it is difficult to determine how the answers to the above questions are modified by a range of contextual variables. Research on external factors like demand and competition is done during the first stage of development, which is the existence stage. It does not provide answers as to what can be done if for example consumers change taste. For this reason, I can recommend the industrial organization model, which uses the game theory extensively. In this case, the industrial organization model focuses on competition in the market and variou s ways of countering firms that pause completion. The other setback for developmental model is that it depicts a linear pathway and it doesn’t consider branching away from this pathway. This means that the firm may not make changes to the model in the process of its growth should there be changes both in the internal and external environment. The company may as well become extinct at a given stage of development. This is unlike the organizational ecology theory, which emphasizes on understanding the conditions under which a company emerges, grows and dies (Tushman and Romanelli 2008, p.174). The theory focuses on various factors that may lead to organizational mortality, and thus the