Which strategy involves company growth through starting up or acquiring businesses outside the companys current products and markets?

Most small companies have plans to grow their business and increase sales and profits. However, there are certain methods companies must use for implementing a growth strategy. The method a company uses to expand its business is largely contingent upon its financial situation, the competition and even government regulation. Some common growth strategies in business include market penetration, market expansion, product expansion, diversification and acquisition.

Market Penetration Strategy

One growth strategy in business is market penetration. A small company uses a market penetration strategy when it decides to market existing products within the same market it has been using. The only way to grow using existing products and markets is to increase market share, according to small business experts. Market share is the percent of unit and dollar sales a company holds within a certain market vs. all other competitors.

One way to increase market share is by lowering prices. For example, in markets where there is little differentiation among products, a lower price may help a company increase its share of the market.

Market Expansion or Development

A market expansion growth strategy, often called market development, entails selling current products in a new market. There several reasons why a company may consider a market expansion strategy. First, the competition may be such that there is no room for growth within the current market. If a business does not find new markets for its products, it cannot increase sales or profits.

A small company may also use a market expansion strategy if it finds new uses for its product. For example, a small soap distributor that sells to retail stores may discover that factory workers also use its product.

Product Expansion Strategy

A small company may also expand its product line or add new features to increase its sales and profits. When small companies employ a product expansion strategy, also known as product development, they continue selling within the existing market. A product expansion growth strategy often works well when technology starts to change. A small company may also be forced to add new products as older ones become outmoded.

Growth Through Diversification 

Growth strategies in business also include diversification, where a small company will sell new products to new markets. This type of strategy can be very risky. A small company will need to plan carefully when using a diversification growth strategy. Marketing research is essential because a company will need to determine if consumers in the new market will potentially like the new products.

Acquisition of Other Companies

Growth strategies in business can also includes an acquisition. In acquisition, a company purchases another company to expand its operations. A small company may use this type of strategy to expand its product line and enter new markets. An acquisition growth strategy can be risky, but not as risky as a diversification strategy.

One reason is that the products and market are already established. A company must know exactly what it wants to achieve when using an acquisition strategy, mainly because of the significant investment required to implement it.

Do you want to grow your company? Due to personal ambition, because an opportunity has presented itself, or simply to increase your turnover? Whatever your motivation, there are various ways to grow a company.

The Ansoff model

These ways are clearly presented in the Ansoff model, a strategic tool used during the development of a growth strategy. It is a good basis for considering the strategic development of your company.

The Ansoff growth matrix is comprised of two axes

• Products:
  Which products do you currently offer, and which new products would you like to offer in the future?

• The market:
  Which markets do you currently serve, and which markets would you like to serve in the future?

The four growth strategies

Four types of growth strategies are proposed on this basis. The four main growth strategies are as follows:

• Market penetration

  The aim of this strategy is to increase sales of existing products or services on existing markets, and thus to increase your market share.  To do this, you can attract customers away from your competitors and/or make sure that your own customers buy your existing products or services more often. This can be accomplished by a price decrease, an increase in promotion and distribution support; the acquisition of a rival in the same market or modest product refinements.

• Market development

  This means increasing sales of existing products or services on previously unexplored markets. Market expansion involves an analysis of the way in which a company's existing offer can be sold on new markets, or how to grow the existing market. This can be accomplished by different customer segments ;  industrial buyers for a good that was previously sold only to the households; New areas or regions about of the country ; Foreign markets

• Product development

  The objective is to launch new products or services on existing markets. Product development may be used to extend the offer proposed to current customers with the aim of increasing their turnover. These products may be obtained by: Investment in research and development of additional products; Acquisition of rights to produce someone else's product; Buying in the product and "branding" it;  Joint development with ownership of another company who need access to the firm's distribution channels or brands.

• Diversification

  This means launching new products or services on previously unexplored markets. Diversification is the riskiest strategy. It involves the marketing, by the company, of completely new products and services on a completely unknown market.
  Diversification may be divided into further categories:

  • Horizontal diversification

    This involves the purchase or development of new products by the company, with the aim of selling them to existing customer groups.  These new products are often technologically or commercially unrelated to current products but that may appeal to current customers. For example, a company that was making notebooks earlier may also enter the pen market with its new product.

  • Vertical diversification

    The company enters the sector of its suppliers or of its customers.For example, if you have a company that does reconstruction of houses and offices and you start selling paints and other construction materials for use in this business.

  • Concentric diversification

    Concentric diversification involves the development of a new line of products or services with technical and/or commercial similarities to an existing range of products. This type of diversification is often used by small producers of consumer goods, e.g. a bakery starts producing pastries or dough products.

  • Conglomerate diversification

    Is moving to new products or services that have no technological or commercial relation with current products, equipment, distribution channels, but which may appeal to new groups of customers. The major motive behind this kind of diversification is the high return on investments in the new industry. It is often used by large companies looking for ways to balance their cyclical portfolio with their non-cyclical portfolio.

Conclusion

Based on the strategies used and its ambitions, a company can choose one of these four strategies. This choice especially depends on the approach of a company's product/market and the latter's taste for risk.

Is a company growth strategy achieved by increasing sales of current products to current market segments without changing product?

Which of the following external analysis tool determines the strategic position of the business brand portfolio and its potential using four different categories?

Which one of the following options represents the collection of businesses and products that make up a company?

Which of the following is an example of growth by diversification?