For every successful small business, there comes a time when the plans that worked when the business started, may no longer be enough. A business growth strategy can help here. By building a growth strategy, a business owner and the business’ key stakeholders can look at the overall plan to make decisions for the business.
There are different categories of growth strategy, as described by Keith McFarland (the author of :The Breakthrough Company), that we will review. These growth strategies are within two classifications; intensive and integrative strategies. After we review what these mean, we will show you how to build your own growth strategy document. The below is all an excerpt from the full Business Expansion Guide, which you can download here.
Business Growth Strategy #1- Intensive
According to McFarland, intensive growth strategies are low-risk and have a high impact on growth. This means that they are a great starting point for a business on it’s search for the right strategy. The below list is ordered from least risk-prone to most risk-prone.
Intensive Strategy #1- Selling More of the Same Product
Effective market penetration is one of the simplest growth techniques,
and has proven to be highly effective. Merchandising techniques like selling multiple units in ‘better value’ bulk quantities help businesses sell more of the same product. For example, 6-packs of beer, or rolls
of toilet paper and paper towels. Another technique is to sell more of the same product include marketing a new use for a familiar product, like positioning baking soda as a deodorizer for refrigerators.
Intensive Strategy #2- Developing Your Market
By offering more of its products to consumers from an adjacent market (a consumer base it doesn’t currently do business with), businesses can develop their existing customer base. Most franchising models are built on this principle. McFarland states that most of the fast-growing companies in the last few decades have used market development to their advantage.
For instance, offering your product or service to customers in another city or state, for example. McFarland points out that many of the great fast-growing companies of the past few decades relied on Market Development
as their main growth strategy. In the case of Express Employment Professionals, a staffing business that began in Oklahoma City, expansion was initiated by launching new offices around the country, following
a franchising model. Today, the company offers employment staffing services in some 588 different locations, and the company became the
fifth-largest staffing business in the US.
Intensive Strategy #3- Exploring Other Channels
This is a strategy that aims to bring in customers through an alternative route. For a brick-and-mortar store, this may mean setting up an eCommerce website. The same target consumer base may be reachable on multiple channels. Going digital makes sure that businesses don’t miss out on the opportunity of generating business through newer, unused channels. For instance, Apple started selling its products through a freshly set up online store in 1997. The company then reported a revenue of $16 million from its online store alone, during the second quarter of 1998.
Intensive Strategy #4- Developing New Products
According to McFarland, it is easier for a business to develop and sell a new
product to customers it is already familiar with. Half the work is done:
the business only needs to study and improve the product, as it has already
studied this customer base.
Another reason to expand the product range is when a business recognizes demand for a product in a category they don’t currently operate in. For example, Minneapolis-based Polaris used to be a snowmobile manufacturer for decades. When they saw sales flagging, they responded by venturing into the All-Terrain Vehicles (ATV) category. This gave the brand a fresh start, and revived it to the point where the brand name is practically synonymous with the ATV category. In 2016, only 8% of Polaris’ earnings came from snowmobiles and snowmobile parts, and related garments and accessories.
Business Growth Strategy #2- Integrative
Integrative Strategy #1-Horizontal Acquisition
This is when a business raises the required capital and simply buys out its competition. Horizontal growth presents two benefits:
• It actively contributes to the company’s revenues and financial performance
• It eliminates the competitors altogether, giving the business a larger share of the market
By acquiring key competitors, businesses like Intuit have improved their product catalogs and increased their market share successfully.
Integrative Strategy #2-Backward Acquisition
This is when a business acquires one or more of its suppliers, making production faster and—in many cases—cheaper. Fastenal, a Minnesota-based company, made nuts and bolts among other products. It bought a number of tool and die manufacturers, and by doing so added the capability of manufacturing custom parts for larger clients.
Integrative Strategy #3-Forward Acquisition
This growth strategy is similar to backward expansion, but this strategy focuses on the other end: the distribution chain. For example, a company that manufactures T-shirt dresses may choose to buy out retail stores that sell its products. This way, it can sell its products at the expense of its competitors.
Bonus: Infrastructure-Focused Growth Strategies
Since expanding through additional infrastructure (developing a current location or expanding into a second location) is such a commonly followed route for growth, it warrants its own set of specific strategies. To get more details on infrastructure-focused growth strategies, download the full guide here.