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Growth Strategy: What Are Growth Strategies?

A growth strategy is a plan to advance and achieve growth in areas like manufacturing, marketing, and finances. There are several types of growth strategies, including horizontal integration which involves acquiring a similar company in the same industry, vertical integration which involves acquiring a company in the supply chain process, diversification which involves expanding into new markets and products, and intensification which focuses on expanding within existing lines of business. Examples provided include Vodafone-Idea merging after market challenges from Jio, Target vertically integrating its supply chain, HubSpot diversifying its software, and McDonald's using market penetration for intensification.

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77 views4 pages

Growth Strategy: What Are Growth Strategies?

A growth strategy is a plan to advance and achieve growth in areas like manufacturing, marketing, and finances. There are several types of growth strategies, including horizontal integration which involves acquiring a similar company in the same industry, vertical integration which involves acquiring a company in the supply chain process, diversification which involves expanding into new markets and products, and intensification which focuses on expanding within existing lines of business. Examples provided include Vodafone-Idea merging after market challenges from Jio, Target vertically integrating its supply chain, HubSpot diversifying its software, and McDonald's using market penetration for intensification.

Uploaded by

Vedant Raj
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Growth Strategy

What are Growth Strategies?

A growth strategy is one under which management plans to advance


further and achieve growth of the enterprise, in fields of
manufacturing, marketing, financial resources etc. As growth entails
risk, especially in a dynamic economy, a growth strategy might be
described as a safest policy of growth-maximising gains and
minimising risk and untoward consequences.
1. Horizontal Integration

When a company wishes to grow through horizontal integration, its aim is


to acquire a similar company in the same industry. Companies may choose
to undergo horizontal integration in order to increase their size, diversify
product or services offerings, achieve economies of scale, or reduce
competition. They may also wish to gain access to new customers or
markets, including overseas.

Example:

​Vodafone-Idea

Vodafone and Idea were two


telecommunications giants in India. Both the
companies had a nominal market share with
some pricing power over the customers.
However, with the entry of Reliance Jio, all
the telecom companies took a significant hit. Jio launched offers that were
too attractive for the customers to avoid and gradually started to shift from
them, which led to the merger of both the giants that is together now called
as VI.

2. Vertical Integration

A company that undergoes vertical integration acquires a company that


operates in the production process of the same industry. Some of the
reasons why companies choose to integrate vertically include
strengthening their supply chain, reducing production costs, capturing
upstream or downstream profits, or accessing new distribution channels.
To do this, one company acquires another that is either before or after it in
the supply chain process.

Example:

Target

Target, which has its own store brands and


manufacturing plants. They, create, distribute and sell
their products– eliminating the need for outside entities
such as manufacturers, transportation, or other logistical
necessities.

3. Diversification

A diversification strategy is the strategy that an organization adopts for the 


development of its business. This strategy involves widening the scope of 
the organization across different products and market sectors. The 
strategy is to enter into a new market or industry which the organization is 
not currently in, whilst also creating a new product for the new market.

Example:

HubSpot

Inbound marketing giant HubSpot began as a


software solution targeting small businesses
with 1-10 employees who needed a more
streamlined way to manage their content and
customers. As their popularity and demand
grew, Hubspot diversified its software to cater
for enterprise-level needs. This saw it rise from $255,000 ARR in 2007 to a
whopping $15.6 million in revenue by 2010. The company went public with
its IPO in 2014, raising an impressive $125 million and cementing the
company’s market value at around $880 million.

4. Intensification

Intensification involves expansion within the existing line of business. 


Intensive g
​ rowth strategy​ involves safeguarding the present position and 
expanding in the current product-market space to achieve growth targets. 
Such an approach is very useful for enterprises that have not fully exploited 
the opportunities existing in their current products-market domain. A firm 
selecting an intensification strategy, concentrates on its primary line of 
business and looks for ways to meet its growth objectives by increasing its 
size of operations in its primary business. 
 
Example:  
 
McDonald’s  
 
McDonald’s uses market penetration as its primary
intensive strategy for growth. In applying this
intensive strategy, McDonald’s grows by reaching
more customers in markets where it already has
operations. For example, McDonald’s opens new
restaurants in North America and Europe by franchising, joint ventures or
corporate ownership. 

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