ANALYSIS OF GROWTH AND MATURE COMPANY

SIMILARITIES AND DIFFERENCES BETWEEN A GROWTH COMPANY AND A

MATURE COMPANY

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ANALYSIS OF GROWTH AND MATURE COMPANY

Introduction

A mature company is a firm or an organization that is well grounded and established in

the industry that it operates in. A mature firm deals in a product that is well known and has

customers who are loyal to it following with an average growth. They are classified based on the

stage of business that it is in at a given point in time. Such types of companies or firms usually

are past the rapid growth stage and they tend to grow almost at the same rate as the economy

overally (Burns, 2016. pp.72). Most of the mature companies in operation usually have

competitors who are equally established competitors, which makes the competition in terms of

price an issue of significance in their profit increment ability. Mature companies include Pepsi,

Coca-Cola, Unilever etc.

Growth companies on the other hand refer to those companies or firms that are still

striving to establish their water level in the business industry. They are companies that are

growing fast and are as well companies that have a higher risk in terms of its operations (Burns,

2016. pp.76).. Growth companies have the characteristic of a higher rate of the overall economy.
ANALYSIS OF GROWTH AND MATURE COMPANY

Such companies usually in a consistent manner generate high earning levels and have a greater

emphasis on expansion of the firm. They mostly are relatively young and have high ambitions in

terms of business strategy and the plans that they have for growth. Growth companies are in

most cases exceptionally common in the sector of technology.

This paper therefore seeks to discuss the similarities and differences between growth

company and mature companies in terms of their strategies in business, their structure of capital,

sources of finance and the policies that the two types of companies have in relation to dividends.

In discussing the similarities and differences, this paper is going to give close respect to Unilever

Company as a mature and Amazon. com as an example of a growth company.

Unilever Company

Unilever company is a British- Dutch company with its headquarters is London in the

United Kingdom and in Rotterdam in Netherlands. It has majored in production of food,

beverages, cleaning agents, beauty and personal care products (Laursen,2016, pp. 108). Food and

beverages account for about 40 percent of the total revenue generated by the company. Unilever

is considered to be among the top ten companies that are most valuable in Europe owing to its

worldwide spreading as well as being among the oldest multinational companies.

Capital structure of Unilever Company

Unilever Company by the fact that it has been in operation for a long time, it has a stable

capital structure. The stability is informed by the acceptance and usage of their products globally

thus generating income for the company. Every financial year, the company realizes profits not

less than 85 billion dollars (Laursen,2016, pp. 116). In order to establish their capital structure,
ANALYSIS OF GROWTH AND MATURE COMPANY

Unilever focuses on their three global divisions, which are, beauty and personal care, home care

and foods & refreshments. They have always recorded a good balance of price and volume

growth. The company has a revenue of about $ 45.11B and a net income of $8.31 B.

Unilever’s Business Strategy

The business strategy of Unilever which is based on Porters model has its its competitive

advantage built on their drive to satisfy the specific needs and preferences of the consumers.

According to Porter as seen in his model, the strategy is used in ensuring that there is

competitiveness that is vital in the growth and resilience of the business (Littler, 1985, pp. 42). In

Unilever’s case, the competitive advantage has its base on developing the products they trade in

so that they can meet the demands of the customers in the market. Unilever Company also uses

broad differentiation as a strategy for its competitive advantage. The sole focus of this strategy is

lay emphasis on the features that make the products of the company to stand out against those of

their competitors (Littler, 1985, pp. 42). For example, in a view tom satisfy the needs of

consumers who want soaps that are not harsh on their skin, Unilever came up with Dove cream

soap. In spite it being expensive than other soaps offered by their competitors, the company still

attract customers because they stand out from those soaps whose focus is only on cleaning and

not moisturizing.

Dividend Policy

Unilever Company has a developed dividend policy that best suits the needs and desires

of the shareholders as well as the employees. There is the dividend reinvestment policy or plan

that enables the shareholders to use their cash dividends to buy more shares in the company. The
ANALYSIS OF GROWTH AND MATURE COMPANY

features of the dividend include the fact that one’s entire cash dividend is used to acquire more

shares at a relatively lower rate of commission (Reitsma, 2001, pp. 66). The dividends also can

be brought back to the market as soon as possible, which could be on or after date of dividend

payment, and then a statement is sent within ten working days.

Sources of Finance

Unilever Company being a mature company has various sources of finance, which enable

it to effectively manage its affairs. Among the major sources of finance for Unilever Company is

the profit they plough back from the sale of their products. The company ploughs back a

substantial amount of money annually as profit generated from selling their produce. Unilever

also acquires its finance from debt financing (Reitsma, 2001, pp. 71). Debt financing refers to a

situation where an established business such as Unilever gets loans from banks and other

financial institutions after it has been in operation for some time and therefore proven its credit

worthiness. Unilever being a mature company has an access to unsecured loans such as working

capital lines of credit. The company also acquires its finance from equity financing where it

merges with other companies as well as partnerships thus attracting higher levels of venture

capital. Owner’s equity is also a source of finance for Unilever Company.

Amazon. com

Amazon.com, otherwise known as just Amazon is an electronic commerce and cloud

company that is based in the United States of America. Amazon was founded in the year 1994 by

Jeff Bezos. It has its headquarters in Washington. Amazon is among the fastest growing

companies in America as well as in other parts of the world owing to how it is being received
ANALYSIS OF GROWTH AND MATURE COMPANY

globally. Unlike Unilever that is a mature company, Amazon is a growth company and therefore

is not so much established in other parts of the world as it is in America.

Business strategy

Amazon has developed various strategies in terms of business and marketing of their

products that has enabled it to effectively compete in the market. Amazon has the generic

corporate strategy which is based on diversification. This strategy has its basis on leveraging

technological capabilities for the success of the business and also following a strategy whose aim

is to offer maximum value for its customers at a relatively low price (Ritala, 2014, pp.61). This

strategy has been handy since it has seen Amazon become the largest online retailer in the world

as well as being the leader in the market that it operates.

Amazon has also has a business strategy that is driven by competitive advantage sources

where it has its focus on technology and actualization of the economies of scale benefits which

have formed the cornerstone of the business model of the company. It has also embraced the use

of Big Data Analysis as tool for mapping the behavior of consumers.

Amazon has also its strategy built around the aspect of convenience to its customers

where they do not have to wait for a long time for their goods to be delivered or have to

physically get to the stores to get their goods (Ritala, 2014, pp.54). It has instead introduced

same day delivery of their products within the United States, they also consider introducing

delivery using drones, which will make the whole process almost instantaneous.

Amazon also regularly enters into new segments and niches in its market and product

structure. Initially, Amazon only dealt in books online, but in the current times, Amazon sells
ANALYSIS OF GROWTH AND MATURE COMPANY

any commodity that can be sold online on the global scale. The idea of venturing into various

businesses has developed Amazon and helped it to engage successfully in diversification of

business.

Capital Structure

The capital structure of Amazon Company is built on equity capital, which consists of the

capital that is brought in from the issuing of equity and net profits that are realized by the

business that can be attributed to shareholders. There is also debt capital in the business structure

of Amazon which is the value of bonds, term loans and other sources of credit that are used in

financing the operations of the business (Ritala, 2014, pp.61) . Amazon has had long term loans

most of the time with short term debts being used rarely. The total debt of Amazon has been

largely unchanged since 2015.

Amazon Dividend Policy

Amazon Company has joined the league of high end technological companies like Apple

and Cisco. Initially, Amazon did not pay dividends to its shareholders due to lack of a consistent

profit. By introducing payment of dividend, Amazon has climbed ahead of other companies such

as Netflix (O’Connor, 2013, pp. 108). In failing to pay its shareholders’ dividends for years,

Amazon has thus failed in doing something that other technological companies like Microsoft

have been doing. The company has chosen to reinvest all the cash flow back into the business.

Sources of Finance

Amazon company has its finance drawn from various sources to finance and run the

business activities of the company. First, Amazon has its finance from equity of the owner, also
ANALYSIS OF GROWTH AND MATURE COMPANY

known as personal investment. The owner of Amazon Company pumps in funds in the business

to enable it run effectively, this is usually done at the inception of the business and the

preliminary levels (O’Connor, 2013, pp. 104). The company can also get its funds from credit

financing such as bank loans and loans from other financial institutions. Amazon finances its

activities from short-term loans, which it borrows from financial institutions. Ploughing back of

profits is another source of finance in Amazon since it makes a substantial amount from the sale

of its products.

Comparison of Unilever and Amazon

There are various differences and similarities between Unilever and Amazon ranging

from the size of the business to the commodities dealt in and financing of the activities of the

business.

Differences Between Unilever and Amazon.

Amazon company being a growth company acquires its finance from short term loans

from banks and other financial institutions. The profits realized from the sales of Amazon are not

very high as compared to those of Unilever. Unilever company on the hand gets its finance from

financial institutions in terms of long term loans which are of high amount since it is an

established company and therefore its credit worthiness is not so much in question.

Whereas Amazon Company has its dividends ploughed back into the business in totality,

Unilever company pays its shareholders their dividends though there are those that are allowed to

reinvest their dividends back in the business.

ANALYSIS OF GROWTH AND MATURE COMPANY

Amazon Company has based its business strategy in diversification of the products in its

business. It has diversified in terms of the products it deals in since its inception when it dealt

only in books (Mudambi, 2010, pp. 188). Unilever on the other hand deals in specific products

which are foods & beverages and beauty products. Unilever does not deal in a variety of

products like Amazon, Amazon currently deals in a variety of commodities such as books, foods

and many other products.

The capital structure of Amazon and that of Unilever are quite different in that Amazon

bases its capital structure on equity capital whereas Unilever does not really have its capital

structure based on equity capital owing to its size and period of operation in the market.

Similarities between Amazon and Unilever Company

Despite Amazon and Unilever dealing in different products and also having entered the

market at different times, the two companies have various similarities in terms of their sources of

finance, business strategy and capital structure.

Both Unilever Company and Amazon have their finances from ploughing back of profits

from sale of their products (Lee,2015. pp. 361). The two companies also finance their activities

and operations from credit and debt financing where they acquire loans from banks and other

financial institutions, which enables them to run their activities effectively.

The two companies also have a similarity in terms of their dividend policy. Unilever

Company has a provision for its shareholders to reinvest back their dividends into the business,

which is still the same thing that Amazon Company does to its shareholders when it comes to

dividends (Lee,2015. pp. 367).

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There is also a striking similarity between Amazon and Unilever in terms of the strategy

employed in running and marketing their business to satisfy the needs and desires of their

customers. Amazon gives priority to satisfaction of the needs of the customer, an aspect that

Unilever pays close attention to. The two companies also use a business strategy that enables

them have a competitive advantage over their customers. This is done mostly in terms of pricing

and provision of goods that just meet the needs and desires of the customers.

Amazon and Unilever Company are two different companies who have rocked the

international market in the various products that they deal. Despite their differences, the two

companies have effectively achieved in addressing the needs of the customers to satisfaction.

The differences that exist between the two companies are majorly based on their size, which can

be attributed to the time the business started, Unilever Company is a mature company whereas

Amazon is still growing and therefore is a growth company.

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Conclusion

In conclusion, Unilever Company based on its mode of operation and the commodities it

deals in makes it stand out from its competitors. It is a mature company and therefore enjoys

economies of scale that are not enjoyed by growth firms such as Amazon. It is therefore evident

that Unilever has a strong customer base as well as finance. Amazon on the other hand despite

being a growth company enjoys massive customer owing to the efficiency in terms of customer

satisfaction (Mudambi, 2010, pp. 188). Amazon has experienced a fast growth in the recent years

and has also diversified its market and the commodities it offers. The fact that its business is

done online makes it convenient to customers.

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