ACE research vignette 004 : growing profitable or growing from profits?

This series of research vignettes is aimed at sharing current and interesting research findings from our team of international Entrepreneurship researchers. In this vignette, Professor Per Davidsson considers some of the dynamics associated with firm growth.

Growing profitable or growing from profits : putting the horse in front of the cart?

Top lists of and praise for the economy's fastest growing firms abound in business media around the world. Similarly, in academic research there has been a tendency to equate firm growth with business success. This tendency appears to be particularly pronounced in-but not confined to­ entrepreneurship research. In this study we critically examine this tendency to portray firm growth as more or less universally favorable. While several theories suggest that growth drives profitability we first show that the available empirical evidence does not support the existence of a general, positive relation­ ship between growth and profitability. Using the theoretical lens of the Resource-Based View (RBV) we then argue that sound growth usually starts with achieving sufficient levels of profitability. In summary, our theoretical argument is as follows: In a population of SMEs, superior profitability is likely to be indicative of having built a resource-based competitive advantage. Building such a valuable and hard to-copy advantage may at first constrain growth. However, the underlying advantage itself and the financial resources generated through high profitability make it possible for firms in this situation to now achieve sound and sustainable growth - which may require building a series of temporary advantages- without having to sacrifice profitability. By contrast, when firms strive for high growth starting from low profitability, the latter often indicates lack of competitive advantage. Therefore growth must be achieved in head-to-head competition with equally attractive alternatives, leading to profitability deterioration rather than improvement. In addition, these low profitability firms are unlikely to be able to finance strategies toward building valuable and difficult-to-imitate advantages while growing.

Financial maturity : a guide to profitable timber growing /

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Growing banana prawns in prawn farm settlement ponds to utilise and help remove waste nutrients.

To assess their utility for profitable wastewater bioremediation, banana prawns, Penaeus (Fenneropenaeus) merguiensis (de Man), were stocked at low densities (1 – 5 m-2) and grown without supplemental feeding in five commercial-prawn-farm settlement ponds (0.3 to 6.0 ha). The prawns free-ranged in the variously designed ponds for 160 to 212 days after stocking as PL15. Survival estimates ranged from 12% to 60% with production of 50 – 528 kg ha-1. Over 1150 kg of marketable product was produced in the study. Exceptional growth was monitored at one farm where prawns reached an average size of 17g in 80 days. Nutrients in water flowing into (8 - 40 ML d-1) and out of the settlement pond at that farm were assessed twice weekly along with routine water quality measurements. Only small differences in water qualities were detected between waters running into and out of this settlement pond. Total nitrogen levels gradually increased from 1 - 1.5 mg L-1 early in the season to over 3 mg L-1 towards the end of the season. Total phosphorus levels similarly rose from 0.1 - 0.2 mg L-1 to 0.3 - 0.4 mg L-1 in the middle of the season, but fell to 0.2 – 0.3 mg L-1 towards the end when approximately 12,000 prawns were harvested with a total weight of 175 kg. No significant differences (P > 0.05) were detected in the overall acceptability of prawns harvested from each of the 5 settlement ponds in small-scale consumer sensory analyses. The prawns from settlement ponds were rated similarly to banana prawns grown with commercial diets at two other establishments. Microbiological analyses of prawns from all farms showed bacterial levels to be well within food-grade standards and lower than prawns produced in a normal growout pond. These results demonstrate that high quality food grade banana prawns can be produced in these wastewater treatment systems.

Driving better vegetable irrigation through profitable practice change

The availability and quality of irrigation water has become an issue limiting productivity in many Australian vegetable regions. Production is also under competitive pressure from supply chain forces. Producers look to new technologies, including changing irrigation infrastructure, exploring new water sources, and more complex irrigation management, to survive these stresses. Often there is little objective information investigating which improvements could improve outcomes for vegetable producers, and external communities (e.g. meeting NRM targets). This has led to investment in inappropriate technologies, and costly repetition of errors, as business independently discover the worth of technologies by personal experience. In our project, we investigated technology improvements for vegetable irrigation. Through engagement with industry and other researchers, we identified technologies most applicable to growers, particularly those that addressed priority issues. We developed analytical tools for ‘what if’ scenario testing of technologies. We conducted nine detailed experiments in the Lockyer Valley and Riverina vegetable growing districts, as well as case studies on grower properties in southern Queensland. We investigated root zone monitoring tools (FullStop™ wetting front detectors and Soil Solution Extraction Tubes - SSET), drip system layout, fertigation equipment, and altering planting arrangements. Our project team developed and validated models for broccoli, sweet corn, green beans and lettuce, and spreadsheets for evaluating economic risks associated with new technologies. We presented project outcomes at over 100 extension events, including irrigation showcases, conferences, field days, farm walks and workshops. The FullStops™ were excellent for monitoring root zone conditions (EC, nitrate levels), and managing irrigation with poor quality water. They were easier to interpret than the SSET. The SSET were simpler to install, but required wet soil to be reliable. SSET were an option for monitoring deeper soil zones, unsuitable for FullStop™ installations. Because these root zone tools require expertise, and are labour intensive, we recommend they be used to address specific problems, or as a periodic auditing strategy, not for routine monitoring. In our research, we routinely found high residual N in horticultural soils, with subsequently little crop yield response to additional nitrogen fertiliser. With improved irrigation efficiency (and less leaching), it may be timely to re-examine nitrogen budgets and recommendations for vegetable crops. Where the drip irrigation tube was located close to the crop row (i.e. within 5-8 cm), management of irrigation was easier. It improved nitrogen uptake, water use efficiency, and reduced the risk of poor crop performance through moisture stress, particularly in the early crop establishment phases. Close proximity of the drip tube to the crop row gives the producer more options for managing salty water, and more flexibility in taking risks with forecast rain. In many vegetable crops, proximate drip systems may not be cost-effective. The next best alternative is to push crop rows closer to the drip tube (leading to an asymmetric row structure). The vegetable crop models are good at predicting crop phenology (development stages, time to harvest), input use (water, fertiliser), environmental impacts (nutrient, salt movement) and total yields. The two immediate applications for the models are understanding/predicting/manipulating harvest dates and nitrogen movements in vegetable cropping systems. From the economic tools, the major influences on accumulated profit are price and yield. In doing ‘what if’ analyses, it is very important to be as accurate as possible in ascertaining what the assumed yield and price ranges are. In most vegetable production systems, lowering the required inputs (e.g. irrigation requirement, fertiliser requirement) is unlikely to have a major influence on accumulated profit. However, if a resource is constraining (e.g. available irrigation water), it is usually most profitable to maximise return per unit of that resource.

Northern challanges for profitable production of quality naked oat

Naked oat (Avena sativa f.sp. nuda L.) is the highest quality cereal in northern growing conditions. However the cultivation area of naked oat is remarkably small. Major challenges for naked oat production are to observe its nakedness. The caryopsis of naked oat is sensitive to mechanical damage at harvest, especially at high grain moisture content. The greater the grain moisture content of naked oat at harvest, the more loses of germination capacity was caused by threshing. For producing high quality naked oat seed, it is recommended that harvesting be done at as low grain moisture content as possible. However, if this is not possible, better germination can be ensure with gentle harvest by reducing the cylinder speed. In spite of conventional oat s excellent fat and amino acid composition in animal feed use, as far as nutritional value is concerned, the total energy yield of oat is weaker than other cereals because of the hulls. Also with naked oat the dehulling is not complete, while hull content on different cultivars mostly varied between one to six percent. In addition to genotype, environmental conditions markedly control the expression of nakedness. Thresher settings had only limited effects on hull content. The function of hulls is to protect the groat, but this was confirmed only for Finnish, small grain, cultivar Lisbeth. The oat kernel is generally covered with fine silky hairs termed trichomes. The trichomes of naked oat are partly lost during threshing and handling of grains. Trichomes can cause itchiness in those handling the grains and also accumulate and form fine dust and can block-up machinery. The cultivars differed considerably in pubescence. Some thresher settings, including increased cylinder speed, slightly increased grain polishing such that grains had some areas completely free of trichomes. Adjusting thresher settings was generally not an efficient means of solving the problems associated with naked oat trichomes. The main differences in cultivation costs between naked and conventional oat lie in the amount of seeds required and the drying costs. The main differences affecting the economic result lie in market prices, yield level and feed value. The results indicate that naked oat is financially more profitable than conventional oat, when the crop is sold at a specific price at all yield levels and when the crop is used as feed at highest yield level. At lower yield levels, conventional oat is, in spite of its lower feed value, the more profitable option for feed use. Dehulled oat did not achieve the same economic result as naked oat, as the cost of dehulling, including the hull waste, was considerable. According to this study naked oat can be cultivated successfully under northern conditions, when taking into consideration the soft, naked grain through cultivation chain.

Evaluation of the profitability of fast-growing tropical trees.

The profitability of fast-growing trees was investigated in the northeastern and eastern provinces of Thailand. The financial, economic, and tentative environmental-economic profitability was determined separately for three fast-growing plantation tree species and for three categories of plantation managers: the private industry, the state (the Royal Forest Department) and the farmers. Fast-growing tree crops were also compared with teak (Tectona grandis), a traditional medium or long rotation species, and Para rubber (Hevea brasiliensis) which presently is the most common cultivated tree in Thailand. The optimal rotation for Eucalyptus camaldulensis pulpwood production was eight years. This was the most profitable species in pulpwood production. In sawlog production Acacia mangium and Melia azedarach showed a better financial profitability. Para rubber was more profitable and teak less profitable than the three fast-growing species. The economic profitability was higher than the financial one, and the tentative environmental-economic profitability was slightly higher than the economic profitability. The profitability of tree growing is sensitive to plantation yields and labour cost changes and especially to wood prices. Management options which aim at pulpwood production are more sensitive to input or output changes than those options which include sawlog production. There is an urgent need to improve the growth and yield data and to study the environmental impacts of tree plantations for all species and plantation types.

Integrated farming is profitable

Growing fish with rice while maximizing land use can bring advantages to both crops as production is intensified. Details are given of the basic structure of rice field aquaculture, listing the major advantages and disadvantages of this system. Particular reference is made to the integrated farms at Culasi, Antique (Western Philippines) and at Barangay Igcocolo, Guimbal, Iloilo where agricultural crops other than rice are integrated with fish farming (tilapia -- Oreochromis mossambicus) and livestock rearing. An account is also given of the system at the AQD site at New Busuang, Kalibo, Aklan which evaluates the economic feasibility and profitability of farming mudcrab in tidal flats with existing mangroves.

Scheduled services of tourist trains in Latin America: A growing market

Trains in Latin America and the Caribbean mainly serve as a means of mass transit, bearing passengers along local and suburban routes of cities and transporting freight beyond. Non-urban passenger trains almost disappeared during the last few decades of the twentieth century. In the new emerging markets, however, demand is based on the train itself or the scenery en route rather than a wish to arrive at a given station as in the past. The new tourist trains, which are often well-restored historical engines, are expensive to operate and their special characteristics make it difficult to integrate them with mass transit railway services. However, some may be profitable when run privately and others may have a social justification, based on the boost they can provide to economic development in the often isolated and relatively depressed areas where they tend to operate.

Promoting sustainable urban development in fast growing city-regions : practices from Kuala Lumpur and Hong Kong

The Asia‐Pacific region is characterised by rapid population growth and urbanisation. These trends often result in an increasing consumption of land, which in turn lead to spatially expansive and discontinuous urban development. As a consequence, local communities and the environment face strong pressures. Many cities in the region have developed policies to tackle the issue of rapid growth and its associated consequences, for example climate change. The broad aim of this paper is to identify the nature, trends and strategies of growth management in major Asia‐Pacific city‐regions, and their implications for natural resource management and infrastructure provision. More specifically, this research seeks to provide insights on sustainable urban development practice, particularly on the promotion of compact urbanisation within the Asia‐Pacific’s fastest growing regions. The methodology of the paper includes a detailed literature review and a comparative analysis of existing strategies and policies. The literature review focuses on the key concepts related to sustainable urban growth management. It also includes existing applications of urban growth management approaches and planning information system in managing growth. Following the literature review, the paper undertakes a comparative analysis of the strategies of major Asia‐Pacific city‐regions of Kuala Lumpur and Hong Kong in terms of their approaches to sustainable urban development. The findings of the paper provide a clear understanding of the necessity of sustainable urban development practices. It contributes to the development of a substantial base for further research. Ultimately, this research aims to shed light on sustainable urban development by providing insights on the management of growth, natural resources and urban infrastructures.

The IMC concept meets political marketing : building brand relationships

There is a need to take a fresh look at the traditional application of the marketing concept to political marketing. As many businesses have learned, Integrated Marketing Communications (IMC) practices and principles will help them to build customer relationships and profitable brands. Political marketing must also change with the times and implement IMC practices toward building and nourishing brand relationships with voters and other important stakeholders. The nature of the contribution of this paper is the identification of a gap in the political marketing literature - the stagnation of political marketing at the 4P's marketing concept, and to play a role in the future development of political marketing. In recent developments, it is seen that there is a gradual movement away from this traditional marketing theory. There are a growing number of academics who have approached very closely to the IMC concept or aspects of it, but have not however embraced or have been reluctant to, the prospect of applying it to political marketing. IMC is a practical, logical and ultimately inevitable future for political marketing.

Growing demand for emergency health services in Queensland, Australia

Introduction: The demand for emergency health services (EHS), both in the prehospital (ambulance) and hospital (emergency departments) settings, is growing rapidly in Australia. Broader health system changes have reduced available health infrastructure, particularly hospital beds, resulting in reduced access to and congestion of the EHS as demonstrated by longer waiting times and ambulance “ramping”. Ambulance ramping occurring when patients have a prolonged wait on the emergency vehicle due to the unavailability of hospital beds. This presentation will outline the trends in EHS demand in Queensland compared with the rest of Australia and factors that appear to be contributing to the growth in demand. Methods: Secondary analysis was conducted using data from publicly available sources. Data from the Queensland Ambulance Service and Queensland Health Emergency Department Information System (EDIS) also were analyzed. Results: The demand for ambulance services and emergency departments has been increasing at 8% and 4% per year over the last decade, respectively; while accessible hospital beds have reduced by almost 10% contributing to the emergency department congestion and possibly contributing to the prehospital demand. While the increase in the proportion of the elderly population seems to explain a great deal of the demand for EHS, other factors also influence this growth including patient characteristics, institutional and societal factors, economic, EHS arrangements, and clinical factors. Conclusions: Overcrowding of facilities that provide EHS are causing considerable community concern. This overcrowding is caused by the growing demand and reduced access. The causes of this growing demand are complex, and require further detailed analysis in order to quantify and qualify these causes in order to provide a resilient foundation of evidence for future policy direction.

Growing up

‘Growing Up’ is the key concept as well as the ideology for modernism. For modernism, ‘Growing Up’ has been regarded as ‘good’, ‘advance’, ‘power’ and ‘positive’; while, postmodernists pay attention to its negatives that it brings about abuse of natural resources, war, suppression of human rights, environmental pollution, and institutionalisation. The artwork, Growing Up illustrates the positive and negative aspects of ‘Growing Up’ by using three images of a flower, a bee and a devil. The flower represents flourish of modernism, the bee does prosperity (spread) of modernism, and a devil image generated from the flower (modernism) is negative aspects of modernism. The message of the artwork is that modernism itself determines its own destiny from ‘Growing Up’ that may jeopardise the bee.