The document discusses different growth strategies businesses can pursue, including market penetration, market development, product development, and diversification. It also outlines Porter's generic strategies of cost leadership, differentiation, and focus. Finally, it discusses strategic alliances using examples from Starbucks and Microsoft and the concept of economies of scale in production.

1. 1.7 Growth and
Evolution
By Alex Arancibia, for Nuevo Mundo High School
Sources:
Business and Management for IB, Paul Hoang, 2007
Business and Management for IB, Peter Stimpson, 2011
Business and Management for IB, Paul Clark, 2009
Business and Management for the IB Diploma, Lloyd Gutteridge, 2009

2. THE ANSOFF MATRIX

3. Market Penetration
The business focuses on selling existing products into existing
markets.
Market penetration seeks to achieve four main objectives:
• Maintain or increase the market share of current products – this
can be achieved by a combination of competitive pricing strategies,
advertising, sales promotion and perhaps more resources dedicated
to personal selling
• Secure dominance of growth markets
• Restructure a mature market by driving out competitors; this
would require a much more aggressive promotional campaign,
supported by a pricing strategy designed to make the market
unattractive for competitors
• Increase usage by existing customers – for example by
introducing loyalty schemes

4. Market Development
It's the name given to a growth strategy where the business seeks to sell
its existing products into new markets.
There are many possible ways of approaching this strategy, including:
• New geographical markets; for example exporting the product to a
new country
• New product dimensions or packaging
• New distribution channels
• Different pricing policies to attract different customers or create
new market segments

5. Product development
It's the name given to a growth
strategy where a business aims to
introduce new products into
existing markets.
• This strategy may require the
development of new competencies
and requires the business to
develop modified products which
can appeal to existing markets.

6. Diversification
• It's the name given to the growth strategy
where a business markets new products in new
markets.
• This is an inherently more risk strategy
because the business is moving into markets in
which it has little or no experience.
• For a business to adopt a diversification
strategy, therefore, it must have a clear idea
about what it expects to gain from the strategy
and an honest assessment of the risks.

7. Strategic Alliance
Starbucks
According to Rebecca Larson, assistant Professor of Business
at Liberty University, Starbucks partnered with Barnes and
Nobles bookstores in 1993 to provide in-house coffee shops,
benefiting both retailers. In 1996, Starbucks partnered with
Pepsico to bottle, distribute and sell the popular coffee-
based drink, Frappacino. A Starbucks-United Airlines
alliance has resulted in their coffee being offered on flights
with the Starbucks logo on the cups and a partnership with
Kraft foods has resulted in Starbucks coffee being marketed
in grocery stores. In 2006, Starbucks formed an alliance with
the NAACP, the sole purpose of which was to advance the
company's and the NAACP's goals of social and economic
justice.

8. Strategic Alliance
In R&D: Microsoft and Nokia- a
software partnership forNokia’s
Windows Phones.
WATCH VIDEO

9. Porter's Generic Strategies
1. Cost Leadership
2. Differentiation
3. Focus

10. Cost Leadership
Being the lowest-cost producer in the
industry for a certain level of product
quality will allow the firm to make higher
profits than rivals or, if it lowers its prices
below the average of competitors, to
increase market share.

11. Cost Leadership
Cost leadership often stems from the following
internal strengths:
● high levels of investment in advanced
production methods, requiring access to much
capital
● efficient production methods, e.g. low stock
levels and low numbers of components used to
shorten the production process
● efficient distribution channels, e.g. Ryanair only
uses the internet for selling tickets and
communicating with customers.

12. Differentiation
This strategy involves developing a product
or service that offers unique features
valued by customers. The value added to
the product or service by these features
may allow the firm to charge a premium
price for it.

13. Differentiation
Apple’s constant research into innovative products
allows it to charge high prices for its
differentiated products. A differentiation strategy
often results from the following internal
strengths:
● excellent research and development facilities
and a track record in developing unique
products
● corporate reputation for innovation and quality
● strong sales team able to promote the perceived
strengths of the brand and the products.

14. Focus (a.k.a Niche)
This concentrates on a narrow market
segment, aiming to achieve either a cost
advantage or differentiation. This can lead
to a high degree of customer loyalty within
the market segment.

15. Focus (a.k.a Niche)
This concentrates on a narrow market
segment, aiming to achieve either a cost
advantage or differentiation. This can lead
to a high degree of customer loyalty within
the market segment.

16. Economies of Scale

17. Economies of Scale
Operating at full capacity Ben Rishi is operations manager for a factory
making saucepans. The weekly maximum capacity of the factory is
3000 units. The main limit on capacity is the old-fashioned machine
for stamping out the metal pans from sheet metal. Purchasing
another machine would be expensive – and would require an
extension to the building. Workers are working very long shifts. Ben
has also been working long days to ensure that all the factory works
at full capacity. For the last three months, demand has been high and
last week there were orders for 3100 pots. Ben is under pressure
from his managing director to see that this number is produced. Ben
is unsure whether to recommend purchasing the new machine or to
buy in components from another fi rm in the city that has spare
capacity.