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A STRATEGY


GROWTH STRATEGY

A strategy is a consistent, appropriate and feasible set of principles or plan of action through which a particular entrepreneur hopes to achieve the objective set for his business. A strategy looks inwards at the entrepreneur’s business and also looks outwards at the competition, environment and business climate.

            There are three major types of strategies available to an entrepreneur; these include Growth strategy, stability strategy and turn- around strategy. But in practice, every entrepreneur hopes to peruse expansion or growth in his business.

One of the commonest strategies adopted by companies is the growth strategy, which implies growth in sales, assets, profits and other dimensions. Companies achieve a growth strategy by selecting a target growth rate and formulating a strategy for achieving it. Growth comes about in two ways. It is achieved through managing current product for growth, and adding new ones to fill the remaining growth gap, which means that two things must be done.

1. Improving the performances of the current product line or;

2. Adding new product lines

Growth can be internal or external. Growth becomes internal when the entrepreneur utilizes growth strategy of either concentration or diversification through the internal development of new product and services. Growth becomes external when the strategies used are not from within internal development, but through mergers, joint ventures and acquisitions. Growth strategies must be planned and controlled in such a way as to grow and consolidate. It should not be haphazardly done. An internal growth strategy can be generated by moving through level of analysis.

-        Intensive growth

-        Integrative growth

-        Diversification growth

Intensive growth

Intensive growth makes sense if a company has not fully explores the opportunities in the current product or market. Thus intensive growth involves the identification of those opportunities available to the company in its current sphere of operation. There are three major areas of intensive growth opportunities.

a)      Market penetration: This consists of a company seeking increased sales in its current product(s) through effective marketing efforts. 

b)     Market development: This consists of companies seeking new increased sales by taking its current products in to new markets. Possibilities for these are;

c)      Product development:  This means that the company producing related products with the same technology and distribution channel e.g. Maidabino Investment producing Yoghurt, Table Water, Sachet water, etc. here the company seek increased sales by developing new or improved products for its current market.

 Integrative growth

This level of strategic growth is meaningful when the company can increase its profitability, efficiency or control by moving backward or horizontally within the industry, thus if a company’s basic industry has a strong growth outlook then, the company has the option either for backward integration, forward integration or horizontal integration. Therefore integrative growth involves the identification of opportunities available through integration with other parts of marketing system. This can be achieved in three ways:

a)      Backward integration:  This contains of a company seeking ownership or increased control of supply system. For instance in the newspaper industry, the daily times newspaper may decide to buy up and  start producing newsprint and even sell to other firms within the industry. This will mean control of supply of raw materials to make it more regular and efficient.

b)     Forward integration: This consists of a company seeking ownership or increased control of its distribution system. For instance Peugeot auto mobile appointing distributors and giving them requirements before appointing them, like asking them to build garages and places of distribution. They can give those instructions on what to do i.e. controlling the outlets.

c)      Horizontal Integration:-This consists of a company seeking ownership or increase control of some of its competitors. For instance holding companies in the past, banks bought over other banks enable them have control over them.  

Diversification growth

The diversification growth is a level that identifies those opportunities lying outside the current marketing channel system, the analyses could be useful where the marketing channel system of a company does not show much additional opportunities for growth or profit, or if the opportunities outside the present marketing system are superior to the one within. Diversification involves making a product in variant sizes, models or styles.  There are 3 types of diversification growth.

a)      Concentric diversification: This method involves company seeking to add new product that have technological or marketing synergy with existing products, e.g. the Unilever Nigeria plc. Producing soap and then adding paste, brush, and cream.

b)     Horizontal diversification: This consists of a company producing new products that could appeal to current customers, though they may not be related to current product technology. E.g. establishing staff clubs, library, canteen, and amusement parks.

c)      Conglomerate diversification: This consists of company seeking to add new products that have no relationship to current product technology or market. E.g. when Julius Berger start producing Berger paint that is going into paint industry. This is a departure from civil engineering construction work.

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