1

To grow or no to grow, that is the question

2

Potential advantage of large firms

Scale economies (in its many diverse forms), when
present, provide a good rationale for firm growth
Also, scope economies, and the learning curve
Keep in mind diseconomies of scale

How to grow?

GROWTH STRATEGY
Wrapping it all up

How to grow: dimensions to consider

3

Product: present versus new

Ansoffs matrix

Mercadona v Alcampo

Market: present versus new

Same industry versus new industry (diversification)

Alone v strategic alliances

Alternatives to (direct) firms growth
Strategic alliances, eg, Airline companies

Internal (organic) versus external growth (mergers)

Example: Mercadona (Wal Mart) v Eroski

Internationalization

Market penetration

Internationalization

Same product (comercial format) in the same

market

Inditex es uno de los principales distribuidores de

moda del mundo, con ocho formatos comerciales Zara, Pull and Bear, Massimo Dutti, Bershka,
Stradivarius, Oysho, Zara Home y Uterqe - que
cuentan con 4.607 establecimientos en 74 pases

New customers, currant customers ot but more

products, to attract competitors customers

Mercadona:
Increase store network
www.compraonlinemercadona.com
Tarjeta Mercadona; revista Mercadona

Vertical integration

Diversification

Same market, new products-activities

Upstream vertical integration

New product in a new market-industry

Retailer becomes wholesaler, and also sells retailers

brands (marcas blancas)

El Corte Ingls Seguros, El Corte Ingls Informtica,

Hipercor, OpenCor, Optica2000, Viajes El Corte
Ingles, Financiera El Corte Ingls, etc.

Downstream vertical integration

Wholesaler becomes retailer

Alcampo
Purchasing group, at Spanish and at an international
level
Retailers brand
7

Alternatives to direct firms growth

9

10

Is direct firms growth necessary to achieve the

advantages of size (economies of scale, scope)?
Whether internal-organic or external-mergers
growth

Alternatives to direct firms growth

11

12

Strategic alliance: two or more firms agree to collaborate in a

project
Firms remain independent, and share information, resources,
technology
E.g. Airline alliances
Joint-venture: a new firm is created owned by the firms that agree to
cooperate.
Purchasing group to achieve bargaining power
UTE technology firms

Outsourcing e.g., EasyJet, Walt Disney

Management contracts, franchises, etc.
Melia international hotels

Intermediate solutions between mergers and each one on its own Cost and benefits

Internal versus external growth

13

More to come
14

Mercadona (Wal Mart) versus Eroski

The growth trap

What is strategy?, by M. Porter
Growth and strategic positioning
M: Porter: too often, efforts to grow (with new
product line, etc.) blur uniqueness, undermine
competitive strategy and firms unique strategic
positioning

15

Growth strategy involves other functional areas

Finances
Human resources
Logistics
Marketing