In a competitive market, growth is the primary objective of any business to ensure its existence. Growth opens up many opportunities for every organization’s employees to grow and expand. To grow efficiently, the company must provide the criteria to develop that need to be fulfill. Growing allows the business to sustain and improve the industry’s position both in the domestic and international markets. It is why an growth strategy is a viable option that is crucial to the business’s longevity. It helps the company increase the rate of profits, sales and market share by introducing new products, gaining access to new markets, utilizing the latest technologies, and gaining management skills.
The expansion strategy is a plan or draft the company can use to reach its long-term business goals. It allows the company to expand even when the business is at the maturation stage of its development. Growth strategies can create economies of scale and extend the company’s scope.
It reduces operating costs and can also boost an organization’s profits. Apart from that, it also maintains the reins over its external environment and safeguards its market share from aggressive competitors.
Reasons to Pursue Growth Strategy
An organization has a growth plan for these reasons.
1. Builds Strength
Growth is an element of strength. The growth is time and time again evaluated against the values that define the culture of the business. Therefore, a growing company considers as successful, whereas those unable to expand their operations are considered a failure.
2. Essential for Survival
Growth strategy is crucial in industries subject to constant environmental and technological changes. These industries must take advantage of every opportunity to combat challenges.
3. Employee Satisfaction
A growth strategy can boost the enthusiasm of top management. If an organization can grow in its particular field, its employees also achieve personal career development. It also creates opportunities for managers to show their talents.
4. Improves Productivity
According to the experience curve theory, over time, an organization’s dimensions and experience level increase efficiency while the costs decrease.
Issues Involved in Growth Strategy
1. Growing too Fast
Companies that are successful in their business and have great demand for their products or services are usually affected by this problem. Rapid growth can lead to grave issues for businesses that lack adequate contingency strategies. Companies growing too fast might have to endure massive consequences to be successful.
2. Expansion Capital
Sometimes, small companies require additional capital to keep their place in the growth stage. It can be challenging for unprepared companies to organize this capital for expansion, but it’s acceptable for companies with an effective contingency strategy. Businesses should regularly revise their business plans and change their marketing strategies to ensure enough financing.
3. Personnel Issues
Concerns regarding the staff of the organization are relevant. Employees must fulfil organizational goals and activities, such as new product development. Record-keeping, marketing, administration and more as the company expands.
4. Customer Service
In times of growth or expansion, organizations generally need more customer service, even though it is the primary aspect of the overall success of an organization. Companies need help to sustain their growth and also retain existing customers. Many employees are the primary reason behind this issue, as it allows for fulfilling their needs and demands.
5. Disagreements Between Owners
Numerous instances have proven that business ownership positioning, which worked quite well in the beginning stages of growth, has been progressively difficult as business issues get more complicated.
Types of Growth Strategy
Strategies for growth include:
- Intensive strategy.
- Diversification strategy,
- Integration strategy and
- Cooperation strategy.
1. Concentration Strategies
Another term for concentration strategy can be an intensive strategy. Intensive strategies aim to boost your market share for the business by introducing new services and products and increasing the variety of offerings offered by the business on the market. The company can provide innovative products to customers to satisfy their requirements and desires. It also plays an essential role in enhancing both sales and revenue of the company.
2. Diversification Strategies
In a diversification approach in a diversification strategy, the business enters new business lines from the existing business lines. It requires a different set of skills and capabilities apart from those already present. The organization includes new markets, products, services, and even changes within the production process of existing processes.
As part of the diversification strategy, The company’s goal is to create a new item or service to its existing. For instance, Reliance industries started in textiles with the Vimal brand. Later, an employer expanded it to Petrochemicals and Telecommunications (Reliance CDMA). Organized Retail (Reliance Retail). In the same way, Wipro has developed in Retail and FMCG. ITC has developed into cigarettes. FMCG (Biscuits, Oil) and Hotels.
Diversification strategies can be connected (concentric) if they utilize the capabilities and expertise already in place, or they may be independent (conglomerate). In the previous example, the growth of ITC across various FMCG industries is a form of diversification. However, expanding into Hotels is separate from diversification.
A diversification plan is an approach to growth. It is a significant improvement in the company’s performance from its previous levels in terms of profits and sales. The majority of companies employ growth strategies in one way or another. The reason for this is that the company’s shareholders and managers view growing strategies in a positive way. Growth in the bottom line (sales) accompanied by a stable or declining profit is suitable for those who invest in the business. An increase in sales will eventually result in a higher level of profitability for the company.
3. Integration Strategies
A company performs various functions, from sourcing raw materials to turning them into a final product and then marketing it to customers. The entire range of these actions is the chain that makes up a company.
Integration strategies are the efforts of the company to advance up or down the value chain and expand the company’s current operations. It allows the company to expand its operations and meet the requirements of its clients in a more efficient method. Integration can also be a diversification strategy since it enhances the company’s operations. It also broadens the capabilities of the business.
4. Cooperative Strategies
The word “cooperation” refers to initiatives by firms to continually interact with their competition so that the result is a higher value to the company’s clients. It is a method that allows companies to combine their resources in an approach that creates the most value for the people who are part of the business. A key element of cooperation in an organization is the presence of a common purpose. When working with rivals, the company can give quality services to its customers at a lower cost than would otherwise be the case.
Collaboration is emerging as an effective strategy, at least on the Indian corporate scene and globally. Cooperative relationships connect organizations. They continuously interact with both their internal as well as their external stakeholders. Organizations establish meaningful partnerships with their stakeholders and successfully achieve their common goals through collaboration. Collaboration can be a crucial strategy to connect stakeholders and overcome the uncertainty of the context.