Small Business Growth Strategies for Entrepreneurs:- When a business succeeds, it is likely to seek growth. Some theorists have pointed out that there are only four growth possibilities, which consist of product development, market development, penetration or diversification. In practice, however, more complex and diverse possibilities have been realized.
Small Business Growth Strategies
The most common strategies are are as under:
1 – MARKET DEVELOPMENT: is achieved by finding new applications or uses for the product or service. This causes a target population sector increased and thus the growth of operations. Frequently the restriction of applications is limited by the same company, either by image, prejudice or resistance to change. As an example, we can cite Google, which started as an information search system and now is also a marketing system.
2 – PRODUCT DEVELOPMENT: It consists in creating new products or provide new features the same superior product for customers to purchase new products or prefer against those of competitors. Such is the case of Sony, which has developed state-of-the-art technology products and this has dragged us to renew the previous ones.
3 – DEVELOPMENT OF NEED: The development of necessity is a highly profitable concept. It consists of getting a high socio-economic niche to consider it indispensable to have a specific type of product. The competitive advantage is to position yourself as top-of-mind as the first brand to come to market and promote the new product under its name. The aspiration of lower social classes will also develop in them the necessity. A very clear example is Kleenex scarves. Few people refer to them as disposable handkerchiefs and higher ed will agree that were essential before there were alternative products; Something similar is happening today with cell phones and other technological gadgets.
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4 – PENETRATION: Wanted to get a greater share of the target market to competition removing part of its contribution. This is coupled with marketing strategies, and resorts to activities such as advertising, promotions, events, sampling, campaigns, among others. It is highly desirable to have (or construct) a very clear differentiation for the product or service to implement this strategy. It should be considered that moving alternative products is also a possibility of increasing penetration. An example is the case of Bonafont, which has displaced other beverages, especially soft drinks, taking away a significant fraction of the market they owned.
5 – REPLICACIÓN: Create new similar operations which gave rise to them. The goal is to reach new markets and increase competitiveness through lower cost and greater presence. One example is the OXXO convenience store chain that has created a very extensive and competitive marketing network by keeping operating costs low in each store.
6 – EXPANSION: New different operations which gave rise to them, but with a certain degree of relationship, either by suppliers in common, target customers in adjacent or related sectors. There are several cosmetic companies that have created special product lines for gentlemen and children; One of the best known in Mexico is Avon.
7 – EXPANSION: Increase the capacity of operations. This is usually due to an inability to meet demand, in anticipation of this happening in the short term, or to an increase in demand for any other reason. Often this leads to large centralized operations and leads to the development of complex distribution and service systems. It is the most common form of growth in companies and the origin of distribution systems.
8 – DIVERSIFICATION: Create new totally different from which they originated, with products and different markets operations. The objective is to decouple one operation from the other, so that the vulnerability of the business as a whole is reduced, since the allocation to a particular market or to a supply chain of one of the operations will not necessarily affect the other In the same way, allowing to maintain certain strength. This is the most risky strategy and is used when the current market no longer allows market growth or profitability, either because the competition is too strong or because the product is in decline. An example of this is PepsiCo, which includes refreshments through its Pepsi brands, Frito-Lay and Sabritas snacks, Gamesa and Quaker cookies and a wide variety of other product lines.
9 – FRANCHISE: It is a replication strategy, unless the owner gives his business know – how and the right to operate for a certain time under the same corporate identity in return for financial reward and low compliance with certain rules. Possibly the best-known franchise is McDonald’s. Usually businesses develop their own operations in the most profitable markets and then offer franchises for less profitable markets or where conditions for the original company would not be as beneficial.
10 – ACQUISITION: When the company has a high purchasing power can visualize the growth through the purchase of another company with high potential, especially if the latter is in a difficult situation, or whether it is a direct competitor. This strategy is one of the safest, since prior to the purchase, consultants specialized in valuation are hired to carry out the process called due diligence. While growth is immediate, the cost of acquisition also requires time to recover, so the business does not immediately benefit from this action. Acquisitions can be made from the market, ie, brand and customers, or include operations. The strategies behind such acquisitions can be very diverse. An example is the case of the purchase of the Saab brand by Swedish Koenigsegg, its competitor, General Motors.
11 – JOINT VENTURE: Some companies find that their desire for growth are limited by the lack of capacity, knowledge, resources, or because the new activities require functions that would not be affordable to them alone. In those cases, they find companies that are experts in doing just what they lack or competitors with whom to share part of the costs and come to agreements to conduct a business together. Joint ventures have been given in large companies such as Air France-KLM-Delta. However, it has also been carried out in smaller companies.
12 – MERGER: While in Mexico merging companies is often not seen as growth, but as a simple way out of a crisis or disguising an acquisition, the reality is that many companies derive benefit from such synergies. The characteristic of the merger is that the result is a single strengthened company, where fixed costs are shared and the strengths of each part are used to strengthen the new company. Such is the case of Cemex merger with four other companies in February 2005, where it subsisted as a merger Cemex Concretos.
13 – STRATEGIC ALLIANCE: The strategic alliance is very similar to the company, except that companies remain as separate entities. The purposes of an alliance can be very diverse, where the common factor is to use the strength of an entity more to address something that would have been inaccessible or difficult to reach for any of the members alone, whether new markets, negotiating volume With suppliers, or develop products where their strengths are used. A recent example is the alliance formed by Dell and Telefonica to develop the mobile internet.
The higher ed of small and medium enterprises in Mexico are seeking to achieve growth with its own means, which limits not only its possibilities but also its scope.
Resorting to growth strategies requires in-depth knowledge of the maturity of the business itself, as well as proper planning. This does not mean that no company can grow without knowing and planning, but doing so can lead to very high costs and jeopardizes the very existence of the organization.
The first stages of the process of maturation of organizations, that is to say the Functional and the Repeatable, are not the most appropriate to carry out a process of growth, because the company can be destabilized very easily and will not have the means to respond appropriately. The third stage, the Defined, is appropriate for some forms of growth, such as replication or franchising, but most growth strategies will be better supported by companies in stages of Managed or Optimized maturity. You can find more information about the maturation of organizations in our website, Resources section.
14 – performance coaching can support you to manage the process of maturation of your company, allowing you to be better prepared to implement successful growth strategies.