For smooth functioning of an alliance, partners are required to have preset priorities and expectations from each other. 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. Instead, the buttons need to be placed evidently so that your site visitors can complete the anticipated action. The company can expand sales through developing new products. Types of Diversification Strategy | Growth Strategy | Intensification A firm selecting an intensification strategy, concentrates on its primary line of business and looks for ways to meet its growth objectives by increasing its size of operations in its primary business. This is done by increasing its sales force, appointing new channel partners, sales agents or manufacturing representatives and by franchising its operation; or (b) the firm can expand sales by attracting new market segments. Other motives for international expansion include extending the product life cycle, securing key resources and using low-cost labour. Its just a plain case of being the biggest frog in the puddle. Cooperative strategies are used to gain competitive advantage by joining with one or two competitors against other competitors of the industry. If as a result of a merger, a new company comes into existence it is called as amalgamation. Internal. Such growth may be possible via mergers, takeovers, joint ventures, strategic alliances etc. Intensive Growth Strategy 9. Often, in such cases, a business consumes a lot of its resources without borrowing anything from outside to expand its operations and grow the company. This strategy seeks to enhance the long-term competitive advantage of the firm by forming alliances with its competitors existing or potential in critical areas instead of competing with others. (d) Results in improved supply of essential materials, components, plants etc. vertical integration with backward and forward linkages. For instance, a business that manufacturers walking sticks will treat elderlies as their target market. Where the company is closely held by small group of shareholders, the controlling interest is obtained by purchasing the shares of other shareholders. Type # 3. A good marketing strategy must tap all the bases. The motive of acquirer is to gain control over the board of directors of the target company for synergy in decision-making. It is a case of down-stream integration extends to those businesses that sell eventually to the consumer. Be the subject stage of the trade phase. 3. This combination may be either through absorption or consolidation. Organic growth is slower than inorganic growth, but it will take your business to the next step you were longing to go to, as well as maintain the control you have always had. All these factors are important to take in. DOCX NKT Degree College (b) Create different quality versions of the product. Its maintaining a steady rate of returns annually but not developing at the desired pace. Once you have researched enough to start implementing, you can think more clearly about what type of niche you want to conquer. Locating call-to-action buttons on your website shouldnt be a scavenger hunt. The contractual arrangements establish joint control over the joint venturers. The takeover bid is finalized with the consent of majority shareholders of the target company. The consideration is decided by having friendly negotiations. However, using only internal means to grow a company means growing at a very measured and organized pace. Growth strategies involve a significant increase in performance objectives. What is Diversification Strategy? (Definition and Examples) A company may be able to increase its current business by product improvement or introducing products with new features. All joint ventures are typically characterized by two or more ventures being bound by a contractual arrangement which establishes joint control. (g) Effective management of capacity imbalances. Another way to expand your insights for niche marketing is to aspect closely who your target audience is and recognize what they want and fulfill the need. Takeover may be defined as a transaction or series of transactions whereby an individual or group of individuals or company acquires control over the management of the company by acquiring equity shares carrying majority voting power. EconomicsDiscussion.net All rights reserved. Growth will accrue if the new products yield additional sales and market share. At the same time, companies must deal with land supply constraints, increases in space demand, and economic and population growth. All rights reserved. A new market is a section or demographic of people which your company hasnt captured yet. Franchising provides an immediate access to business operations and technology in profitable fields of operations. Joint ventures with multinational companies contribute to the expansion of production capacity, transfer of technology and capital and above all penetrating into global market. The growth. They are listed here: Theres nothing secretive about internal growth strategies. Merger is said to occur when two or more companies combine into one company. A joint venture by a domestic company with multinational company can allow the transfer of technology and reaching of global market. The first three strategies are usually pursued with the same technical, financial, and merchandising resources used for the original product line, whereas diversification usually requires a company to acquire new skills, new techniques, and new facilities. The research method used is a descriptive . Take the time to evaluate your sales numbers before increasing production since this strategy is one of the most expensive and long-lasting. STRATEGY FORMULATION LESSON NOTES.doc - STRATEGY Perhaps, the most important advantage of horizontal integration is that it eliminates or reduces competition. A business that operates in an expanding market can grow through market penetration. Learn how your comment data is processed. Disclaimer 8. Entering into a Joint venture is a part of strategic business policy to diversity and enter into new markets, acquire finance, technology, patent and brand names. However, while going in for internal expansion, the management should consider the following factors. Keeping your site optimized well, as a direct result, will help to drive organic traffic over time and start showing growth results. Meaning of Expansion Strategy | PDF Attractive product design, high product quality, attractive prices, stronger advertising, and wider distribution can assist an enterprise in gaining lead over its competitors. This includes increasing production value, creating new products or services, or focussing on other developmental strategies. This will help your company not only to continue doing business with them but also maintain the relationship. Better control and coordination: companies can maintain control and ownership, whereas inorganic approaches lead to loss of control and ownership. Image Guidelines 4. Examples of successful growth strategies. The company can create different or improved versions of the currents products. 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. Price concessions, better customer service, increasing publicity and other techniques can be useful in this effort. Concentration or intensification strategy is the one in which organization seeks growth by focusing on . Comparatively inexpensive: The resource is obtained from retained profits, a smaller amount of risk is involved of capital and is relatively lower than outward growth. But it can be broadly categorized into three: The operation of some joint ventures involves the use of the assets and other resources of the venturers rather than the establishment of a corporation, partnership or other entity or a financial structure that is separate from the venturers themselves. Motivating the existing customers to buy its product more frequently and in larger quantities. (b) Whether the market wants the new product or service which we offer? To achieve this, youll need to shape your calls to action that stays with your readers. Having a good call to action (CTA) is crucial for growing your business organically and increasing online sales. Doing so will help retain the customers trust and loyalty. When a firm believes that there exist ample opportunities by aggressively exploiting its current products and current markets, it pursues market penetration approach. Content Filtration 6. before, a firm may enter into new markets, introduce new product lines, serve additional. You might also enjoy these popular startup growth-related articles Types Of Business Growth Explained, 11 External Growth Strategies For Businesses and What Is Market Penetration Growth Strategy? Most tend to be patents, trademarks, or technical know-how that are granted to the licensee for a specified time in return for a royalty. Consequently, tender offers are used to carry out hostile takeovers. The lead financial institution will evaluate the bids received for acquisition, the financial position and track record of the acquirer. Technological, social and demographic trends should be carefully monitored before implementing product or market development strategies. Activities, which have no contractual arrangements to establish joint control, are not joint ventures. You should always strive to evoke an emotional response from the targeted customers. Increasing its efforts to attract its competitors customers. The partners in joint venture will provide risk capital, technology, patent, trade mark, brand names and allow both the partners to reap benefit to agreed share. Maybe youve hit a deadlock at your business. The development of new markets for the product may be a good strategy if the firms core competencies are related more to the specific product than to its experience with a specific market segment or when new markets offer better growth prospects compared to the existing ones. In diversification, firm acquires ownership or control over another firm against the wishes of the latters management. Another one of the best low-cost internal growth strategies is to increase your companys current market share. Acquirer makes a direct offer to the shareholders of the target company without the prior consent of the existing promoter/management. Always plan quick sit-downs with your staff members every few days as you deem possible to get their feedback, which may give you some innovative idea that you had not thought of or reaffirm what you had thought of initially. However, internal growth is generally viable and can help improve the companys overall growth. Concentration Expansion Strategy, Types of Growth Strategies 3 Important Types: Intensive Growth Strategies, Integrative Growth Strategies and Diversification Growth Strategies (With Examples). The integrative growth strategies are designed to achieve increase in sales, assets and profits. The company taken over remains in existence as a separate entity unless a merger takes place. If neither of these offers sufficient potential, a business may consider diversification to achieve further growth. Intensification Growth Strategies in Automotive Repair The most suitable may be derived only after all the variables have been considered. Describe the gandhian principle of self reliance In a purchase of assets, one firm acquires the assets of another, though a formal vote by the shareholders of the firm being acquired is still needed. (6) _____ strategy helps to spread business risks. However, a business in a mature, stable market may choose to grow either through market development or product development depending on its internal strengths. The main objective of takeover bid is to obtain legal control of the company. In addition, allocation of decision-making powers to executives (reducing control of original owners) might occur. Assuming that you already have captured a great chunk of the prevailing demographic, you have some options to go about it: a) increase loyalty within the prevailing chunk of market share or magnify your share into another demographic. For example, lets say youre endorsing a new product you have launched recently on your website. Growth Strategy is pursued to reduce the cost of production per unit. The takeovers are subject to the regulations contained in SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997. Internal growth is the organic expansion of a business through calculated decision-making. Its, in essence, growing your sales from within using the resources you have, including skills, data, capabilities, connections, and other tools. TOPIC:- GROWTH /EXPANSATION STRATEGY. Traditional means of operating with little cultural diversity and without global competition are no longer effective firms. By doing so, it bypasses the incumbent management and board of directors of the target firm. Sometimes the acquirer may have tacit support of the financial institutions, banks, mutual funds, having sizable holding in the companys capital. Firms generally prefer the external growth strategies for quick growth of market share, profits and cash flows. In this form, a firm is acquired by its own management or by a group of investors, usually with a tender offer. Faster. Internal growth strategies provide companies with: Despite the rewards of organic growth, when equated to inorganic growth, there are still some limits associated with relying on this type of growth. To understand how different growth strategies work, let's look at some real-world examples. The most extreme practice of inorganic growth is the takeover, which will, in turn, expand its size and churn up the sales. The concept of alliance is gaining importance in infrastructure sectors, more particularly in the areas of power, oil and gas. Cooperative strategy is the third major alternative (internal growth and mergers and acquisitions are the other two) firms use to grow, develop value-creating competitive advantages, and create differences between them and competitors. Joint ventures with multinational companies contribute to the expansion of production capacity, transfer of technology and capital and above all penetrating into global market. what are the 4 external growth strategies a firm can chose?
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