Growth Strategies

Presented By:Rajesh SainiR.No. 01213030

Growth Strategy- An organization substantially broadens the scope of one or more of its business in terms of their respective customer group, customer functions and alternative technologies to improve its overall performance.

Types of Growth Strategies Internal External

Definitions

Intensive/Internal Growth

Expansion

Modernisation

Diversification

External/Integrative

Growth

Merger

Acquisition

Joint Ventures

Internal Growth Stratégies

Internal growth strategies relate to the following actions:-

Designing and developing new products/services Building on existing products/services for new

opportunities Increase sales of products/services through better

market reach Expanding existing product lines and service offerings Reaching out for new markets Expansion into foreign markets

Expansion Strategy

Increase sales through effective marketing strategies within the current target market

1. To maintain or grow the market share of the current product range2. Become the dominant player in the growth markets3. Drive out competitors4. Increase the usage of a company's products by its current customers

Market Penetration

Expand sales in new markets through expanding geographic representation

An organization's current product can be changed improved and marketed to the existing market.

The product can also be targeted to anther customer segment. Either way, both strategies can lead to additional earnings for the business.

Market Development

Increase sales through new products/services An organization that already has a market for

its products might try and follow a strategy of developing additional products, aimed at it's current market.

Even if the new products are need not be new to the market, they remain new to the business.

Product Development

Diversification Strategy is the development of new products in the new market. Diversification strategy is adopted by the company if the current market is saturated due to which revenues and profits are lower.

It is of two types:- Concentric: Diversification of operations in related

goods and services. Conglomerate : Diversifying the operations in

unrelated goods and services. For Ex: Tata, Reliance

Diversification

Virgin Media moved from music producing to travels and mobile phones

Walt Disney moved from producing animated movies to theme parks and vacation properties

Canon diversified from a camera-making company into producing whole new range of office equipment.

Diversification strategy examples

Merger

The combining of two or more companies. In merger two companies agree to move ahead and exist as a single new company.

Example: Glaxo Wellcome + SmithKline Beecham =

GlaxoSmithKline

Benefits of M&A

Diversification of product and service offerings

Economies of scale

Increase in plant capacity

Acquiring new technology

Improved market reach and industry visibility

Acquisition When one company takes over another company and clearly establishes itself as the new owner, the purchase is called an acquisition.

Acquisition can be friendly or Hostile.

Example: Acquisition of Corus by Tata Steel.

Type of Acquisition: Hostile Takeover A takeover attempt

that is strongly resisted by the target firm

Friendly Takeover Target company's

management and board of directors agree to a merger or acquisition by another company.

Joint Ventures A joint venture is an entity created when two or more firms

pool a portion of their resources to create a separate, jointly owned organization. All involved will have an equity stake in the new venture

It is a legal partnership between two(or more) companies where in they both make a new (third) entity for competitive advantage

Unlike mergers and acquisitions, in joint venture the parent companies does not cease to exist

Joint Ventures

A joint venture may be formed to:

run production facilities in

another countryestablish a

marketing and distribution presence

use complementary technologies held by

each participant.

Why Joint Venture?

Provide companies with the opportunity to gain new capacity and expertise.

Allow companies to enter related businesses or new geographic markets or gain new technological knowledge.

access to greater resources, including specialised staff and technology.

sharing of risks with a venture partner. Joint ventures can be flexible. For example, a joint venture

can have a limited life span and only cover part of what you do, thus limiting both your commitment and the business' exposure.

Advantages

It takes time and effort to build the right relationship and partnering with another business can be challenging.

There is an imbalance in levels of expertise, investment or assets brought into the venture by the different partners.

Different cultures and management styles result in poor integration and co-operation.

Potential financial losses if project fails.

Disadvantages