What is Growth Strategy
Growth strategy is a corporate strategy that focused on expanding the business or increasing revenue in various ways. The company adopts the growth strategy when they need to increase the size or scope of the business to the next level.
There are many types of growth strategy, but the growth strategy can be categorized into three categories including Intensive growth, Integrative growth, and Diversification growth.
- Intensive growth is the growth strategy that is related to the products and markets.
- Diversification growth is the strategy that focused on expansion into a new business that is may be related or not related to the current business.
- Integrative growth is a strategy that is aimed at expanding into the related business.
Intensive Growth Strategy
Intensive growth is the growth strategy that is related to the products and markets. The intensive growth strategy focused on increasing sales in various ways to increase the company’s revenue.
- Market penetration focused on selling more existing products to existing markets.
- Market development focused on selling existing products to new markets.
- Product development focused on developing new products and selling to existing markets.
The intensive growth strategy + diversification growth strategy is also known as the four strategies of the Ansoff product-market matrix. The Ansoff matrix is a strategic tool that helps the manager select a growth strategy along with the relationship between product and market.
Market penetration is a strategy that focused on selling more existing products to existing markets or finding new customers within the existing markets.
Normally, this type of growth strategy often involves encouraging current customers to buy more each time they go to the store or buy more frequently. This can be implemented by a sales promotion, offering the new utility of the current product, bundling the product, and lowering the price.
Product development is a growth strategy that focused on developing new products and selling to existing markets. For example, Pepsi and Coca-Cola launched a new flavor of cola.
The company that adopts the product development strategy may try to find and satisfy the unmet needs of the existing customers to fulfill.
Market development focused on selling existing products to new markets. Market development is about exploring new customers in new geographies and finding new customers in existing geographies. The targeted new customers could be of a different gender, age, region, or country.
The market development strategy is the highest risk among the three intensive growth strategies because it is almost the same thing as creating a new product.
Diversification Growth Strategy
Diversification growth is a growth strategy that focused on expansion into a new business (new products in new markets) which is may or may not be related to the current business. There are two types of diversification strategies undertaken by the organization;
- Concentric diversification focused on expansion into a new business (selling new products to new markets) that are related to the original businesses, products, markets, or activities.
- Conglomerate diversification is a contrast of the concentric, the conglomerate diversification is focused on expansion into unrelated businesses, products, markets, or activities.
The diversification growth strategy holds a high risk of failure since it is about creating new products and entering an entirely new market. But it generally reduces specific industry risks, the profit of this business unit might offset a loss in another business unit during the downturn.
Integrative Growth Strategy
Integrative growth is a strategy for growth by expansion into the related business with no change in the customer groups. The integrative growth strategy can be separated into horizontal integration and vertical integration:
- Horizontal integration strategy is a strategy that the company expansion by acquiring or take-over a similar business in the industry.
- Vertical integration strategy is a strategy to expand the business into supply chains (the backward integration) or to distributors (the forward integration) by acquisition or development of new businesses.