002 growth strategy

Strategy aimed at winning larger market share, even at the expense of short-term earnings. Four
broad growth strategies are diversification, product development, market penetration, and market
development.

There are several methods companies use for implementing a growth strategy. Some common growth
strategies in business include market penetration, market expansion, product expansion, diversification and
acquisition.

Most small companies have plans to grow their business and increase sales and profits. However, there are
certain methods companies must use for implementing a growth strategy. The method a company uses to
expand its business is largely contingent upon its financial situation, the competition and even government
regulation. Some common growth strategies in business include market penetration, market expansion,
product expansion, diversification and acquisition.

Market Penetration

One growth strategy in business is market penetration. A small company uses a market penetration strategy
when it decides to market existing products within the same market it has been using. The only way to
grow using existing products and markets is to increase market share, according to small business experts.
Market share is the percent of unit and dollar sales a company holds within a certain market vs. all other
competitors. One way to increase market share is by lowering prices. For example, in markets where there
is little differentiation among products, a lower price may help a company increase its share of the market.

Market Expansion

A market expansion growth strategy, often called market development, entails selling current products in a
new market. There several reasons why a company may consider a market expansion strategy. First, the
competition may be such that there is no room for growth within the current market. If a business does not
find new markets for its products, it cannot increase sales or profits. A small company may also use a
market expansion strategy if it finds new uses for its product. For example, a small soap distributor that
sells to retail stores may discover that factory workers also use its product.

Product Expansion

A small company may also expand its product line or add new features to increase its sales and profits.
When small companies employ a product expansion strategy, also known as product development, they
continue selling within the existing market. A product expansion growth strategy often works well when
technology starts to change. A small company may also be forced to add new products as older ones
become outmoded.
Diversification Strategies

Growth strategies in business also include diversification, where a small company will sell new products to
new markets. This type of strategy can be very risky. A small company will need to plan carefully when
using a diversification growth strategy. Marketing research is essential because a company will need to
determine if consumers in the new market will potentially like the new products.

Acquisition Strategies

Growth strategies in business can also includes an acquisition. In acquisition, a company purchases another
company to expand its operations. A small company may use this type of strategy to expand its product
line and enter new markets. An acquisition growth strategy can be risky, but not as risky as a
diversification strategy. One reason is that the products and market are already established. A company
must know exactly what it wants to achieve when using an acquisition strategy, mainly because of the
significant investment required to implement it.
alternative

Types of growth strategies

Do entrepreneurs want to grow entrepreneurs’ company? Due to personal ambition, because an opportunity
has presented itself, or simply to increase entrepreneurs’ turnover? Whatever entrepreneurs’ motivation,
there are various ways to grow a company.

These ways are clearly presented in the Ansoff model, a strategic tool used during the development of a
growth strategy. It is a good basis for considering the strategic development of entrepreneurs’ company.
The Ansoff growth matrix is comprised of two axes

 Products:
Which products do entrepreneurs currently offer, and which new products would entrepreneurs like
to offer in the future?
 The market:
Which markets do entrepreneurs currently serve, and which markets would entrepreneurs like to
serve in the future?
Four types of growth strategies are proposed on this basis. The four main growth strategies are as follows:

 Market penetration
The aim of this strategy is to increase sales of existing products or services on existing markets,
and thus to increase entrepreneurs’ market share.  To do this, entrepreneurs can attract customers
away from entrepreneurs’ competitors and/or make sure that entrepreneurs’ own customers buy
entrepreneurs’ existing products or services more often. This can be accomplished by a price
decrease, an increase in promotion and distribution support; the acquisition of a rival in the same
market or modest product refinements.
 Market development
This means increasing sales of existing products or services on previously unexplored markets.
Market expansion involves an analysis of the way in which a company's existing offer can be sold
on new markets, or how to grow the existing market. This can be accomplished by different
customer segments ;  industrial buyers for a good that was previously sold only to the households;
New areas or regions about of the country ; Foreign markets

 Product development
The objective is to launch new products or services on existing markets. Product development may
be used to extend the offer proposed to current customers with the aim of increasing their turnover.
These products may be obtained by: Investment in research and development of additional
products; Acquisition of rights to produce someone else's product; Buying in the product and
"branding" it;  Joint development with ownership of another company who need access to the
firm's distribution channels or brands.

 Diversification
This means launching new products or services on previously unexplored markets. Diversification
is the riskiest strategy. It involves the marketing, by the company, of completely new products and
services on a completely unknown market. 
Diversification may be divided into further categories:

o Horizontal diversification
This involves the purchase or development of new products by the company, with the aim
of selling them to existing customer groups.  These new products are often technologically
or commercially unrelated to current products but that may appeal to current customers.
For example, a company that was making notebooks earlier may also enter the pen market
with its new product.

o Vertical diversification
The company enters the sector of its suppliers or of its customers.For example, if
entrepreneurs have a company that does reconstruction of houses and offices and
entrepreneurs start selling paints and other construction materials for use in this business.

o Concentric diversification
Concentric diversification involves the development of a new line of products or services
with technical and/or commercial similarities to an existing range of products. This type of
 diversification is often used by small producers of consumer goods, e.g. a bakery starts
producing pastries or dough products.

o Conglomerate diversification
Is moving to new products or services that have no technological or commercial relation
with current products, equipment, distribution channels, but which may appeal to new
groups of customers. The major motive behind this kind of diversification is the high
return on investments in the new industry. It is often used by large companies looking for
ways to balance their cyclical portfolio with their non-cyclical portfolio.

Based on the strategies used and its ambitions, a company can choose one of these four strategies. This
choice especially depends on the approach of a company's product/market and the latter's taste for risk.

The key with any growth strategy is to be deliberate. Figure out the rate-
limiting step in entrepreneurs’ growth, and pour as much fuel on the fire as
possible. But for this to be beneficial, entrepreneurs need to take the
following steps:

1. Establish a value proposition.

For entrepreneurs’ business to sustain long-term growth, entrepreneurs must
understand what sets it apart from the competition. Identify why customers
come to entrepreneurs for a product or service. What makes entrepreneurs
relevant, differentiated and credible? Use entrepreneurs’ answer to explain to
other consumers why they should do business with entrepreneurs.

For example, some companies compete on “authority” -- Whole Foods

Market is the definitive place to buy healthy, organic foods. Others, such as
Walmart, compete on price. Figure out what special benefit
only entrepreneurscan provide, and forget everything else. If entrepreneurs
stray from this proposition, entrepreneurs’ll only run the risk of devaluing
entrepreneurs’ business.

2. Identify entrepreneurs’ ideal customer.

Entrepreneurs got into business to solve a problem for a certain audience.
Who is that audience? Is that audience entrepreneurs’ ideal customer? If not,
who are entrepreneurs serving? Nail down entrepreneurs’ ideal customer, and
revert back to this audience as entrepreneurs adjust business to stimulate
growth.

3. Define entrepreneurs’ key indicators.

Changes must be measurable. If entrepreneurs’re unable to measure a
change, entrepreneurs have no way of knowing whether it’s effective.
Identify which key indicators affect the growth of entrepreneurs’ business,
then dedicate time and money to those areas. Also, A/B test properly --
making changes over time and comparing historical and current results isn’t
valid.

4. Verify entrepreneurs’ revenue streams.

What are entrepreneurs’ current revenue streams? What revenue streams
could entrepreneurs add to make entrepreneurs’ business more profitable?
Once entrepreneurs identify the potential for new revenue streams, ask
entrepreneurs’self if they’re sustainable in the long run. Some great ideas or
cool products don’t necessarily have revenue streams attached. Be careful to
isolate and understand the difference.

5. Look to entrepreneurs’ competition.

No matter entrepreneurs’ industry, entrepreneurs’ competition is likely
excelling at something that entrepreneurs’ company is struggling with. Look
toward similar businesses that are growing in new, unique ways to inform
entrepreneurs’ growth strategy. Don’t be afraid to ask for advice. Ask
entrepreneurs’self why entrepreneurs’ competitors have made alternate
choices. Are they wrong? Or are entrepreneurs’ businesses positioned
differently? The assumption that entrepreneurs’re smarter is rarely correct.

6. Focus on entrepreneurs’ strengths.

Sometimes, focusing on entrepreneurs’ strengths -- rather than trying to
improve entrepreneurs’ weaknesses -- can help entrepreneurs establish
growth strategies. Reorient the playing field to suit entrepreneurs’ strengths,
and build upon them to grow entrepreneurs’ business.

7. Invest in talent.
Entrepreneurs’ employees have direct contact with entrepreneurs’ customers,
so entrepreneurs need to hire people who are motivated and inspired by
entrepreneurs’ company’s value proposition. Be cheap with office furniture,
marketing budgets and holiday parties. Hire few employees, but pay them a
ton. The best ones will usually stick around if entrepreneurs need to cut back
their compensation during a slow period.