The market development strategy involves broadening the market for a product. The internal growth of an organization is possible by expanding operations through diversification, increase of existing capacity, market growth strategies etc. An organisation can go international by crossing domestic borders international expansion involves establishing significant market interests and operations outside a companys home country. Sometimes the acquirer may have tacit support of the financial institutions, banks, mutual funds, having sizable holding in the companys capital. Concentration Expansion Strategy 4. However, diversification may be a reasonable choice if the high risk is compensated by the chance of a high rate of return. On the contrary, inorganic growth may call for additional funds, leading to modifications in proprietorship. What is internal growth? To penetrate and grow the customer base in the existing market, a company may cut prices, improve its distribution network, invest more in marketing and increase existing production capacity. Intensification strategy is a which type of growth( internal - Brainly A licensing agreement is a commercial contract whereby the licenser gives something of value to the licensee in exchange of certain performance and payments. Intensification strategy is. The development of new markets for the product may be a good strategy if the firms core competencies are related more to the specific product than to its experience with a specific market segment or when new markets offer better growth prospects compared to the existing ones. Intensification is promoted as a way to achieve several benefits. vertical integration with backward and forward linkages. With forward integration, firms can acquire greater control over sales, distribution channels, prices, and can improve its competitive position through differentiation and customer support. (a) The licenser may provide any of the following: i. If the willingness is absent, it is known as takeover. Privacy Policy 9. Another one of the best low-cost internal growth strategies is to increase your companys current market share. These forms of takeover are resorted to bailout the sick companies, to allow the company for rehabilitation as per the schemes approved by the financial institutions. EconomicsDiscussion.net All rights reserved. ~preserves organizational culture. Competition. Some companies expand the business into unrelated industries (Example Wipro which is in the business of several FMCG, electrical and lighting, furniture and IT). When two or more firms dealing in similar lines of activity combine together then horizontal integration takes place. (a) Increase sales to current customers by habituating existing customers to use more. Looking at the two major elements of product and market, the model offers a wide range of variations that can help organizations select which option is or are the most suitable. Intensification strategy is followed when adequate growth opportunities exist in the firms current products-market space. Have we missed anything or have any questions? Large conglomerate (diversified) business houses dominate the industrial sector of many countries. Some may say that its a little unconventional to narrow down when trying to grow your business initially. Diversification strategies are becoming less popular as organizations are finding it more difficult to manage diverse business activities. Since mergers and consolidations involve the combination of two or more companies into a single company, the term merger is commonly used to refer to both forms of external growth. More sustainable. A person seeking control over a company, purchases the required number of shares from non-controlling shareholders in the open market. As the firm achieves success at each stage, it moves to the next. Your email address will not be published. Advertisement . Acquirer makes a direct offer to the shareholders of the target company without the prior consent of the existing promoter/management. Connected services. Thus, cooperating with other firms is another strategy that is used to create value for a customer that exceeds the cost of creating that value and to create a favourable position in the marketplace relative to the five forces of competition. Intensification strategy is followed when adequate growth opportunities exist in the firm's current products-market space. Diversification is defined as the entry of a firm into new lines of activity, through internal or external modes. The growth. Concentration involves expansion within the existing line of business. This method normally involves purchasing of small holding of small shareholders over a period of time at various places. Once you have researched enough to start implementing, you can think more clearly about what type of niche you want to conquer. Always plan quick sit-downs with your staff members every few days as you deem possible to get their feedback, which may give you some innovative idea that you had not thought of or reaffirm what you had thought of initially. A vertical integration refers to the integration of firms in successive stages in the same industry. External growth is an alternative to internal (organic) growth. The main objective of takeover bid is to obtain legal control of the company. These acquisitions are called management buyouts, if managers are involved, and leveraged buyout, if the funds for the tender offer come predominantly from debt. The research method used is a descriptive . It occurs when the company decides to collaborate with another organization to achieve its objectives. 3. strategic alliances and joint ventures. Having this level of clarity for whichever strategy you commit to will give you a detailed draft to make the most informed decisions to support and sustain growth. Integration at the same level of business, popularly known as horizontal integration, involves the acquisition of one or more competitors. All rights reserved. When research is done right, the answers can get you to focus on a particular niche. The marketing efforts are made on existing products, to customers in related market areas, by adding different channels of distribution or by changing the current content of the advertising and promotional efforts. Combination of firms may take the merger or consolidation route. Once the time is right, it should be the natural path to follow for any companys growth trajectory. Types of Corporate Level Strategies - Your Article Library Types of Diversification Strategy | Growth Strategy | Intensification 4 Real Growth Strategy Examples & What to Take from Them The other is Customer Retention which focuses on keeping existing customers. All the original business entities cease to exist after the combination. Where the company is closely held by small group of shareholders, the controlling interest is obtained by purchasing the shares of other shareholders. Some companies expand the business into unrelated industries (. There are broadly two types of integrative growth: i. For example, CTAs that deliver value aim to keep readers reading your content or encourage them to give you their email address in exchange for what you are looking for. As the saying goes, a frog in a pond of water with a slowly rising temperature will die without getting to know what happened, but a frog placed into hot boiling water will see the difference in heat and try to get out immediately. Before selecting diversification strategy, one must have a clear understanding of the new product/service, the technology and the markets. Market Expansion Strategy: All You Need To Know. Activities, which have no contractual arrangements to establish joint control, are not joint ventures. Thus, the proficiency of your facilities, assets, the new and even existing product, and what potential new grounds could be focused on with your current strategy are all carefully examined. Facebook is ubiquitous today, but when it . If you keep offering value through your CTAs, you will be on the right path. McDonald's, Starbucks, and Subway are three firms that have relied heavily on concentration strategies to become dominant players. Intensive Strategy includes safeguarding the current place and escalating in the recent product-market space to attain growth targets. Get in touch. However, market penetration has limits, and once the market approaches saturation another strategy must be pursued if the firm is to continue to grow. The most frequent increase indicating a growth strategy is to raise the market share and or sales objectives upward significantly. The element of willingness on the part of the buyer and seller distinguishes an acquisition from a takeover. However, internal and external growth should not be considered opposites. Traditional means of operating with little cultural diversity and without global competition are no longer effective firms. The consideration is decided by having friendly negotiations. Intensive expansion of a firm can be accomplished in three ways, namely, market penetration, market development and product development is first suggested in Ansoffs model. Businesses stereotypically depend on in-house backing for expansion such as reserved earnings instead of external funding such as bonds. A jointly controlled entity is a joint venture, which involves the establishment of a corporation, partnership or other entity in which each venturer has an interest. Another licensing strategy is to contract the manufacturing of its product line to a foreign company to exploit local comparative advantages in technology, materials or labour. Keeping your site optimized well, as a direct result, will help to drive organic traffic over time and start showing growth results. (c) Convert non-users of a product into users of the product and making potential opportunity for increasing sales. The Ansoff matrix is another way of looking at the 4Ps of marketing mix after a business has had the time to operate in its market and is poised for strategic decision-making. (c) Whether the product or service has a good growth potential? The target market is the market that a business focuses on when launching a new product/service. A consolidation is a combination of two or more business units to form an entirely new company. Unless there is an intrinsic growth in its current market, this strategy necessarily entails snatching business away from competitors. However, a business in a mature, stable market may choose to grow either through market development or product development depending on its internal strengths. Global. (k) Greater leverage to deal with the customers and suppliers. Articulate the best strategy based on your companys current health, rivalry, industry trends, and financial capacity, then design a strong business case around that line of attack by projecting short- and long-term financial goals. Similarly, a company that makes microwaves will treat bakers, chefs, and people interested in cooking as their target audience. (i) Making common purchases at low prices. Types of Growth Strategies: Top 10 Growth Strategies - Economics Discussion Chapter 14 Flashcards | Quizlet First, if population growth can be accommodated at higher densities, or within existing urban areas, or both, less greenfield land will be required for new housing. Strategic alliances, which enable companies to increase resource productivity and profitability by avoiding unnecessary fragmentation of resources and duplication of investment and effort in R&D/technology. Hierarchical arrangements may intensify the communication problems, and there may be a problem of slow decision-making. Examples of horizontal integration includes acquisition of Universal Luggages (Aristocrat) by Bioplast (V.I.P.) Irrespective, introducing a new product to the marketplace can attract a new customer base and increase the overall turnover and value. Thus, a takeover is different from merger in that under a takeover, the company taken over maintains its separate entity, while under a merger both the companies merge to form single corporate entity, and at least one of the companies loses its identity. In some cases firms choose diversification because of government policy, performance problems and uncertainty about future cash flow. The two possible methods of implementing market development strategy are, (a) the firm can move its present product into new geographical areas. The partners in joint venture will provide risk capital, technology, patent, trade mark, brand names and allow both the partners to reap benefit to agreed share. Key elements of the roadmap are process intensification (Fig. The company taken over remains in existence as a separate entity unless a merger takes place. All joint ventures are typically characterized by two or more ventures being bound by a contractual arrangement which establishes joint control. Typical schemes used for this purpose are volume discounts, bonus cards, price promotion, heavy advertising, regular publicity, wider distribution and obviously through retention of customers by means of an effective customer relationship management. Take the time to evaluate your sales numbers before increasing production since this strategy is one of the most expensive and long-lasting. External growth (also known as inorganic growth) refers to growth of a company that results from using external resources and capabilities rather than from internal business activities. It is today the most fully integrated company in the world (from petroleum exploration to textiles retailing). Market development 3. Intensification involves expansion within the existing line of business. 4. franchising. 1. mergers and acquisitions. Occasionally, shareholders might favor inorganic growth because it proposes swift growth to kick its share price. By organically growing, you have the more controlled evolution and still have a substantial market share to win. a internal and external type of growth. Joint ventures with multinational companies contribute to the expansion of production capacity, transfer of technology and capital and above all penetrating into global market. For this purpose, the firm must develop significant competitive advantages. (b) Integration of different levels/stages of business in the same industry i.e. 3. Strategic alliance is an arrangement or agreement under which two or more firms cooperate in order to achieve certain commercial objectives. Registered office: 71-75 Shelton Street, Covent Garden, London, WC2H 9JQ. And because we do it as a service, its brilliantly affordable. Expanding the market to geographical areas where the company has not had business is also regarded as diversification. Agricultural intensification can be technically defined as an increase in agricultural production per unit of inputs (which may be labour, land, time, fertilizer, seed, feed or cash). We know business growth isnt easy. Franchising provides an immediate access to business operations and technology in profitable fields of operations. Management of the company that is already operating can have more control over the resources to grow, which disparities with acquirements, including another firm. There are basically two variants in integrative growth strategy which involves: (a) Integration at the same level or stage of business in the same industry i.e. As a matter of fact, some research shows that firms with high growth are 75 percent more likely to have a well-defined niche. By partnering you with the processes and insight youre missing and the people whove been through it all before. ~provides maximum control. Businesses often move into this growth stage after a period of organic growth. STRATEGY FORMULATION LESSON NOTES.doc - STRATEGY This combination may be either through absorption or consolidation. Integration Expansion Strategy 5. This market comprises an audience or people who would likely use your product/service. The most extreme practice of inorganic growth is the takeover, which will, in turn, expand its size and churn up the sales. Intensive Growth Strategies - Ansoff Matrix - Product-Market Grid In this form, a firm is acquired by its own management or by a group of investors, usually with a tender offer. Vertical integration may be either backward integration or forward integration. (a) Expand sales through developing new products. This. Advantages and Disadvantages of Organizational Change, Role of Information Technology (IT) in the Banking Sector, Elton Mayos Hawthorne Experiment and Its Contributions to Management, How To Assess the Financial Health of a Company, Role of Information System in Business Process Reengineering (BPR), The Engel Kollat Blackwell Model of Consumer Behavior, Traditional Management Model vs. Modern Management Model. Perhaps, the most important advantage of horizontal integration is that it eliminates or reduces competition. The integration of different levels/stages of the industry is known as vertical integration. (6) _____ strategy helps to spread business risks. Other advantages of diversification include the potential to gain a foothold in an attractive industry and the reduction of overall business portfolio risk. Types of Diversification Strategy | Growth Strategy | Intensification StrategyHello friends in today's video I will discuss the different types of the growth. Diversification makes addition to the portfolio of business the growth strategy is pursued when the firms growth objectives are very high and it could not be achieved with in the existing product/market scope. For example- a cement manufacturing company undertakes the civil construction activity; it will be a case of diversification with forward linkage. (17) Diversification strategy helps to minimize business risks. A business that operates in an expanding market can grow through market penetration. They may also grow by developing highly specialized and unique skills to cater to a small segment of exclusive customers with special requirements. There are three concentration strategies: 1. International expansion is fraught with various risks such as, political risks (e.g., instability of host nations) and economic risks (e.g., fluctuations in the value of the countrys currency). Uploader Agreement. The concept of alliance is gaining importance in infrastructure sectors, more particularly in the areas of power, oil and gas. As they say, there is a great team standing behind every successful leader. Plagiarism Prevention 5. A joint venture by a domestic company with multinational company can allow the transfer of technology and reaching of global market. Disclaimer 8. Although the firm operates in familiar markets, product development strategy carries more risk than simply attempting to increase market share since there are inherent risks normally associated with new product development. The most suitable may be derived only after all the variables have been considered. Faster. Intensification strategies - corporate level strategies - Strategic It occurs when a company uses its already existing resources and capital to grow. In a purchase of assets, one firm acquires the assets of another, though a formal vote by the shareholders of the firm being acquired is still needed. Entering into a Joint venture is a part of strategic business policy, to diversity and enter into new markets, acquire finance, technology, patent and, Types of Growth Strategies Top 5 Types: Concentration Expansion Strategy, Integration Expansion Strategy, Diversification Expansion Strategy and a Few Others, Type # 1.