The materials are very good for understanding growth strategy

1. Chapter 11: Strategies for a firm’s growth
By:
Teshale L. (MBA- Marketing Mgt)
Monday, March 11, 2024 1
Lecturer Teshale L. (MBA in Mkg MGT)

2. Introduction
 The term strategy means a well-planned, deliberate and
overall course of action to achieve specific objectives.
 A growth strategy is one that an enterprise pursues when it
increases its level of objectives upward, much higher than an
exploration of its past achievement level.
 Growth Strategy is pursued to reduce the cost of production
per unit.
 Growth strategies involve a significant increase in
performance objectives.
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Lecturer Teshale L. (MBA in Mkg MGT)

3. Introduction cont…
 Growth strategies are adopted when firms remarkably
broaden the scope of their customer groups, customer
functions and alternative technologies either singly or in
combination with each other.
 Growth strategy can be adopted in the form of expansion,
vertical integration, diversification, merger, acquisition
and joint venture.
 ‘Growth Strategy’ refers to a strategic plan formulated
and implemented for expanding firm’s business.
 Every firm has to develop its own growth strategy
according to its own characteristics and environment.
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Lecturer Teshale L. (MBA in Mkg MGT)

4. Growth strategies
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Lecturer Teshale L. (MBA in Mkg MGT)
Internal growth strategy:-
• refers to the growth within
the organisation by using
internal resources.
• focus on developing new
products, increasing efficiency,
hiring the right people, better
marketing etc.
•can take place either by
expansion/intensive strategy,
diversification and
modernisation.
External growth strategy:- Sometimes, a
firm intends to grow externally when it
take over the operations of another
firm. Such growth may be possible via
mergers, takeovers, joint ventures,
strategic alliances etc. Such growth is
called ‘inorganic growth’. Firms generally
prefer the external growth strategies for
quick growth of market share, profits and
cash flows.

5. Internal growth strategy
Expansion Strategies/Intensive Growth Strategies
 Business expansion refers to raising the market share, sales
revenue and profit of the present product or services.
A. Market penetration strategy- involves selling existing products
to existing markets. To penetrate and capture the market, a firm
may cut prices, improve distribution network, increase
promotional activities etc.
B. Market Development strategy- involves extending existing
products to new market. It aims at reaching new customer
segments or expansion into new geographic areas. In other
words, aims to increase sales by capturing new market area.
C. Product Development strategy- involves developing new
products for existing markets or for new markets. Product
development means making some modifications in the existing
product to give value to the customers for their purchase.
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Lecturer Teshale L. (MBA in Mkg MGT)

6. Internal growth strategy Cont…
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Diversification
 Its purpose is to allow the company to enter new lines of business
that are different from current operations.
 Types of diversification: vertical, horizontal, concentric, and
conglomerate diversifications.
1. Vertical Diversification/Integration- new products or services
are added which are complementary to the present product line
or service. Its purpose is to improve economic and marketing
ability of the firm.
 Vertical diversification includes: backward & forward
integrations.
• Backward integration- example: despite of being the leaders in
textiles, to strengthen it position, decided to produce fibres.
• Forward Integration- rather than only using distributes; having
access to retail stores, sales staff and in store promoters.
Lecturer Teshale L. (MBA in Mkg MGT)

7. Internal growth strategy Cont…
Diversification cont…
2. Horizontal Diversification- involves addition of parallel
products to the existing product line.
 For example: A company, manufacturing refrigerator may enter
into manufacturing air conditioners.
 Its purpose is to expand market area and to cut down competition.
3. Concentric diversification: this is when a firm diversifies into
business, which is related with its present business. It is an
extreme form of horizontal diversification.
4. Conglomerate diversification- this occurs when a firm diversifies
into business which is not related to its existing business both in
terms of marketing and technology.
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8. External growth strategies
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1. Merger- refers to a combination of two or more
similarly sized companies into a single/one/ company.
 If as a result of a merger, a new company comes into
existence it is called as ‘amalgamation’.
• Motives for Merger- Strategic motives, financial
motives, and organizational motives.
2. Takeover- takes place when a business buys a small
business. Its main objective is to obtain legal control of
the company.
3. Acquisition- occurs when a business buys part of another
business.
Lecturer Teshale L. (MBA in Mkg MGT)

9. External growth strategies Cont…
4. Joint Venture-
 All joint ventures are typically characterized by two or more
ventures being bound by a contractual arrangement which
establishes joint control.
 Joint venture may give protective or participating rights to
the parties to the venture.
5. Strategic Alliances-
 An ‘alliance’ is defined as associations to further the
common interests of the members.
 Strategic alliance is an arrangement or agreement under which
two or more firms cooperate in order to achieve certain
commercial objectives.
 The motives behind strategic alliances are to reduce cost,
technology sharing, product development, market access,
availability of capital, risk sharing etc.
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Lecturer Teshale L. (MBA in Mkg MGT)

10. External growth strategies Cont…
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Lecturer Teshale L. (MBA in Mkg MGT)
6. Franchising
 The concept of franchising is quite comprehensive and
covers an extensive range of marketing and distribution
arrangements for goods and services.
 Franchises are becoming a key mechanism for
technological, marketing and service linkages between
enterprises within a country as well as globally.
7. Licensing Agreement
 Licensing is a business arrangement in which one
company gives another company permission to
manufacture its product for a specified payment.

11. THANK YOU ALL!!
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Lecturer Teshale L. (MBA in Mkg MGT)