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Growth and expansion strategy

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  • 1. GOOD MORNING WELLCOME TO ALL………….
  • 2. TOPIC:- GROWTH /EXPANSATION STRATEGY
  • 3. GROWTH /EXPANSATION STRATEGY MEANING:- The growth strategy is called as expansion strategy .To achieve higher targets than before ,a firm may enter into new market, introduce new product lines, serve additional market segments, and so on . GROWTH /EXPANSATION STRATEGY
  • 4. The growth strategy can be further classified into :- • Internal growth strategies • External growth strategies
  • 5. • INTENSIFICATION STRATEGY • DIVERSIFICATION STRATEGY • MODERNISATION STRATEGY • SELF-FINANCING STRATEGY • INTEGRATION STRATEGY INTERNAL GROWTH STRATEGY
  • 6. In the case of intensification strategy, the firm pursues growth within the existing businesses. intensification strategy involves three alternatives:- 1)MARKET PENETRATION STRATEGY:- In this case the firm continues with its current products &current market but it tries to increase its market share through aggressive marketing in the areas of advertising sales promotion, price cuts , etc . INTENSIFICATION STRATEGY
  • 7. 2)MARKET DEVELOPMENT STRATEGY :- The firm enters into new markets apart from current markets by offering the existing range of product. For this purpose the firm has to undertake market research right pricing effective promotion-mix & appointment of goods dealer’s network. 3)PRODUCT DEVELOPMENT STRATEGY:- The firm may continue with the existing market but introduces improved products & substitutes. It may also enter in new market with the help of improved and new products.
  • 8. DIVERSIFICATION STRATEGY MEANING:- Diversification is one type of internal growth strategy. It involves entry into new products& in new markets. Diversification can be defined as entry of a firm into new product or product line, new services or new markets , involving substantially different skill, technology & knowledge.
  • 9. TYPES OF DIVERSIFICATION STRATEGY 1)VERTICAL DIVERSIFICATION:- it consists of extending the activities of a firm it can be in two forms :- a) Backward integration :- In backward integration a company moves one step backwards from the current line of business. For instance, hero cycles has set up a subsidiary to manufacture cycle wheels and tubes. b) Forward integration:- In this case the company moves one step ahead of its current line of business activities. For instance, a cloth manufacturer may enter into readymade garments business. The company may also diversify into distribution activities by opening up its own retail shops like that of Bata or Raymond’s.
  • 10. 2) Horizontal diversification:- when a company enters into a new business which is closely related with the existing line of business through processes , Technology or markets. for instance, a gents readymade garment manufacturer may enter in the business of ladies ready made garment . 3) Concentric diversification:- It involves diversification into such areas or products which are indirectly related to its existing line of business . concentric diversification the new business is linked to existing businesses. For example, a car dealer may start a finance company to finance hire purchase of cars. 4) conglomerate diversification:- It involves entry in a totally new areas or business. It is an attempt to diversify outside the present market or product. In conglomerate diversification , no linkages exit between the new business and the existing business. For instance, a firm may enter into several types of business such as computer software, banking, insurance, airline, etc.
  • 11. MODERNISATION STRATEGY MEANING:- Modernization strategy involves up gradation of existing physical facilities like plant and machinery and processes. The modernization result into improvement in the quality of products so that they offer better value to the customers.
  • 12. ADVENTAGES OF MODERNISATION STRATEGY The modernization strategy must be adopted by Indian firms, as it offers several advantages:- • Industrial productivity • Full utilization of plant capacity • Helps to face competition • Enhances corporate image • Increase in profit • Higher efficiency • Research & development • Economy in production
  • 13. SELF-FINANCING STRATEGY MEANING:-Self-financing refer to ploughing back of profit or accumulation of earning over a period of time. This approach is followed by well established profit making companies. ploughing back of profit can be defined as the process of setting aside a portion of profit earned for the purpose of investing in fixed assets and/or to meet working capital needs, if the need so arise.
  • 14. MERITS OF PLOUGHING BACK OF PROFIT: A) To the company : • Economical • Less financial risk • Repayment of debentures and term loans • Freedom to management B) To the shareholder: • Appreciation in share value • Regular dividends • Increase in collateral value of shares • Easy liquidity C) To the society: • Capital formation • Development of industry • Goods at reasonable prices • Social welfare
  • 15. INTEGRATION STRATEGY MEANING:-Integration means combining activities related to the present activity of business of a firm. There can be interlinking of activities performed by a firm right from the procurement of basic raw materials down to marketing of goods to the final consumer. Integration is an expansion strategy as it involves widening of business definition of a firm. It is also a subset of diversification strategy as it involves undertaking certain activities or business, which the firm was not dealing earlier. The integration strategy can be of two types:- 1)Vertical integration :-backward integration & forward integration 2) Horizontal integration.
  • 16. 1)VERTICAL INTEGRATION:- it consists of extending the activities of a firm it can be in two forms :- a) Backward integration :- In backward integration a company moves one step backwards from the current line of business. For instance, a firm may tie up with supplier of raw materials or take over a firm that supplies raw materials and/or components, hero cycles has set up a subsidiary to manufacture cycle wheels and tubes. b) Forward integration:- In this case the company moves one step ahead of its current line of business activities. For instance, a cloth manufacturer may enter into readymade garments business. 2) HORIZONTAL INTEGRATION:- when a company enters into a new business which is closely related with the existing line of business through processes , Technology or markets. for instance, a gents readymade garment manufacturer may enter in the business of ladies ready made garment .
  • 17. THANK YOU SPECIAL THANKS TO DEVSHREE MAM…....