2. What is Growth or Expansion Strategy?
There are a number of ways of growing or expanding a business.
Whatever choices there may be, business owners who are in the
hot seat to make a judgment, should consider the best possible
option that is in line with their main objectives.
A growth or a expansion strategy is kind of layer by layer action of
events a company implies for the achievement of the desired
results (its short term.)it s a short range tool used for the basics
goal of a firm i.e. profit ,market share and consumer satisfaction.
3. Why does a company needs this?
1. Create a clear vision of what a company wants- which means to achieve
what the company desires for.
2. Understand the market which the company plans to dominate- which
means to be a part of the competition and be a strong contender.
3. To Know who is the ideal client for the business- which means to
increase customers and market share.
4. To Make sure the company has a clearly defined sales process- which
means to to have a maximum profit.
4. How is strategy is made and used?
Ansoff's Growth Matrix (Product & Market Mix)
One of the common business strategy frameworks
used in understanding growth strategies is the
Ansoff's Growth Matrix, developed by H. Igor
Ansoff โ a strategic management guru. The matrix
serves as a basic handy tool to set a firm thinking
about the direction it wants to take in its search
for growth.
As you can see in the diagram below, the two axes
are marked by products and market respectively.
Should the firm be expanding to new markets or
target the existing market with new or existing
products?
5. Market Penetration
In this strategy, it would mean that the firm aims to sell more of its existing
products in the markets that they are already in. This would translate into
allocating more resources and efforts to build up sales and marketing activities
to attain revenue growth. Indirectly, the firm is also trying to increase its
market share. Generally, this may seem less risky to a certain extent because
the firm is already dealing in the same markets and products, however there
may be limitations as to how much growth one can derive in this strategy.
Market Development
For this strategy โ existing products/new markets, this happens when a firm
decides to sell its existing products into new geographical markets or new
market segments (another defined target market). For example, it could mean
selling an existing computer model to a new market overseas or alternatively,
selling it to a new market segment (e.g. second-hand market). The firm would
also need to spend on sales and marketing to persuade consumers in new
markets to purchase the product/services.
6. Product Development
This strategy on the other hand, necessitates developing new
products to be sold in existing markets. This can be seen as a
quite common process because for a company to sustain its
presence and growth, it cannot rely on a single product range.
For instance, in the retail industry of product consumables like
shampoo, cosmetics and even apparels, companies are
competitively refreshing their product lines to keep in touch
with consumers as well as to keep up with certain trends,
market needs/tastes and etc. One would need some good
grasp of market knowledge and skills to come with new
product introductions that suits consumer's needs.
7. Diversification
Often seen as a high risk strategy, diversification is where the
firm sells entirely new products to new customers in new
markets. The reasons for such a business strategy could be due
to a rise in opportunity that the firm has identified, or feel the
need to tap and rely on new sources of growth and so on. While
it is considered as a more risky approach that the others, the
firm must be able to carefully assess its abilities before plunging
into a new area that it may or not have competencies in.
8. Franchising & Licensing
Franchising and licensing are considered as
viable business growth options. In both
situations, you build your business through
intellectual property and sharing a proven way
of running a business effectively. In these
circumstances, you must have a good
understanding of your rights as to whether you
are a franchisor or franchisee, licensor or
licensee. The agreements must then of course
be translated into a legal binding contract for a
certain period of time for selected market(s).
9. Merger & Acquisition
Merger is a business term used to describe a tool implemented
by corporations for expansion purposes. Normally, a merger
means the combination of two business firms that results into
one bigger entity. Acquisition or acquiring refers to the act of
taking control over another corporation. By taking control over
a another business entity, one would hope to gain access to
certain key functions, skill or knowledge in a particular
industry.
While the above are not meant to be an exhaustive list, there
are various reasons for taking on different options. In
determining your growth path, it is very critical to have both
inward and outward looking approach. Identify key resources
that you need within your firm is one way and understand
what is in for you should go with any strategy.
10. IPO
Initial public offering (IPO) refers to the company's first equity
issue made available to the public to raise new sources of funds
to finance its next stage of growth. In other words, it is the first
time a company offers its shares to the public which was
previously unlisted, at a particular price.
The reasons for an IPO are typically associated to a firm's
decision to raise additional capital. If the firm decides to put up
a sale of its stock and sells part of their ownership to the
public, it then engages in an IPO. Before even making the step
towards IPO, the firm must go through a meticulous process of
weighing its benefits and costs .
12. GAP introduced Forth & Towne brand aimed at women
over 35.
Technique used -Product diversification
Result-New product; market potential increases since no
brand of Gap (Gap, Old Navy, Banana Republic) was
specifically targeted toward women over 35.
13. Campbell developed advertising campaign for
its soups.
Technique used-Market penetration
Result-No product modification; no change in
soup market potential.1
14. Hasbro (toy company) launched baby care
products under Playskool brand.
Technique used-Product diversification
Result-New product line; market potential
increasing from toys to toys + baby care.
15. Coca-Cola launched Diet Coke Sweetened with
Splenda
Technique used-Product development
Result-New product; still in soft drink market (or
even diet soft drink market), hence no increase in
market potential.
16. Frito-Lay removed trans fats from its salty snack products.
Technique used- Product development
Result-Products were modified without introducing new
brands; no change in market potential. Still salty snack
foods market and even those non-buyers who didn't
buy for health reasons, say concern over trans fat, were
in Frito-Lay's target market. Indeed, this was a way to
reach those non-buyers.
17. Nintendo launched DS hand-held game device.
Technique used-Product development
Result-New product; no change in market potential since
Nintendo already sold Game Boy and thus had hand-
held game devices as a target market.
18. Unilever introduced Sunsilk shampoo in US. Was sold in
Europe, Latin America and Asia.
Technique used-Market development
Result-Product not modified; expansion to US increased
market potential.
19. What is global strategy?
'Global Strategy' is a shortened term that covers three
areas: global, multinational and international
strategies. Essentially, these three areas refer to those
strategies designed to enable an organisation to achieve
its objective of international expansion
20. International- For example, a dairy company might sell some of
its excess milk and cheese supplies outside its home country.
But its main strategic focus is still directed to the home
market.
In South Korea, international and global soft drinks strategy
will involve mixing both the global brands
like Coke and Sprite with the local brands like Pocara Sweat.
21. Multinational strategy-For example, a car company
might have one strategy for the India- smaller
cars, fuel efficient - with another for European
markets - specialist cars, higher prices - and yet
another for developing countries - simple, low
priced cars.Example โTATA Nao Europa
22. Global strategy. For example, the luxury goods
company Gucchi sells essentially the same
products in every country.