According to market research, organizations today consider growth to be a critical necessity rather than an objective. An efficient corporate growth strategy is essential to achieving business growth.
Since just 50% of start-ups last longer than five years, small businesses have even more incentive to implement business growth methods.
Corporate sustainable growth strategies are actually just small, incremental changes made to the company’s weaker areas. You will use a range of growth strategies during the course of expanding your business, but they always follow a few broad guidelines.
What exactly is a business development plan, though, and which kinds of business growth strategies work best? Learn more by continuing to read.
This all-inclusive guide will help you chart a successful path to business growth by guiding you through the seven most successful categories of business growth techniques.
What is a Business Growth Strategy?
A plan to assist a business in growing and developing is known as a business growth strategy. It can include targeted initiatives, brand-new goods or services, partnerships, diversification into new markets, mergers and acquisitions, product or service promotion, or any combination of these strategies. It can even involve small details like putting KYB verification in place to make sure business partners are real.
For greatest impact, you can employ a tried-and-true business growth strategy or create your own using market research.
Industry professionals categorize business strategy into three stages. Every level of the company will be impacted by a strong business growth strategy, so it’s critical to comprehend each level and how it fits into the overall plan while putting one into practice. There are three tiers to company strategy:
Since the Corporate Level establishes the primary goal of the organization, it will guide all subsequent decision-making processes.
The exact tactics and strategies required for each market the organization participates in are defined at the business unit level.
The daily company actions necessary to accomplish corporate aims and comply with business-unit strategies are outlined at the functional level.
Five Different Business Growth Strategy Types
After talking about what a growth strategy is and why it might be useful, let’s examine some of the more popular ones and how they affect businesses.
Market Penetration Strategy
One of the four primary business growth techniques is market penetration. In order to increase your market share, it entails concentrating on selling your current goods and services into your current customer bases.
Due to its minimal risk, this technique will eventually be considered by the majority of organizations. It can be really beneficial when first getting started.
Strategies for entering new markets
Having a great product and thorough understanding of your market are essential for creating an effective market penetration plan. You also need to be well-aware of your rivals.
Generally speaking, there are four approaches to penetrate the market. One may:
Raise the present goods’ market share
Raise the amount that current consumers use
Competitors are driven out of a saturated market by dominant growth markets.
You can use a variety of strategies to boost the market share of current items, such as:
Price reductions,
Special offers,
Focused marketing,
The launch of new channels for distribution, such internet sales
Additionally, you can segment your consumer base to find a new market for your goods, such as an older population. Companies frequently use marketing and advertising to draw in and close deals with particular market demographics.
If there are too many competitors in your industry, you might need to try a different strategy. For instance, changing your prices and aggressively marketing your goods might help make the market unwelcoming or unreachable for smaller rivals.
If price and offering allow you to compete, you could consider ways to get more out of your current clientele. For instance, you might offer loyalty programs or enhance the current offering to entice customers to use it more frequently and help you maintain and expand your clientele.
A market penetration plan won’t be effective for every kind of product or business. In order to attain and maintain growth, you might need to employ various business growth tactics. For instance, diversification, market expansion, or product development.
How to calculate market share
Knowing your market penetration will enable you to assess how well your product is performing and how consumers perceive it in relation to rival goods and services.
Market penetration is measured and presented as a percentage. It can be computed by taking the current sales volume, multiplying it by 100, and dividing the result by the total sales volume of all comparable products—including those offered by rival companies.
Product development strategy
The goal of the product development strategy is to create new items or alter old ones to make them look brand-new, then market those products to existing or potential customers. If carried out properly, it can increase market share and revenues.
When companies see no more room for expansion with their present product or inside their current markets, they usually turn to product creation.
Development of new products to spur growth
When it comes to product creation, a company typically has three options. One may:
make a completely new item
adapt your current offering to the needs of the current market.
improve your current offering to expand its market reach.
Detailed research and development, a thorough evaluation of client demands, product design and analysis, design documentation, prototyping, and production are likely steps in the process of creating a new product or improving an existing one.
Every business has a unique way to create its product development plan. Some companies acquire another product to sell under their own brand and outsource the development of new products. Others purchase the rights to market someone else’s creation or collaborate with another company to create brand-new goods.
Ongoing customer needs analysis and continual research are essential components of a successful new product development process.
Strategies for brand extension
In product development, brand stretching, also known as brand extension, is a helpful strategy. It entails using your well-known brand name to a fresh product or line of products.
There are numerous methods you can expand your brand, such as:
Presenting the original product in a new format
Merging two well-known products into one
Utilizing the current brand in a new product category
Generating accessories
Since brand extension is typically simpler to implement than developing whole new items, it is a popular method in product development.
It enables you to introduce a new product by utilizing the fame and reputation of your current one. Additionally, the expenses are typically less than those associated with launching a new product without a distinct brand identity.
But for the brand extension to be effective, there needs to be a logical connection made between the new product and the old one. Brand dilution may result from an incompatibility or a bad connection created by the new product.
Remember that there are four main tactics for growing a firm, and product creation is just one. Along with the other options—market penetration, market development, and diversification—you should think about it.
3. Market development strategy
As a growth strategy, market development entails reaching out to a new clientele with your current goods and services. Market research is the first step, where you:
Perform a market segmentation research on your current clientele.
Make a shortlist of the market niches you believe you should target.
A segment of a bigger population is only a smaller sub-group within it. In order to determine a target market sector, consider the following:
Fresh geographic regions
New demographic divisions
Needs of new customers
Consumer lifestyle, hobbies, and preferences
Consider looking at the clients that your competitors usually serve or the clients that no one else now serves. Learn how to divide up your clientele.
After determining the target market, you should develop a marketing plan and look for methods to draw in and close business from that group of people.
Typical approaches to market development
Important techniques for developing your market include:
Price: To charge a higher price, supply a product that is more valuable than that of the competition, or establish competitive price structures with offers and discounts.
Distribution: if you presently just have a “brick and mortar” store, you could create new avenues to reach your target market, such as selling online.
Branding: For products intended for a target market or a particular customer segment, you might develop a new brand.
Promotion: You might think about customizing marketing messaging to lure clients with deals, discounts, loyalty programs, etc.
Sales: In order to generate fresh leads and prospects, you could focus on a different consumer base or demographic segment.
Product development: you may create a new product for an unexplored market or modify an existing one.
In addition to drawing in new clients, market development considers increasing revenue by finding new or creative applications for your product. Consider ways to encourage your present customers to use your product differently.
Market penetration versus market development
The primary distinction between market penetration and development is that the former aims to expand the market’s potential. It accomplishes this by growing into unexplored market niches. Since the market size is fixed when it comes to market penetration, the strategy’s main goal is to maximize the potential of an already-existing marketplace.
Growth of a business through diversification
As a growth strategy, diversification entails both product development for the new market and market entry into an industry or market that your company is not presently operating in.
Various approaches to diversification
There are numerous varieties of diversification, including:
Horizontal diversification
The process of acquiring or creating new goods or services that enhance your main line of business and appeal to your present clientele is known as horizontal diversification. For instance, an ice cream company expands its product offering by introducing a new kind of candy. To diversify in this way, you could need new technologies, abilities, or marketing strategies for business growth.
A focus on diversification
Concentric diversification is the process of introducing new items that appeal to new markets while having technological or marketing synergy with current product lines or industries. As an illustration, a PC company begins to produce laptops. You might be able to diversify in this way by making use of the technology, tools, and marketing you already have.
Conglomerate diversification
Conglomerate diversification is the process of introducing new goods and services that have no connection to and are completely unconnected to your main line of business. For instance, a movie company launching a theme park. The dangers are great because this strategy necessitates expanding your customer base in addition to breaking into a new industry.
Vertical diversification
Expanding your business in a forward or backward manner along the product’s production chain is known as vertical diversification or integration. You could be in charge of more than one supply chain step with this strategy. For instance, a technology company may develop a retail location or a film distributor may create its own content.
The choice of when and how to diversify
You will need a clear product development plan, market testing, and comprehensive market research for the new product or service. It will also need a thorough assessment of consumer needs. Finally, it will need supply chain operations, sales, and marketing that can handle the increased demand.
Benefits and drawbacks of diversification
Every diversification strategy has advantages and disadvantages. A well-executed diversification can assist you in:
Raise market share, boost sales,
Generate new revenue streams,
Outperform competitors in terms of profits,
Lessen the effects of market fluctuations.
However, diversification will cost more in terms of development, marketing, and sales. It will also need more managerial abilities, operational resources, and expertise. Diversification might put your company at danger if these demands outweigh the potential revenue and profit improvements.
For instance:
Investing money and efforts on diversification could impede your company’s ability to thrive in its core competencies.
Lack of experience or understanding in the new market or industry could result in expensive blunders or delays.
Excessive diversification could lead to a loss of focus or dilution of your primary offerings.
Overstretching your resources could make it difficult for you to deliver a consistent level of service, which could result in unhappy customers and lost business.
Generally speaking, diversifying with comparable goods or services and marketing to a known clientele is less hazardous than some other company expansion tactics, including developing a product for an entirely untapped market. Sustaining corporate stability can be effectively achieved through diversification. It lets you diversify your bets so that, in the event that one of your products or marketplaces falters, you have another to fall back on until you become better.
Business expansion through partnerships, mergers, and acquisitions
In addition to expanding naturally, you can grow your company by partnering with another company. There may be definite benefits, even though it may lead to concerns with decision-making, potential management, and employee relations.
Advantages of corporate collaboration
Effective corporate collaboration can result in:
Increased resource sharing among managers
Greater pool of contacts
Greater pool of skills and aptitude
Greater market diversification
Organic growth utilizing greater resources
Lower risk for business
You should carefully assess the kind of partnership you wish to pursue to ensure the best possibilities of success. The proper partner should compliment your primary brand and business development goals.
Joint ventures and partnerships
Significant advantages can be gained by both parties via joint ventures and partnerships, including the sharing of people, equipment, customer bases, expertise, and skills. It may be possible for you to expand into new markets or enhance your offerings to current ones by entering into a partnership or joint venture agreement with a complementary, non-competitive business.
It’s crucial to exercise extreme caution when forming connections. It is necessary to have a contract or agreement outlining the conditions of the partnership or joint venture, and it is desirable to have additional legal protection. Learn how to draft a joint venture contract.
It should be mutually beneficial for both sides to collaborate. Companies that engage in related activities or competencies are typically the best fits. For instance, a trio of independent contractors, consisting of a carpenter, builder, and gas installer/electrician, may establish a business to:
Enhance their reputation in the building industry
Enable them to submit bids for bigger projects
Attract clients seeking a “one-stop-shop” experience
Purchasing and merging
Growth via mergers and acquisitions is a popular strategy for achieving market positioning and diversification. It can assist:
amplify market share
enlarge the labor force
expand the current range of services or goods offered
increase income
reach scale economies
lower expenses by utilizing common budgets
Increased purchasing power
Nonetheless, merging two companies may present new difficulties, such as:
Keeping up a presence across several markets
Maintaining a wider and more varied consumer base
Overseeing a complicated product and service range
Controlling a larger workforce and operational complexity
Not all businesses may benefit from mergers and acquisitions as effective corporate growth methods. They are better suitable for well-established businesses because transactions may need a significant amount of legal work and commercial lawyers.
You should carefully consider your options, plan ahead, and pursue business growth in a way that best suits your needs. You might want to consider growing your company organically if you determine that expanding through partnerships isn’t the best course of action for your enterprise.
Financing for business growth
A strong finance strategy is the cornerstone of any business expansion plan. First, you ought to determine:
How much capital will you require to finance the project,
When you’ll need it
When it will be accessible
When will you be able to pay back the capital?
It’s crucial to list every expense invested in launching your growth choice and weigh them against the expected returns. When establishing goals for business growth, you need to be practical and reasonable.
Financial projections
Not least since expenses will most likely increase sooner rather than later than income, a thorough cash flow forecast is crucial. The pot ought to have enough money to support the operation of the main enterprise. It’s a good idea to factor in some excess as well, since these kinds of projects frequently go over budget.
You would also need to create thorough projections for working capital, sales, and the sources of seed money or any further funding in addition to cash flow. Learn how to modify your business plan so that it can be funded.
Financial investment
Businesses seeking capital investment have three primary options outside bank financing:
Funds invested in a business that are not immediately repaid are known as equity finance. It might be your own, which you most likely raised by remortgaging a property, or it could come from outside investors who have taken a stake in the company.
Another name for venture capital is private equity financing. Venture capitalists, as opposed to business angels, seek to make sizable financial investments in exchange for equity—that is, a stake in the company—in your enterprise.
Private investors known as “business angels” may acquire a minority or full ownership in a company in exchange for advice and connections that can provide significant business knowledge.
Growth’s return on investment
The return on investment, or ROI, is one of the most often used metrics for assessing a company’s profitability. This ratio indicates the expected percentage return over a given period of time. Three- to five-year time frames are commonly used by growing companies.
Calculate your ROI as a percentage of the investment by taking the whole investment amount, adding up the sales growth each year, and calculating the net profit that results.
The best ways to set up your company for expansion
Carefully preparing your company’s growth strategy will pay you in the long run with several rewards. To help get your company ready for expansion planning , consider our best advice.
Determine the current performance of your business.
It’s critical to assess your company’s present performance to see whether it has a solid basis on which to build a growth strategy. KPIs can be used to evaluate the performance of your company in a number of important areas, such as finances, profitability, human resources, and facilities.
Evaluate your growth choices.
There are numerous approaches to corporate growth. Depending on your situation, you might think about:
Market penetration: Try reaching out to additional clients, both current and prospective, or think about exporting to reach new markets.
Growth by diversification: such as by developing new goods or services apart from your main business.
Growth through mergers, acquisitions, and other forms of strategic cooperation.
Strategic sourcing: make the most of your supplier connection and make sure you are getting the best value.
Technology: Spend money on tools like CRMs (customer relationship management systems) and take SEO strategies into consideration. These can assist you in closing more deals with both current and potential clients.
Create a growth-oriented business plan.
Describe your business growth strategy and how it will help you achieve your growth goals. Included in your business growth plan should be:
Goals and objectives for marketing
Financial and operational data
Business objectives
Completion dates
Set goals to carry out your business expansion strategy.
Your growth plan’s objectives can be met with the aid of SMART objectives, which stand for specified, measurable, attainable, realistic, and timely.
Track the expansion of your company
The ROI (return on investment) for expanding your business should be quantified. Applying the ROI formula is a common method for doing this. This will provide you with an estimated % of return over a given period of time.