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Growth strategies

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This presentation analyses strategic options of growing a business. It begins with an understanding of the term—growth. This understanding helps in appreciating various growth strategies available to …

This presentation analyses strategic options of growing a business. It begins with an understanding of the term—growth. This understanding helps in appreciating various growth strategies available to companies.

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  • 1. GROWTH STRATEGIES E x a m i n e O p t i o n s f o r B u s i n e s s G ro w t h
  • 2. © 2015 Berlin Asong. All rights reserved. 2 I. Analyse alternative options for growth for entertainment businesses. Learning Objective
  • 3. © 2015 Berlin Asong. All rights reserved. 3 ?GROWTH What does business growth mean?
  • 4. © 2015 Berlin Asong. All rights reserved. 4 • Units sold • Revenue • Profit • Product/service range Dimensions of Business Growth • Geographic footprint
  • 5. © 2015 Berlin Asong. All rights reserved. 5 1 Organic growth 2 Inorganic growth Forms of Strategic Growth
  • 6. © 2015 Berlin Asong. All rights reserved. 6 Organic Growth Thompson, J. L. & Martin, F. (2010), “Strategic Management: Awareness and Change”. Cengage: Hampshire, pp. 442 - 449 The firm grows by developing its existing business as opposed to acquiring or merging with other companies.
  • 7. © 2015 Berlin Asong. All rights reserved. 7 What are the benefits of organic growth?
  • 8. © 2015 Berlin Asong. All rights reserved. 8 Organic growth is a fine testament of the strengths of a company. 1
  • 9. © 2015 Berlin Asong. All rights reserved. 9 It shows how well the firm uses its internal resources. 2
  • 10. © 2015 Berlin Asong. All rights reserved. 10 Organic growth helps avoid the risks and complexity of acquiring other companies. 3
  • 11. © 2015 Berlin Asong. All rights reserved. 11 Can a company achieve sustained growth organically?
  • 12. © 2015 Berlin Asong. All rights reserved. 12 Organic growth is hard to sustain as evidenced by Apple, Deezer, Disney, Lions Gate, Universal Music, Vivendi, Warner Music, etc.
  • 13. The firm grows by acquiring or merging with other companies. © 2015 Berlin Asong. All rights reserved. 13 Inorganic Growth Thompson, J. L. & Martin, F. (2010), “Strategic Management: Awareness and Change”. Cengage: Hampshire, pp. 442 - 449
  • 14. © 2015 Berlin Asong. All rights reserved. 14
  • 15. © 2015 Berlin Asong. All rights reserved. 15 20 minutes Why would a company choose to grow inorganically? Are there any risk associated with inorganic growth that we must be aware of?
  • 16. © 2015 Berlin Asong. All rights reserved. 16 Growth strategies
  • 17. © 2015 Berlin Asong. All rights reserved. 17 Market Penetration Product Development Market Extension Diversification Ansoff-Growth Matrix Product Market NewCurrent Current New
  • 18. © 2015 Berlin Asong. All rights reserved. 18 Market Penetration Strategy The company seeks to expand sales of a product or service within its market.
  • 19. © 2015 Berlin Asong. All rights reserved. 19 The growth objective is to increase the sales and market share of a product or service.
  • 20. © 2015 Berlin Asong. All rights reserved. 20 As an independent music artist, what market penetration tools can I use? Market Penetration Strategy Picturesource:inlivemusic.com
  • 21. © 2015 Berlin Asong. All rights reserved. 21 … … Expand existing distribution channel Multi-distribution channels … Multi-product sizes/formats or flexible services … Hire more sales staff … Offer price promotion … Use a mixed of relevant media (traditional & digital) for promotion Techniques of Market Penetration … Etc.
  • 22. © 2015 Berlin Asong. All rights reserved. 22 Multichannel distribution (theatre, VOD, mobile, DVD, Netflix, YouTube, etc.) continues to be a market penetration tool for media and entertainment companies to reach broader audiences.
  • 23. © 2015 Berlin Asong. All rights reserved. 23 Growth through market penetration poses significant challenges. What are these challenges? 15 minutes
  • 24. © 2015 Berlin Asong. All rights reserved. 24 Apple’s iTunes revenue have been falling. Apple strategically chose to buy Beats in 2014 than to push on with the growth of iTunes. Digital music consumption is lagging behind music streaming.
  • 25. © 2015 Berlin Asong. All rights reserved. 25 Product Development Strategy The company grows sales or market share by constantly launching new products and services.
  • 26. © 2015 Berlin Asong. All rights reserved. 26 Picturesource:printambition.com
  • 27. © 2015 Berlin Asong. All rights reserved. 27 Regular new movie releases is a means for Lions Gate to stay relevant and competitive in the marketplace.
  • 28. © 2015 Berlin Asong.All rights reserved. 28 Apple’s iPod line from 2001-2014.
  • 29. © 2015 Berlin Asong. All rights reserved. 29 As an independent music artist, what product development tools can I use? Product Development Strategy Picturesource:inlivemusic.com
  • 30. © 2015 Berlin Asong. All rights reserved. 30 As a music artist, releasing new songs or albums is the sole tool of product development strategy.
  • 31. © 2015 Berlin Asong. All rights reserved. 31 Philip Kotler & Gary Armstrong (2009) Principles of Marketing, 13Ed. As a product or service reaches peak sales (maturity), new product development presents a viable way to reignite sales.
  • 32. © 2015 Berlin Asong. All rights reserved. 32 Does new products or services guarantee increased sales and profit?
  • 33. © 2015 Berlin Asong. All rights reserved. 33 Costs of innovation and failure are main challenges of growth through product development.
  • 34. © 2015 Berlin Asong. All rights reserved. 34 Market Extension Strategy The company expands sales or market share of an existing product or service by targeting a new customer segment.
  • 35. © 2015 Berlin Asong. All rights reserved. 35 Forms of Market Extension A Gender market extension B C D Age market extension Income market extension Geographic market extension
  • 36. © 2015 Berlin Asong. All rights reserved. 36 American TV series “Breaking Bad” co-produced by Sony Pictures Television. Growth through geographic market extension is prevalent in media entertainment. Picturesource:wallpapervortex.com
  • 37. © 2015 Berlin Asong. All rights reserved. 37 Philip Kotler & Gary Armstrong (2009) Principles of Marketing, 13Ed. As a product or service reaches peak sales (maturity), market extension is a viable option to reignite sales.
  • 38. © 2015 Berlin Asong. All rights reserved. China, the world largest phone market, was always on Apple’s sight. In January 17, 2014, Apple launched the iPhone in China. Apple Inc. CEO Tim CookChina Mobile Chairman Xi Guohua 38 Picturesource:businessinsider.com
  • 39. © 2015 Berlin Asong. All rights reserved. 39 Diversification Strategy The company grows by expanding into new product or service categories that are related or unrelated to its existing business.
  • 40. © 2015 Berlin Asong. All rights reserved. 40 Disney is a diversified company.
  • 41. © 2015 Berlin Asong. All rights reserved. 41 Related diversification vs. Unrelated diversification
  • 42. © 2015 Berlin Asong. All rights reserved. 42 From computer maker to maker of phones, portable music players, tablets, watches and vendor of music and apps. A high degree of relationships exit among Apple’s product categories.
  • 43. © 2015 Berlin Asong. All rights reserved. 43 Event TicketingMusicTV & CinemaTelecom operator Un/related Diversification: Vivendi’s diversified businesses.
  • 44. © 2015 Berlin Asong. All rights reserved. 44 Un/related Diversification: Google search, online ad, YouTube, Google Maps, Gmail, Google Office, Google+, Google Glass, etc. Picturesource:genheration.com
  • 45. © 2015 Berlin Asong. All rights reserved. 45 Backward diversification vs. Forward diversification
  • 46. © 2015 Berlin Asong. All rights reserved. 46 Backward Integration Forward Integration Raw Materials Retailer Primary Maker Product Producer Distributor
  • 47. © 2015 Berlin Asong. All rights reserved. 47 Hypothetically, if Spotify acquires Universal Music, it is a backward diversification. If Universal Music acquires Spotify, it is a forward diversification.
  • 48. © 2015 Berlin Asong. All rights reserved. 48 Why would Universal Music be interested in forward diversification (i.e. buying Spotify)?
  • 49. © 2015 Berlin Asong. All rights reserved. 49 Reasons for Forward Diversification • Access to distribution channel • • • Control distribution channels Stay close to consumers Respond quickly to market changes • Reduce distribution costs by ridding-off middlemen
  • 50. © 2015 Berlin Asong. All rights reserved. 50 Why would Spotify be interested in backward diversification (i.e. buying Universal Music) ?
  • 51. © 2015 Berlin Asong. All rights reserved. 51 Reasons for Backward Diversification • Access to raw materials • • Access to input resources Lower input costs
  • 52. © 2015 Berlin Asong. All rights reserved. 52 As an independent music artist, what sort of related or unrelated diversification can I use? Diversification Strategy Picturesource:inlivemusic.com
  • 53. © 2015 Berlin Asong. All rights reserved. 53 20 minutes What are the benefits and challenges of achieving growth through diversification?
  • 54. © 2015 Berlin Asong. All rights reserved. 54 Starbucks CEO Howard Schultz Perils of Rapid Growth Source: McKinsey Quarterly 2011 Click slide to play video.
  • 55. © 2015 Berlin Asong. All rights reserved. 55 Equity Diversification A company owns shares of one or more companies.
  • 56. © 2015 Berlin Asong. All rights reserved. 56 Liberty Media has 27% share ownership of Livenation, 2% of Barnes & Noble, 1% Viacom, and many others.
  • 57. © 2015 Berlin Asong. All rights reserved. 57 Disinvestment strategies
  • 58. © 2015 Berlin Asong. All rights reserved. 58 1 2 Divestment Downsizing 3 Bankruptcy 4 Liquidation
  • 59. © 2015 Berlin Asong. All rights reserved. 59 Divestment When a company sells an asset or part of its business.
  • 60. © 2015 Berlin Asong. All rights reserved. 60 Why would a company sell a part of its business? Picturesource:©Jerome-Lecomte
  • 61. © 2015 Berlin Asong. All rights reserved. 61 1 To rid-off an unprofitable asset or business.
  • 62. © 2015 Berlin Asong. All rights reserved. 62 In August 2011, Google acquired Motorola Mobility, which it later sold to Lenovo in 2014. To get rid of a bad investment. 2
  • 63. © 2015 Berlin Asong. All rights reserved. 63
  • 64. © 2015 Berlin Asong. All rights reserved. 64 3 To cash in on an asset or business.
  • 65. © 2015 Berlin Asong. All rights reserved. 65 4 A regulator can request a company to give up part of its business, usually to promote fair competition.
  • 66. © 2015 Berlin Asong. All rights reserved. 66 UK competition regulator may ask BT to give up part of its business in order to approve the EE acquisition.
  • 67. © 2015 Berlin Asong. All rights reserved. 67 Downsizing Downsizing involves reducing the size of a business through staff layoff, units closure, delayering or restructuring to kick-start growth for a loss-making or struggling company.
  • 68. © 2015 Berlin Asong. All rights reserved. 68 In 2013, News Corp. split into two companies: 21st Century Fox and News Corp.
  • 69. © 2015 Berlin Asong. All rights reserved. 69 Bankruptcy A company files for bankruptcy when it cannot pay its debts. Bankruptcy protects the company against lawsuit from creditors, and allows the company to make changes to its business. Also called Administration
  • 70. © 2015 Berlin Asong. All rights reserved. 70 Liquidation A business ceases all operations. All assets of the company are sold to pay-off debts and other financial obligations.
  • 71. GROWTH STRATEGIES E x a m i n e O p t i o n s f o r B u s i n e s s G ro w t h