What is a Growth Strategy?
Developing a growth strategy is essential for expansion. Growth strategies allow small businesses to compete with larger companies. In the past, it was nearly impossible to successfully launch a startup business to compete with dominant corporations.
The growth strategy is a strategic business technique that enables you to increase your marker share. It involves allocating resources to grow or expand your business.
In light of the information, growth planning is not a one-off function or technique. An effective growth strategy should merely focus on achieving your marketing goals. Especially if your company is still in the business development phase.
Establishing a business is the easy part; it becomes complicated once you become established. In terms of growth strategies, opportunities and resources are limited. That’s why you need to get creative if you want to grow your business successfully.
Purpose of Growth Strategies
There’s no such thing as a stable business environment. The marketplace will forever be subject to change; new companies will emerge, customers will come and go and products and services will eventually decline. Eventually, the market will shift. Therefore, as a business, you must establish growth strategies so your business can remain relevant!
Furthermore, most businesses need capital to launch their business, therefore, they turn to banks or investors for financial support. But both banks and investors want to know when will they receive their return on investment (ROI). They ask questions like, “where’s your business plan”? Or, “have you created a vision statement for your organization”? For this purpose, you may need a growth plan to pay back the bank or investors.
4 Fundamental Growth Strategies
The four fundamental or generic growth strategies are diversification, product development, market development, and market penetration. These methods are unique and require strategic planning skills. More specifically, your business needs to adapt to grow.
Examples of growth strategy include:
- Build a company in a strategic location, i.e, near target audience, cost-efficient
- Launch new product line
- Modify your current products
- Strategically merge with an organization
As mentioned earlier, growing a business is not a simple task. Expanding an organization requires patience, commitment, tactical planning, and perseverance.
More importantly, the planner should have a purported knowledge of growth planning; the strategist should possess strategic thinking competencies like intelligent opportunism, systems perspective, and intent-driven.
These maneuvers help you to react under pressure, in unknown situations, and in the spotlight. Listed below are 4 fundamental growth strategies.
1. Diversification (High risk)
You can use diversification at any stage of your business. However, it would be wiser to implement this high-risk growth strategy in time. Nonetheless, the decision is ultimately up to whoever develops the marketing plan.
Diversification is a high risk because it involves selling new products to a new market. Successful diversification requires trustworthy skills along with knowledge and technology that’s updated.
2. Product Development (Mild risk)
As you may already know, product development is the act of developing new products. However, when it comes to the growth strategy, your products need to produce profits. In other words, your products should essentially be the cornerstone of the organization’s growth.
The development of valuable products is the bread and butter for successful organizations. Successful companies understand the importance of developing valuable products. They know customers will come if they deliver valuable goods.
As an illustration, let’s examine 7- Eleven and other convenient stores. Fifteen years ago, convenience store owners began to realize that many customers were visiting their stores around breakfast and lunchtime. This led many store owners to convert to providing fresh food for their customers.
Most of these store owners did not have a hot food permit or have any interest in preparing meals. However, they came across an opportunity in the marketplace and took advantage. Keep in mind, you can include modifications to your model to generate more appeal.
3. Market Development
Market Development (low risk) The growth strategy known as market development involves selling to existing clients to attract new clientele. The process involves new geographical markets, new distribution channels, and differentiating pricing policies to compete within the marketplace.
4. Market Penetration
Market penetration is the safest of the four basic growth strategies. This strategy involves measuring how much your product(s) or services is being used by customers compared to the total estimated market for that specific product or service. It entails selling your current products to your existing customers.
Vertical integration is the ability to expand based on using a single business. This means being able to supply your own product and demands. Therefore, you can keep all business matters internal.
Horizontal integration is the opposite of verticle integration. This process involves operating in an existing market.