Curing the Addiction to Growth

Curing the Addiction to Growth

Subtitle: 
Lessons from the retail industry
Author: 
Fisher, Marshall
Publisher: 
Harvard Business School Press
Date published: 
2017
Record type: 
Responsibility: 
Gaur, Vishal, jt. author
Kleinberger, Herb, jt. author
Journal Title: 
Harvard Business Review
Source: 
Harvard Business Review, Vol. 95, No. 1, January-February 2017, pp. 65-74
Abstract: 

In pursuit of double-digit top-line growth, many retailers relentlessly open new stores, even when doing so destroys the profitability of their businesses. This addiction is fueled by Wall Street and a capitalist culture that's obsessed with growth. It's hard to kick, primarily because companies don't know when or how to turn off the growth machine--or what to replace it with. To explore the problem, the authors studied the financial data of 37 U.S. retailers with recent sales of at least $1 billion whose growth rate had faltered. They found that the less successful retailers had continued to chase growth by opening new stores far past the point of diminishing returns. By contrast, the more successful retailers had drastically curtailed expansion and instead relied on operational improvements at their existing stores to drive additional sales. This allowed them to increase revenues faster than expenses, which had a powerful positive impact on earnings. This article lays out a framework for determining when to switch to a low-growth strategy and how to put it into practice. If retailers execute well, they can stay in the maturity stage of the life cycle for a very long time, forestalling decline.

Language: 

CITATION: Fisher, Marshall. Curing the Addiction to Growth . : Harvard Business School Press , 2017. Harvard Business Review, Vol. 95, No. 1, January-February 2017, pp. 65-74 - Available at: http://library.au.int/curing-addiction-growth