Business Growth Strategies

STAGES OF BUSINESS GROWTH

Stages of Business Growth

• Start up – Define product and market niche

– Create your business model

– Prepare your business plan. Build management team

– Protect your competitive advantage

– Raise capital

– Create your brand, produce and differentiate your products

• Initial Growth – Capture market share, launch differentiated product

– Gain repeat customers, expand channels and revenues

– Expand management team, train employees

– Start inventing your second stage of growth

Stages of Business Growth

• Rapid Growth – Reinvent product and competitive strategies

– Cultivate leaders, empower employees

– Broaden lines, expand territories

– Inject relentless growth attitudes in your people

• Continuous Growth – Build a balanced business system

– Keep reinventing your growth strategies

– Establish a responsive innovation system

– Develop Capability for Flexibility and speed

PRODUCT LIFE CYCLE

Introduction

• Market size and growth is slight.

• Marketing costs may be high

• Distribution is selective.

• Profit is not likely.

Growth

• Characterised by rapid growth in sales and profits.

• Profits arise due to an increase in output (economies of scale)and possibly better prices.

• It is cheaper for businesses to invest in increasing their market share

• Increase in distribution channel as demand increase.

Maturity

• Competition is most intense as companies fight to maintain their market share.

• Both marketing and finance become key activities.

• The most profit is earned by the industry as a whole.

• Distribution channel becomes intense

• Research pours into product modification and improvement and perhaps to improve production efficiency and quality.

Decline

• Market is shrinking, reducing the overall amount of profit that can be shared amongst the remaining competitors.

• Newer and better products are available

• There should be a plan to exit the market if not profitable anymore

BUSINESS GROWTH STRATEGIES

Growth Strategies

• Market Penetration. – The least risky growth strategy for any business is to simply sell more

of its current product to its current customer.

• New Products for existing customers – it involves developing new products to sell to your existing customers

as well as to new ones.

• New Products for New Customers. – Sometimes, market conditions dictate that you must create new products for

new customers, eg Toyota and Lexus

• Alternative Channels. – This growth strategy involves pursuing customers in a different way such as,

for example, selling your products online.

• Diversification – This is when you decide to be a part of many unrelated businesses. The

Dangote group is an example with investments in noodles, transport, cement, etc same with the Honeywell Group with Investments in Oil and Gas, Flour Mills. Noodles production, Real Estate etc

• Integrative Growth Strategies – Every market structure has Value chain( suppliers), Competitors – Large and

Small and those who provide value add to their products. Eg will be software for PCs, ring tones to telecoms.

– What is a value chain------

– What is value add

– One may seek growth by either building partnership and Alliances with some of the other players in the industry, or pure merge or acquire them

Growth Strategies

• Horizontal Integration – This growth strategy would involve buying a competing business or

businesses.

– A variation of this is Acquisition, where one company acquires the other and Mergers where two equals agree to go together.

• Backward Integration – A backward integrative growth strategy would involve buying one of your

suppliers as a way to better control your supply chain.

– Doing so could help you to develop new products faster and potentially more cheaply.

– It could help reduce your cost.

• Forward Integration

– Acquisitions can also be focused on buying component companies that are part of your distribution chain

Growth Strategies

FOOD FOR THOUGHT

Food for thoughts

• What are the Market Trends?

• What do they suggest?

• What is the product lifecycle of the market?

• What is the market size?

• How many competitors?

• What is our market share?

• What is our stage of business growth?

Final Words

What three things should we do to increase our market share, sales and profits?

Femi Olaiya femi@redwdood-consulting.com www.redwood-consulting.com