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The notion of sustainable growth has become the key concept within the sphere of business management in the 21st century. This idea corresponds with an organizations long-term objectives, as it reflects the companys ability to continue its development over a considerable period. Therefore, sustainable growth is a critical benchmark for modern businesses, which signifies the right balance between advancement and the ability to maintain the required level of resources. In other words, for the growth to be positive and comprehensive, all elements of the supply chain and production are to harmonize (Higgins et al., 2018). Accordingly, balanced growth is key to the firms optimal performance in the long term, which aligns with the purpose of top-level management. The companys executives have a mission of paramount importance, as it falls upon them to ensure that all units and assets are properly synchronized. This idea resembles the concept of balance between actual and sustainable growth, meaning that it is, indeed, top managements responsibility to ensure that the two expansion rates remain aligned.
Sustainable growth exists in the form of a number or a range with an upper limit. It refers to the maximum rate of expansion an organization is capable of sustaining with its current financial policies, equity, and debt. As such, growth beyond this point would require significant changes in one of the aspects mentioned above. At the same time, as inferred from the term, the actual growth rate reflects the pace of a companys expansion in reality, and serious divergences may entail negative implications for the company. If the actual growth is below the sustainable one, the company is likely to perform worse than it potentially could. On the contrary, if the actual figures exceed the sustainable potential, the organization may face adverse implications in the long term. Higgins et al. (2018) refer to the example of Medifast, which showed rapid growth followed by a considerable cash deficit. Ultimately, the balance between sustainable and actual growth rates is a major component of positive development, which is to be considered by the management.
Reference
Higgins, R., Koski, J., & Mitton, T. (2018). Analysis for financial management (12th ed.). McGraw-Hill Education.
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