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Internal Growth Strategy

This document discusses internal and external growth strategies for businesses. It describes internal growth strategies as expansion through market penetration, development, and product development. It also discusses diversification strategies like vertical, horizontal, concentric, and conglomerate diversification. External growth strategies involve foreign collaboration to gain expertise, technical knowledge, and access new markets. In summary, the document outlines different strategies companies can use for internal growth through existing resources or external growth through collaboration.

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978 views6 pages

Internal Growth Strategy

This document discusses internal and external growth strategies for businesses. It describes internal growth strategies as expansion through market penetration, development, and product development. It also discusses diversification strategies like vertical, horizontal, concentric, and conglomerate diversification. External growth strategies involve foreign collaboration to gain expertise, technical knowledge, and access new markets. In summary, the document outlines different strategies companies can use for internal growth through existing resources or external growth through collaboration.

Uploaded by

manisa1992
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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NORTHERN INDIA ENGINEERING COLLEGE

[AFFILIATED TO GURU GOBIND SINGH


INDRAPRASTHA UNIVERSITY, DELHI]

Assignment of
Strategic Management
Submitted in Partial fulfilment of requirement of award of MBA degree of
GGSIPU, New Delhi

MBA
4TH SEMESTER (2013 -2015)

SUBMITTED BY

SUBMITTED TO

MANISHA GAUTAM

MRS. KAMAYNI

INTERNAL GROWTH STARTEGY


Growth Strategy refers to a strategic plan formulated and implemented for
expanding firms business. Every firm has to develop its own growth strategy
according to its own characteristics and environment.

Internal growth strategy refers to the growth within the organization by using
internal resources. Internal growth strategy focus on developing new products,
increasing efficiency, hiring the right people, better marketing etc. Internal
growth strategy can take place either by expansion, diversification and
modernization.

I. Internal Growth Strategies


A. Expansion:
Business expansion refers to raising the market share, sales revenue and profit
of the present product or services. The business can be expanded through
product development, market development, expanding the line of product etc.
Expansion leads to better utilization of the resources and to face the competition
efficiently. Business expansion provides economics of large-scale operations.

Business can be expanded through:a. Market penetration strategy:


This strategy involves selling existing products to existing markets. To penetrate
and capture the market, a firm may cut prices, improve distribution network,
increase promotional activities etc.

b. Market Development strategy:


This strategy involves extending existing products to new market. This strategy
aims at reaching new customer segments or expansion into new geographic
areas. Market development aims to increase sales by capturing new market area.

c. Product Development strategy:


This strategy involves developing new products for existing markets or for new
markets. Product development means making some modifications in the
existing product to give value to the customers for their purchase.

B. Diversification:
Diversification is another form of internal growth strategy. The purpose of
diversification is to allow the company to enter new lines of business that are
different from current operations. There are four types of diversification:
a) Vertical diversification
b) Horizontal diversification
c) Concentric diversification

d) Conglomerate diversification
a) Vertical Diversification
Vertical diversification is also called as vertical integration. In vertical
integration new products or services are added which are complementary to the
present product line or service. The purpose of vertical diversification is to
improve economic and marketing ability of the firm. Vertical diversification
includes:

i. Backward integration:
In backward integration, the company expands its business activities in such a
way that it moves backward of its present line of business.

Example:
Despite of being the leaders in Textiles, to strengthen his Position, Dhirubhai
Ambani decided to integrate backwards and produce fibers.

ii. Forward integration:


In forward integration, the company expands its activities in such a way that it
moves ahead of its present line of business.

Example:
New Zealand based Natural health care products company Comfit purchased its
Hong Kong distributor Green Life Ltd. And thus achieved forward integration
by having access to green lifes retail stores, sales staff and in store promoters.

b) Horizontal Diversification:
Horizontal diversification involves addition of parallel products to the existing
product line. For example: A company, manufacturing refrigerator may enter
into manufacturing air conditioners. The purpose of horizontal diversification is
to expand market area and to cut down competition.

c) Concentric diversification:
When a firm diversifies into business, which is related with its present business
it is called concentric diversification. It is an extreme form of horizontal
diversification. For example: Car dealer may start a finance company to finance
hire purchase of cars.

d) Conglomerate diversification:
When a firm diversifies into business, which is not related to its existing
business both in terms of marketing and technology it is called conglomerate
diversification.
It involves totally a new area of business. There is no relation between the new
product and the existing product.

II. External Growth Strategies:


Foreign Collaboration:
Collaboration means cooperation. It means coming together. Collaboration is
the act of working jointly. It is a process where two people or organization
comes together for the achievement of common goal.

With the advent of globalization, foreign trade and foreign investments are
encouraged to increase the volume of trade. This concept gave rise to foreign
collaboration to acquire expertise in the manufacturing process, gain technical
know-how and market or promote the products or services to the foreign
countries.
Foreign collaboration is an agreement or contract between companies or
government of domestic country and foreign country to achieve a common
objective. Foreign collaboration is a business structure formed by two or more
parties for a specific purpose.
It is collaboration where the domestic firm and the foreign firm join hands
together to achieve a common goal. Foreign collaboration helps in removing
financial, technological and managerial gap in the developing countries. It is
recognized as an important supplement for development of the country and for
securing scientific and technical know-how.

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