Business growth can result from the marketing, innovation and operations of an organization. Alternatively, growth can be obtained with mergers and acquisitions. The following are some common growth strategies.
Top-line growth is an increase in a firm’s revenue or sales. Bottom-line growth is an increase in a firm’s profitability defined as revenue minus all costs. The bottom-line is generally more important because it represents earnings that benefit shareholders. It is common for startup companies to experience a high rate of top line growth for a number of years. It can be difficult to determine whether this will ever translate into bottom line growth. It is easier to generate revenue by spending a lot of money. The true test of a company is whether they can turn profit into scale that makes revenue increasingly profitable.
Market expansion is a growth strategy that involves offering an existing product to a new market. This could be done in a couple ways. A market entry strategy is a plan to distribute products and services to a new market. This has the obvious advantage of potentially increasing revenue but is associated with a variety of competitive and financial risks due to factors such as barriers to entry, taxation and exchange rates. Market development is the process of entering new markets to expand revenue and reduce concentration risk. This involves identifying a target market and finding a way to sell to them. Target markets are a flexible concept that can include factors like location, demographics, customer needs, customer preferences and lifestyle. As target markets are diverse, so are strategies to reach them.
Forward integration is a business strategy that involves expanding to control more of the supply chain in the direction of the customer.
Distribution strategy is a plan to reach customers with goods and services. Distribution includes both sales and delivery of everything that surrounds a product including customer service and customer experience. It is common for companies to adopt multiple distribution channels to reach customers in convenient ways. It is also common for distribution strategy to vary by region as a firm may seek partnerships or light capital structures to reach international markets.
Premiumisation is competition to offer higher quality items that consumers value to a mass market. It is the opposite of commoditization that can be defined as competition to lower prices for a standard level of quality. Premiumisation occurs in a product category, market or industry where customers are willing to pay more for higher quality.
Organic growth is an increase in revenue that is driven by a firm’s business capabilities in areas such as marketing, innovation and operations. The term is meant to exclude growth obtained by buying or merging with other companies. In some cases, a company looks like it is growing because it is acquiring smaller ones but its core business is actually in decline.
Product development is the process of bringing new products and product updates to market. It is concept-to-launch process that includes product positioning, design and marketing. Products may be services and it is common for product development efforts to include end-to-end customer experience.
Vertical integration is when a single firm owns multiple levels of its supply chain. A supply chain is the flow of goods and services through levels of production and distribution networks to the end customer.
