Top 10 Strategies for Growth of Business
Strategy is a plan of action designed to achieve a particular goal. Business growth strategy is a practical approach to achieve growth in business. Some of the popular growth strategies are discussed below.
Diversification is high risk growth strategy. Entrepreneurs can enter into new field of activity either in terms of Technology or market. It helps in effective utilization of firm’s resources. It minimizes the risk involved in the business.
Diversification employees growth in unrelated businesses. It results in introduction of total risk through substantial reduction of cyclicality of operations.
Louis Philippe the premium apparel brand from Madura garment’s entry into footwear industry.
2. Market development
An Entrepreneur can attempt to develop a new market for their existing products and services. The new market can be geographical (eg. foreign export) or an untapped segment of a domestic market. It is possible to develop a new market for existing products by adjusting the product’s packaging for expanding the product’s distribution channels.
Such strategies are adopted by companies like Godrej, Tata, Kisan to increase their revenues.
3. Product development
An entrepreneur instead of finding a new market with existing products can bring out a new product in a market.
Nokia’s introduction of Qwerty device with keypad similar to computer keyboard. Its target market is on youth and executives who often use chat and email services more than making calls.
4. Market Penetration
An entrepreneur through a Market Penetration strategy can aim for a greater percentage of market share. This type of strategy usually seeks to gain a competitive edge through pricing, marketing, or other initiatives.
Market Penetration strategy helps to increase market share of the current product or services in the existing market. Market Penetration strategy can be implemented by offering sales, increase in sales-force, increasing expenditure on distribution and promotion of products. More expenditure in marketing and Advertising activities will result in increasing sales.
5. Joint Venture
In a joint venture, two or more “parent” companies agree to share capital, technology, human resources, risks and rewards in a formation of a new entity under shared control. It allows enterprises to enter into related businesses or new geographic markets or obtain new technological knowledge. It reduces the risk involved in business.
Some popular joint ventures are discussed below.
- Tata Motors & Fiat: The JVresults in manufacture of cars from Tata & Fiat stables. Tata Motors also buys diesel engines for it cars from Fiat, while fiat distributes Tata cars in Europe.
- Mahindra & Renault: This JV was the market entry strategy for Renault. This JV manufactures Renault’s Logan cars in India. Renault gains market knowledge while Mahindra learn how to make good cars, and leverage its dealership network to additional profits.
Merger is the combination of merging two or more existing enterprises into one. Mergers may be horizontal, vertical, and conglomerate depending on the nature of the merging companies. Merger helps in enhancement of market share and reduces competition. It helps to enjoy economies of scale.
For example, merger of Hindustan Computers Ltd, Hindustan Instruments Ltd, Indian Software Company Ltd and Indian Reprographics Ltd into an entirely new company called HCL Ltd.
The three major types of mergers are as follows.
1. Horizontal merger
Horizontal merger is a combination of two or more firms in the same area of business. For example, two publishers combine together to gain dominant market share.
2. Vertical merger
Vertical merger is a combination of two or more firms involved in different stages of production or .distribution of the same product. For example, joining of a TV manufacturing company and a TV marketing company.
3. Conglomerate merger
Conglomerate merger is a combination of firms engaged in unrelated lines of business activity.
Franchising is a well-known business strategy. This strategy can be opted by small businesses by having a brand name of a well-known company associated with it. Running a small business under the franchisor’s name and organization is very beneficial for businesses that can’t afford much finance and capital investment for their own business. Buying a franchise can be a shortcut to success.
8. Niche Market
A niche market is a specialized market segment where entrepreneurs can cater to the demand of products and services that are not currently being supplied by the main suppliers. It is essentially a narrowly defined market segment. It involves identifying a place in the market where no business owner is serving it.
The great advantage of being the sole supplier is like being a single dominant supplier in the target market.
Small businesses can capitalize on this and develop a niche market where customers are accessible and which are not already owned by an established vendors or big businesses.
Pinpointing a market segment that is growing requires doing some research. It is necessary to track customer behavior and buying patterns, identify demographic changes, and determine the size of the target audience. Background work is essential. The product features should be tailor-made and it should suit the requirements of the target market.
For example, establishing a boutique in an area that satisfies the need of the customers in that local area is an effective niche strategy.
Advantages of niche marketing
Niche marketing is a very effective means of advertising as it focuses on a specific target group. It helps to address the unique requirements of that target group. An entrepreneur by focusing on niche market and by being a Nichepreneur can enjoy certain benefits. They are as follows:
1. Fewer Competitors
An entrepreneur concentrates only on a smaller market segment. The entrepreneur faces less competition as the majority of business owners concentrate on the marketplace as a whole.
2. Dominant position
An entrepreneur can occupy the dominant position in the market by focusing on a small segment.
3. More Efficient
A Nichepreneur focuses his or her efforts and practice in one narrow area. This helps the entrepreneur to run business efficiently.
The entrepreneur can enjoy more profits by concentrating in a narrow segment and focusing the efforts towards the target market.
An entrepreneur by positioning himself as an expert sets apart from the crowd. The entrepreneur puts himself in a position of prominence and enjoys visibility and recognition in the market.
6. Establishing brand
An entrepreneur can establish own market, create a brand and set a standard.
Networking leads to referral business and referral business leads to increased customer satisfaction and loyalty. A chain of contacts helps in developing networks. It involves retaining the old contacts and developing new contacts and enlarging the network base. The network can comprise of customers, suppliers, retailers, wholesalers, government agencies and non-government organizations.
Networking is a business strategy by which business opportunities are created through networks of like-minded business people. It is the process of establishing a mutually beneficial relationship with other business people and potential clients and/or customers. The best business networking groups operate as exchanges of business information, ideas, and support.
Attending parties, joining clubs, attending seminars, visiting exhibitions can help to develop contacts. Networking helps to solve the problems and identify opportunities in the business environment.
Amway and Tupperware are the examples of networking business.
Advantages of Networking
1. Increase in revenue: Networking helps to increase business revenue.
2. Mutual benefit: Many business owners choose to become part of organizations such as their local Chamber of Commerce. It helps the like minded business people to band together for their own protection.
3. Increase in customer base: A business owner who is well-versed in networking skills can be assured of a profitable business climate and a steady stream of both new customers and repeat business.
10. Geographic Concentration
The concentration of industries in a certain geographic region is known as geographic concentration. We can find textile industries in Coimbatore, crackers in Sivakasi, garment industries in Tirupur etc. Geographic concentration may arise either due to the initiatives taken by the government or as a result of natural forces.
For example, at T.Nagar in Chennai, India, one can find many jewellery and textile show rooms. Guindy industrial estate, Tidel Park, SIPCOT, are the examples of geographic concentration. Similarly, the industrial estate developed by the government falls under this category.
Advantages of Geographic Concentration
1. Large customer base
There will be large number of people floating to that area. So firms can enjoy a large customer base.
2. Redaction in cost
Firms can reduce the costs of marketing as it is not necessary for entrepreneurs to attract customers. Advertisement given by one firm may become attractive to another firm.
3. Economies of scale
Large geographic concentration of similar firms can also provide scale economies in the production of shared inputs. Firms can utilize the same technologies and collaborate with one another to share information on the similar problems faced by them and find ways to develop new technologies.
4. Better amenities
Certain amenities like water, electricity, Infrastructure, effective services like transport, banks are provided by the government to enhance entrepreneurship in such regions.
Large geographic concentration of similar firms can also enjoy the following benefits:
- Availability of financial institutions to facilitate the growth of industries
- Availability of commercial selling agencies.
- Vicinity of markets for finished goods.
- Well connected roads and railways lines.
- Availability of raw materials, man power and electric power.
- Availability of skilled laborers at economic rates.
- Top 10 Strategies for Growth of Business
- 1. Diversification
- 2. Market development
- 3. Product development
- 4. Market Penetration
- 5. Joint Venture
- 6. Mergers
- 7. Franchising
- 8. Niche Market
- 9. Networking
- 10. Geographic Concentration