A business strategy is a program designed to direct the entire organization toward long-term success (“marathon”), or in other words known to maximize profits for firm owners over time. Its content touches on the essence of society and is related to vision and mission.
Its main goal is to ensure that the company continues to exist, create value for its customers and thrive.
A growth strategy is an action plan designed to achieve a specific goal, most often to increase a company’s market share.
It should be a derivative of the business strategy, and one of its key roles is to signal to stakeholders (investors, strategic partners, etc.) that it is a developing and growing company that is worth doing business with, using its products or investing in if it is a public company.
Strategic Growth is focused and will usually be related and planned around one product, in one market or in the activity of one department (profit unit or division in the case of large companies). This is a strategy that largely deals with the company’s performance in order to achieve significant results in a defined period of time (“Sprint”).
Beyond these differences, while a growth strategy will present a plan for achieving the organization’s measurable concrete business goals, the business strategy focuses on the ways the company wants to compete in the market and is, therefore, more related to the company’s vision, mission and brand. In addition, the growth strategy is aimed at successfully competing in the market vis-à-vis other companies. The business strategy places emphasis on increasing profitability as a result of realizing the company’ score business.
The business world talks about 4 types of growth strategies
A good way to look at growth strategies is an infinity matrix developed by the mathematician Igor Ansoff and published in the Harvard Business Review in 1957.
Growth strategies are a combination of two axes, product (new or existing) and market (new or existing), meaning there are 4 main types of growth strategies:
1. Product Development
New products in an existing market: For example, a company that sells dairy ice cream will start producing vegetable-based ice cream so that its products will be suitable for vegans, religious and people allergic to milk. Another example would be a company that markets mineral water in large bottles and will start marketing six small bottles that can fit in student’s school bags.
2. Market Development
Developing a new market while relying on existing products: Reaching new segments, expanding the customer base or increasing the use of the product by existing customers. This is a sales-focused strategy. For example, a company that sells amplification and recording equipment to business customers and will start selling to private customers as well.
3. Market Penetration
Relying on existing products in an existing market: This is a marketing-focused strategy, which will usually include one of the following three tactics: increasing advertising and distribution channels, reducing prices or bundling products. For example, cellular companies reduce prices on communications packages or also offer streaming.
4. New Markets
Penetration into entirely new markets with an entirely new product: A strategy that is considered to have the highest risk of the four types. For example, a Belgian company that sells chocolate within Europe, and produces cocoa drinks for countries in the Middle East. Which strategy is right for you?
At this point, you’re probably asking yourself how do you know which strategy to choose? As with many excellent questions, the most accurate answer is dependent on multiple factors.
Here are some of the first questions to answer so you can start getting a feel for the right direction:
- What are your existing resources and assets today? (Knowledge, money, patents, real estate, technology, what is happening in your industry/product category and what are the forecasted trends in the coming years?
- Have there been any regulatory, economic, social changes, etc.? How do these changes affect you?
- Where are you in relation to your competitors?
- What is the quality of your external interfaces? (Distribution channels, relationships with suppliers for example).
- Are you a service or product company?
- Do you sell online or offline?
- What are the needs of your customers? Have and how have they changed recently? Why have they changed? How does this affect you?
The formulation and implementation of a new growth strategy are not necessarily a long and tedious process but they are a product of analysis, evaluation and selection of the most successful alternative.
The signs that signal to you that it is time for a change fall into three main areas
Your intrinsic motivation as an entrepreneur or owner of the company, the state of the company or the market in which you operate.
Many times we instinctively know that the time has come but we do not know how to search for more methodical and clear signs, so we postpone the decision. This failure to formulate a strategy or decide that further undermines the growth of the venture or company.
Your inner motivation: Hungry to succeed and great ambitions based on the experience and understanding of the market in which you operate or alternatively a great vision and mission that burns in you to create change and influence (many times these characteristics can be seen in projects or companies in health or education).
Company situation: When it comes to output in revenue, profits or increasing the number of employees in the company, and output that lasts for a long period of time. Another signal can be the slow growth of the company that is not commensurate with the fact that the market in which it operates is growing faster.
The market in which they operate: External changes such as regulation, political changes or even an epidemic that is shaking the world…
These changes can be perceived as a threat, meaning if no change is made, then the company will be harmed and may not even survive. Alternatively, these changes can be perceived as an opportunity, meaning the market is changing and there is a possibility to capture a wave and leverage a competitive advantage or assets.
Sometimes our competitors will come out in a move that will help them open a gap in their favour and may even force our hand.
We put ourselves at a disadvantage if we do not respond.
It is important to take into account timing as well, which means that sometimes those who lead the company will notice that change is required but cannot always implement change from on their own leveraging the company’s day-to-day operations.
In this instance, It is usually preferable to include experienced external inputs into the mix to assist the company in choosing the right growth strategy.