What Is the Difference Between Exponential Growth & Exponential Decay Functions in Business?

Exponential growth and exponential decay are common mathematical concepts used very frequently in modeling. These exponential functions describe both the rise and the fall of particular systems, especially systems that can be described through mathematical concepts, such as population or radioactive decay. Organizations frequently use both exponential growth and exponential decay functions during their work on modeling, but the two are very different and require different responses based on the produced data.

Growth Functions

Exponential growth functions show the rise of a particular system. In business, this may refer to the rise of a population when the company is running modeling approaches on emerging markets that are in stages of fast-paced development. However, the growth function is also used to describe the growth of investments, changes in the economy, and alterations in the value of currency, all highly useful types of information that businesses and investors can use to make their decisions.

Decay Functions

Decay functions are in most cases the opposite of growth functions. They show the fall of systems: it business, this translates into losses. Sometimes decay functions show how certain investments can lead to exponential decay in worst-case scenarios. They can also describe the collapse of markets in particular areas and a slide into economic collapse based on the decaying worth of money.

From Data to Strategy

The general concept behind exponential functions is simple: the larger the numbers involved, the faster the process occurs. However, businesses typically create growth strategies very differently from decay strategies. When examining exponential growth, a business is primarily concerned with taking advantage of a particular market that appears to be following a growth trend, or choosing the best security for creating an exponential growth rate in returns. When it comes to decay, the business strategy usually approaches the change from a different angle. Organizations are interested in how to pull out of markets before the decay leads to extensive losses, or in how to take advantages of the new conditions the decay is creating.

Macro and Micro Uses

You can use both growth and decay exponential functions at the macro and micro level. For example, a company can examine the exponential growth rates of investments across an economy, or only its own organization and how it resembles models created by the growth function. You can apply the concept to a single investment or to the value of a nation. In this way, the two functions are similar, both with high flexibility.


About the Author

Tyler Lacoma has worked as a writer and editor for several years after graduating from George Fox University with a degree in business management and writing/literature. He works on business and technology topics for clients such as Obsessable, EBSCO, Drop.io, The TAC Group, Anaxos, Dynamic Page Solutions and others, specializing in ecology, marketing and modern trends.