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Growth-focused or profit-focused firms: Transitions toward profitable growth

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  • Jang, SooCheong (Shawn)

Abstract

Profitable growth is the most desirable state tourism and hospitality firm managers can hope to achieve. In reality, however, it is not easy for a tourism and hospitality firm to consistently grow and accumulate profits. In order to achieve profitable growth, some firms focus on sales growth while victimizing profits, while others concentrate on profits and hold off on growth. To better understand these strategies, this study investigated the growth state, profit state and transitions of restaurant firms. The findings of this study supported that profit-focused firms are more likely to achieve profitable growth than growth-focused firms. In addition, growth-focused firms with low liquidity had a higher likelihood of transitioning to a state of low growth and low profit in the short-term, and this liquidity effect was more serious for small firms in terms of long-term performance. Further, when profit-focused firms had few growth opportunities, large free cash flows increased the likelihood of transitioning to a state of low growth and low profit in the short-term. More detailed results are provided in this paper.

Suggested Citation

  • Jang, SooCheong (Shawn), 2011. "Growth-focused or profit-focused firms: Transitions toward profitable growth," Tourism Management, Elsevier, vol. 32(3), pages 667-674.
  • Handle: RePEc:eee:touman:v:32:y:2011:i:3:p:667-674
    DOI: 10.1016/j.tourman.2010.05.023
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    File URL: http://www.sciencedirect.com/science/article/pii/S026151771000107X
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