Growth strategies

Growth is something for which most companies strive, regardless of

their size. Small firms want to get big, big firms want to get bigger. Indeed,
companies have to grow at least a bit every year in order to accommodate the
increased expenses that develop over time. With the passage of time, salaries
increase and the costs of employment benefits rise as well. Even if no other
company expenses rise, these two cost areas almost
always increase over time. It is not always possible
to pass along these increased costs to customers and
clients in the form of higher prices. Consequently,
growth must occur if the business wishes to keep
up.
Growth of an enterprise should always be
multidimensional. For example, growth on the
production sideshould be supplemented by growth
on technological and marketing sides.
Organizational growth, however, means
different things to different organizations. There are
many parameters a company may use to measure its
growth. Since the ultimate goal of most companies
is profitability, most companies will measure their
growth in terms of net profit, revenue, and other
financial data. Other business owners may use one
of the following criteria for assessing their growth:
sales, number of employees, physical expansion,
success of a product line, or increased market share.
Ultimately, success and growth will be gauged by
how well a firm does relative to the goals it has set for itself.

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 Business life cycle

A business goes through stages of development similar to the cycle of

life for the human race. Each stage of the business life cycle may not occur in
chronological order. Some businesses will be "built to flip"; quickly going
from start-up to exit. Others will choose to avoid expansion and stay in the
established stage.
The Seven Stages of Business Life cycle are:

1. Seed Stage: The seed stage of the business life cycle is when the business is
just a thought or an idea. This is the very conception or birth of a new
business. At this stage of the business the focus is on matching the business
opportunity with the skills, experience and passions. Other focal points
include: deciding on a business ownership structure, finding professional
advisors, and business planning.

2. Start-Up Stage: The business is born and now exists legally. Products or
services are in production and you have your first customers. Start-ups
requires establishing a customer base and market presence along with tracking
and conserving cash flow.

3. Growth Stage: The business has made it through the toddler years and is
now a child. Revenues and customers are increasing with many new
opportunities and issues. Profits are strong, but competition is surfacing.
Growth life cycle businesses are focused on running the business in a more
formal fashion to deal with the increased sales and customers. Better
accounting and management systems will have to be set-up. New employees
will have to be hired to deal with the influx of business.

4. Established Stage: The business has now matured into a thriving company
with a place in the market and loyal customers. Sales growth is not explosive
but manageable. Business life has become more routine. An established life
cycle company will be focused on improvement and productivity. To compete

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in an established market, you will require better business practices along with
automation and outsourcing to improve productivity.

5. Expansion Stage: This life cycle is characterized by a new period of

growth into new markets and distribution channels. This stage is often the
choice of the small business owner to gain a larger market share and find new
revenue and profit channels. Add new products or services to existing markets
or expand existing business into new markets and customer types.

6. Decline Stage: Changes in the economy, society, or market conditions can

decrease sales and profits. This may quickly end many small companies.
Search for new opportunities and business ventures. Cutting costs and finding
ways to sustain cash flow are vital for the declining stage.

7. Exit Stage:This is the big opportunity for your business to cash out on all
the effort and years of hard work. Or it can mean shutting down the business.

Get a proper valuation on the company. Look at business operations,

management and competitive barriers to make the company worth more to the
buyer. Set-up legal buy-sell agreements along with a business transition plan.

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Need for growth strategies in
a business organization

1) Survival: A firm has to grow in order to survive in the competitive

business world. A growing firm has a capacity to accept business risks
and uncertainties. It can also face any adverse situation effectively. A
firm has to reach to the optimum size and growth. So growth is needed
for survival.
2) Secured position in the market: To establish secured
position is one reason for the growth of an enterprise. A firm having a
large market share enjoys better security in marketing its products, the
product range can also be expanded. Thus, growth strategies are needed
as a protection against period of adversity.

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3) Benefits of Government policies: Government offers
various facilities and concessions to business enterprises. Businessmen
can take the benefit of such policies by expanding their activities. For
example, Government may offer tax concessions or finance at lower
rates of interest.
4) Financial benefits: The owners of an enterprise may take interest
in growth because growth offers financial benefits. For example,
increase in production ultimately results in increase in profits. The
managers and other employees may get higher wages and other
monetary benefits from such growth.
5) Goodwill amd Market Reputation: A business enterprise
always wants that there in goodwill and market reputatipn of the
enterprise. For this, the enterprise must grow and reach the masses.
Thus,growth is needed for goodwill and market reputation.
6) Make organization self sufficient:To make the enterprise
self sufficient and ensure its regular working over a long period. The
programs like backward integration , forward integration, expansion,
take over of other organization,etc have to be undertaken by the
company.

Factors affecting growth

1) Availability of resources: One of the preconditions for the

growth of business is the availability of resources both physical and
natural. If the resources fall short, the growth process of the business
will be adversely affected. Availability of adequate funds, tax incentives,
etc facilitate growth. The enterprise may come in difficulty when such
factors are not favourable.
2) Ability to face competition: Competition is a factor, which
limits the growth of business. A business that has the ability to face
competition can achieve smooth growth. Quality products, lower cost of
production, consumer loyalty, etc are useful for facing market
competitioneffectively.

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 3) Progressive management: Management of a company should
always be flexible. Progressive management always plans to expand the
size of the business and growth plans. Such managements are always
prepared to finance the business growth.
4) Attitude of management: The management should have
genuine desire to face th challenges of growth. The attitude of
management needs to be positive and favourable for the growth and
expansion.
5) Product/Service: Product plays an important role in the growth
process. Quality of product, regular and continous supply of product,
reasonable price, satisfactory after sales service brand image, consuner
loyalty, effective marketing are the favourable points relating to the
product. These help to create market demand and facilitate large scale
production.
6) Flexibility: The company should be flexible enough to adopt
changes immediately. For example, technological application, use of
good raw materials, modern methods of production etc. The company
should implement these changes in the organization.

Reasons for no growth in

business

1) Lack of time: Due to lack of time the company’s management is not

able to handle the business properly and because of this the company may
suffer losses. It means the company is thinking for expansion without
giving any attention to the current business activities.

2) Lack of focus: The lack of focus in business can sink the organization.
If the organization is thinking in too many directions instead of focusing on
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 the current business the company may suffer losses due to this.

3) Lack of support: If the company’s directors are carrying out all the
activities on their own without the help of experts then the company may
not grow properly. There should be specialization in business.

4) Lack of creative "space": If the management is not able to bring

creativity in business then the company will not be able to face the
competition.The company should plan, strategize and think creatively.

5) Wasting resources on time and energy-busters: The

company may show stagnant or no growth if it has entered into the business
which is not of its interest. There will also be waste of time and other
resources.
6) Focusing on "cheap" instead of cost-effective: If the
company is giving more importance to cost rather than quality then it may
suffer losses because customers want good quality at reasonable price.The
company should put value, quality and ROI above cost.

7) Frittering away billable hours: The company should not waste

time in looking only after the management but it should also invest time in
overall business activities. By doing this the company is wasting time--thus
money.
8) Inefficient administrative foundations: If the company fails
to systemize, automate and streamline the business processes then it may
go into losses. It should be able to implement latest changes in the business.

9) Squandering core strengths: The company should first find out

its strengths and weakness then try to overcome the problems and focus on
business growth, and revenue generation.

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10) Not investing in the right support: The company should
place the right people at the right job. They should be skilled, committed,
thinking, creative professionals who value in the business and help it grow.

Indicators of growing
organization
1) Net worth: The net worth refers to the total of the paid-up capital
and reserves and surpluses available with an enterprise. It is often used
as an indicator of growth. Increase in net worth indicates growth.
However, net worth is not a satisfactory measure of comparison between
different firms. For example, firms having identical net worth may have
different growth rates.

2) Total assets: Total assets can be used for measuring the growth of a
firm. This indicator is extensively used for inter firm comparisons as
regards size. However, it is difficult to conclude that an enterprise is
growing only because its total asseta are increasing.

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 3) Volume of output: The volume of output produced within a
specific period can be used in order to find out the growing tendency of
an enterprise. An increase in the volume of production indicates the
growth of an enterprise. This test will prove to be unsuitable when the
output of an enterprise is of heterogenous nature. It is much better as
compared to others.

4) Volume of sales: Increase in the volume and value of sales over a

specific period can be used for measuring the growth of an enterprise.
Increase in volume of sales is a better indicator of growth as compared
to increase in the volume of output as increase in output has no
significance if there is no corresponding increase in sales.

5) Porfit earned: Increase in porfit earning capacity is normally due

to more production and turnover. A company earning more profit can be
said to be growing. However it is not a good indicator of growth as
increase in profit may be due to various reasons such as increase in
efficiency, productivity or price rise of the products of the company.

Ways of Growing the Business

1) Penetrate your existing market. The first thing that comes

to mind when thinking of growing the business is getting new
customers. But the customers that are already there are the best bet for
increasing the sales; it’s easier and more cost-effective to get people
who are already buying from the company to buy more than to find new
customers and persuade them to buy from the company.

2) Ask for referrals. Getting new customers is another approach to

growing the business. One of the easiest way to do this is to ask the
current customers for referrals. Doing a great job and just assuming that
the customers are passing the word about the business isn’t going to do

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 much to increase the customer base; the company has to actively seek
referrals.

3) Innovate your product or service. Discovering and

promoting new uses for the products or services is a great way to both
get existing customers to buy more and attract new customers.

4) Extend your market reach. There are several ways of growing

the business by making product or service available to a new pool of
customers. The most obvious is to open stores in new locations, such as
opening a store or kiosk in a new town. New locations can also be
virtual, such as a website with an online store. Another approach is to
extend the reach through advertising. Once a new market is identified, it
might advertise in select media that targets that market.

5) Participate in trade shows. Trade shows can be a great way of

growing the business. Because trade shows draw people who are already
interested in the type of product or service offer, they can powerfully
improve bottom line. The trick is to select the trade shows participate in
carefully, seeking the right match for the product or service.

6) Conquer a niche market. Remember the analogy of the big fish

in the small pond? That’s essentially how this strategy for growing
business works. The niche market is the pond; a narrowly defined group
of customers. Think of them as a subset whose needs are not being met
and concentrate on meeting those unmet needs.

7) Contain your costs. Surprised? Bear in mind that when we’re

talking about growing the business, we’re actually talking about
growing the business’s bottom line. And the difference between pre-tax
and post-tax money can make this a very effective growth strategy.
There are two main approaches to cutting costs; liquidating your “loser”
products and improving your inventory turnover.

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 8) Diversify your products or services. The key to
successfully growing the business through diversification is similarity.
The focus ison the related needs of already established market or on
market segments with similar needs and characteristics.

9) Franchising. The stories of entrepreneurs who have become both

well known and well heeled due to franchising their small businesses
are legion – and not just stories. If the business is successful and can
develop a system that ensures that others can duplicate your success,
franchising may be the fast track for growing your business.

10) Exporting. Expanding into international markets can also be a

powerful boost to the business’s bottom line. Like franchising, this is a way
of growing your business that requires quite a commitment of time and
resources, but can be extremely rewarding.

Methods of Growth

Joint Venture/Alliance.
This strategy is particularly effective for smaller firms with limited resources.
Such partnerships can help small business secure the resources they need to
grapple with rapid changes in demand, supply, competition, and other factors.
Forming joint ventures or alliances gives all companies involved the flexibility
to move on to different projects upon completion of the first, or restructure

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agreements to continue working together. Subcontracting, which allows firms
to concentrate on those aspects of their business that they do best, is
sometimes defined as a type of alliance arrangement. Joint ventures and other
business alliances can inject partners with new ideas, access to new
technologies, new approaches, and new markets, all of which can help the
involved businesses to grow. Indeed, establishing joint ventures with overseas
firms has been hailed as one of the most potentially rewarding ways for
companies to expand their operations. Finally, some firms realize growth by
acquiring other companies.
Diversification (New Products/New Market)
Diversification is a high-risk growth strategy, largely because both the
products and the market are unproven territory for the entrepreneur. Though
trailblazing emerging products and markets can be exhilarating, it can also be
terrifying given the fact that neither you nor anyone else can rely on prior
experience for reassurance. But if innovation is one of the company's defining
characteristics, a diversification strategy will eventually become second
nature. To achieve growth, the company will have to be realistic about the
risks it face and crystal clear about what has to be achieved.
Market Development (Existing Products/New Market)
A more common scenario is one in which a small business owner attempts to
develop a new market for their existing products and services. The new market
can be geographical (e.g. foreign export) or an untapped segment of a
domestic market. It's even possible to develop a new market for existing
products by adjusting the product's packaging or expanding the product's
distribution channels. In any event, a market development growth strategy
requires a working knowledge of existing markets and the ability to gaps in the
marketplace that can be exploited to your advantage.
Product Development (New Products/Existing Market)
A growth strategy based on product development is the mirror image of a
market development strategy. Instead of pioneering a new market with existing
products, you attempt to roll out a new product(s) in a market with which you
are already familiar. Many small business owners are more comfortable
working in this kind of scenario because they already possess an awareness of
prevailing market conditions. However, a product development strategy can be
just as challenging as a market development strategy because it often requires

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the business to develop new abilities and continuously adapt the products until
they achieve marketplace success.
Market Penetration (Existing Products/Existing
Markets)
Businesses that find themselves in a situation that involves neither new
markets nor new products are forced to grow through a market penetration
strategy, a strategy that is designed to give the business a greater percentage of
market share. This type of strategy usually seeks to gain a competitive edge
through pricing, marketing, or other initiatives. Additionally, market
penetration can be achieved by increasing customer usage through loyalty
programs and incentives targeting your existing customer base.
Mergers and Acquisitions
A merger is a combination of two or more businesses into one business. Laws
in India use the term 'amalgamation' for merger. The Income Tax Act,1961
[Section 2(1A)]defines amalgamation as the merger of one or more companies
with another or the merger of two or more companies to form a new company,
in such a way that all assets and liabilities of the amalgamating companies
become assets and liabilities of the amalgamated company and shareholders
not less than nine-tenths in value of the shares in the amalgamating company
or companies become shareholders of the amalgamated company. An
acquisition may be defined as an act of acquiring effective control by one
company over assets or management of another company without any
combination of companies. Thus, in an acquisition two or more companies
may remain independent, separate legal entities, but there may be a change in
control of the companies.

Horizontal and vertical Integration

Horizontal integration occurs when two firms in the same industry join
together who produce the same product and are at the same stage of the
production process (e.g. the Nestle takeover of Rowntree). The new, larger
business is likely to be more powerful, have a larger market share, and achieve
higher sales revenue and profits. However, the new business may become
complacent and inefficient and find that it suffers from diseconomies of scale
and / or falling profits.Vertical integration occurs when two firms combine
who are in the same industry, but at a different stage of the production process.

Forward vertical integration.

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Occurs where a company merges with, or takes-over, another company which
is closer to the retail stage (i.e. nearer to the consumer). An example of this
would be a car manufacturer taking-over a range of car showrooms. Forward
Vertical integration is often the result of a desire to secure an adequate number
of market outlets and to raise their standard.

Backward vertical integration.

Occurs where a company merges with, or takes-over, another company which
is closer to the source of the raw material (e.g. a car manufacturer taking-over
a supplier of car components). Backward Vertical integration is often the result
of a company being able to exercise much greater control over the quantity and
quality of it supplies, as well as securing its supplies at a lower cost.

Conglomerate.
This occurs where two firms merge which are in different industries and
produce different goods - in other words, it is pure diversification. The major
advantage to the new, larger firm is that it has diversified its product range and
spread its risks.

Lateral.
This occurs where two firms combine which are similar in some way, but are
not in the same industry (e.g. Cadbury-Schweppes). Here, both companies
produced products which were sold to similar market segments (confectionery
and soft drinks). Often, the firms can benefit from the management and
marketing techniques employed by the other.

Conclusion

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 Organization is a living organism that can be energized to affect every
and any thing related to it. The secret to keeping an organization alive and
youthful is to keep it operating at its maximum capacity and to keep increasing
that capacity by constantly upgrading the building blocks of organization (job
positions, activities, and systems), and then coordinating and integrating the
subunits that make up that building block. In addition, organization is
maximized when top management develops a vision and mission, including
clear objectives and business values, which are well communicated by top
management to the staff, and well executed by the employees in the company.

Organizational growth, then, may well require as much planning, effort,

and work as did starting a company in the first place. stablishing and
improving standard practices is often a key element of organizational growth
as well. Organisation must implement changes in order to be cost efficient,
innovative, decrease customer complaints and increase sales. Change will
always be a factor for organizations wanting to increase their prolonged
existence and prosperity in volatile markets.

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 Bibliography

The information contained in this project has been taken from various sources.
www.google.com (search engine),wikipedia, www.investorswords.com
www.web-enable.com and various books.
The information is true in the best of our knowledge.

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