4 Growth Strategies Companies Use to Win
Success in the business world doesn’t happen without growth. Unfortunately, not all companies have the ability to grow.
According to the U.S. Bureau of Labor Statistics, nearly 20% of small businesses fail within the first year. By the end of the second year, that number goes up to 30%.
Growth is critical, but how can you ensure your company grows instead of succumbing to the statistics? It begins with the proper growth strategy.
What Is a Growth Strategy?
A growth strategy is a relatively simple concept to understand – it’s a strategy that allows your company to scale up. There are two basic kinds – short-term and long-term growth strategies.
If you’re a small business, you likely want to focus on long-term growth strategies, as those will put into place the processes necessary to sustain your business for years to come, not the processes that will only increase your profits over the short term.
Not sure what corporate growth strategies might work for your company? There are four to understand if you’re ready to become the next industry powerhouse.
Four Basic Business Growth Strategies
- Market Penetration: This is the lowest risk strategy on the list, but it requires real resources to make it happen. The idea behind market penetration is pretty self-explanatory – take over the market for your goods or services by completely penetrating the market. In general, you’ll use your existing customer base because they’re already thinking about your products. The goal here is to get them to move from your competitors to you or ensure your current customers buy more of your products. There are a few different ways to handle this. You could decrease your prices or increase your promotions. You could also purchase your rival. On the other hand, simply showing your customers additional uses for your products and services may make this happen pretty quickly without the added resources. For example, imagine you sell UV phone cleaners. If the same cleaners could be used on other electronic devices like tablets or even laptops, simply helping customers realize how powerful they can be could mean you better penetrate the market.
- Product Diversification: The idea behind this business growth strategy is to offer new products or diversify your current line. While you’ll undoubtedly want to stay within your industry or your area of expertise, there’s no reason you can’t further develop what you already offer. There are four different ways to diversify your offerings. Horizontal diversification is one option. Here, you’ll develop new products to sell to your current customers. They’re products that would appeal to existing customers. For example, if you’re selling UV phone cleaners, horizontal diversification might mean you sell phone cases that offer added germ resistance. Vertical diversification is the second option. Here, you’re meeting customers at a different stage of the process. For example, you might begin selling the phones themselves, as well as the UV phone cleaners. Concentric diversification is the third type. It’s also one of the most common. This is where you develop a new line of products or services similar to what you already offer. For example, if you sell those UV phone cleaners, maybe you sell an upgraded version of those. Conglomerate diversification is the final type. It’s where you move to new products or services that aren’t related to what you’ve sold before or your target audience. In the phone cleaner example, you might add hooded sweatshirts or shoes to your product line.
- Market Development: Companies look to this growth strategy when they prefer to focus less on their products and more on the markets in which they’re available. The best way forward is to expand into new locations. Maybe that’s the next big city. Perhaps that’s into an international strategy where you market what you have all over the world. Your success here depends on your ability to do two things. First, you need to get your products into the other market. Second, and almost as important, you need to engage with customers in that new market. Logistics here is complicated because you could be marketing to people who are hundreds of miles from you, so that needs to be something you think about before using this growth strategy.
- Channel Diversification: This option has you reaching customers in brand new ways. For example, maybe right now, you only market your UV phone cleaners in brick-and-mortar locations. Using this growth strategy, though, you might start selling your products online and reaching a very different audience. If you already market online, you can further diversify by engaging with social media influencers to help reach that audience.
These four basic corporate growth strategies can help you expand your reach, but there’s much to consider before undertaking any of them.
No single growth strategy follows a specific formula, so working with a business coach can help you develop your chosen growth strategy for your company.
If you think it’s time to grow but you’re unsure where to begin, working with your coach is the perfect way to understand what might be ideal for your company and products.