M: Business 3rd Edition by O. C. Ferrell, Geoffrey Hirt, Linda Ferrell

Exercise 34

What began in 1948 as a small bait and tackle shop is now the multibillion- dollar national sporting goods chain Dick’s Sporting Goods. Founded by Richard Stack with $300 from his grandmother’s cookie jar, the company is currently run by second-generation Ed Stack (CEO). Annual revenues in 2010 soared beyond the $4 billion mark, landing the company on the Fortune 500. Since the company’s public debut in 2002, share value has increased over 600 percent. Analysts continue to predict growth for the company.

Such growth may be attributed in part to Ed Stack and the lessons that he has learned as CEO. With a personal stake in two-thirds of the voting shares and onefourth of the common stock, Stack wins or loses significantly based on the company’s performance. Early on Stack led the company on a path of rapid expansion, nearly causing the company’s failure. When firms expand too rapidly, this creates financial pressure as expenses become greater than revenue. Today Stack grows the company slowly, focusing on regional customers throughout its over 400 stores. For example, the company pays attention to each region’s seasons to ensure that products are stocked at exactly the right times. This allows products to quickly leave the shelves, thereby increasing revenue. Stack also focuses heavily on customer experience in an effort to create repeat customers willing to pay Dick’s prices.

With an eye toward 800 stores, Stack is building relationships with professional athletes, sports fishermen, and more. He also views financial performance as the key to shareholder support. Of course, as with all companies, success hinges in part on events outside the company’s control. For example, Dick’s Sporting Goods depends heavily on the seasons, which can be unpredictable. However, Stack is driven and determined to control all in his power, steering Dick’s Sporting Goods toward continued success for shareholders.

Why does too rapid growth of a company cause a stress on finances?

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No business should go after skyrocketing expansion if it wants to survive long term. Business growth may seem appealing, however, is accompanied by specific dangers and potential liabilities. Hence, business always strives for growth, but one must make sure that it’s not outgrowing its capabilities.