STRATEGIES FOR FIRM GROWTH

Internal Growth Strategies

Internal growth strategies involve efforts taken within the firm itself, such as new product development, other product-related strategies, and international expansion. Internally generated growth is often called organic growth because it does not rely on outside intervention.

📮 New Product Development

New product development involves designing, producing, and selling new products as a means of increasing firm revenues and profitability. Successful new products can also provide sufficient cash flow to fund a company's operations and provide resources to support developing additional new products. The keys to effective new product and service development, which are consistent with the material on opportunity recognition and feasibility analysis, follow:

⤐ Find a need and fill it

⤐ Develop products that add value

⤐ Get quality and pricing right

⤐ Focus on a specific target market

⤐ Conduct ongoing feasibility analysis

Additional Internal Product-Growth Strategies

⛳ Improving an Existing Product or Service

by enhancing quality, making it larger or smaller, making it more convenient to use, improving its durability, or making it more up-to-date.

⛳ Increasing the Market Penetration of an Existing Product or Service

A market penetration strategy involves actions taken to increase the sales of a product or service through greater marketing efforts or through increased production capacity and efficiency. By increasing advertising expenditures, offering sales promotions, lowering the price, increasing the size of the sales force, or increasing a company's social media efforts will increase in a product's market share. Another example is the prepaid card, which making it more convenient for customers to purchase its products, restaurants and retailers boost their revenues. Prepaid cards also make it easier to give a restaurant's or retailer's offering as a gift.

⛳ Extending Product Lines

A product line extension strategy involves making additional versions of a product so that it will appeal to different clientele or making related products to sell to the same clientele. This is a strategy that allows a firm to take one product and extend it into several products without incurring significant additional development expense. Firms also pursue product extension strategies as a way of leveraging their core competencies into related areas. 

⛳ Geographic Expansion

Many entrepreneurial businesses grow by simply expanding from their original location to additional geographic sites. The keys to successful geographic expansion follow:

↬ Perform successfully in the initial location

↬ Establish the Legitimacy of the business concept in the expansion locations

↬ Don't isolate the expansion location

International Expansion

International new ventures are businesses that, from inception, seek to derive competitive advantage by using their resources to sell products or services in multiple countries. Some start-ups become international firms because overseas customers request their product or service. To successfully use this growth strategy, firms must master the complexity of profitably selling their product or service outside their home, domestic market.

External Growth Strategies

An emphasis on external growth strategies typically results in a more fast-paced, collaborative approach toward growth than the slower-paced internal strategies. External growth strategies rely on establishing relationships with third parties :

🔮 Mergers and Acquisitions

A merger is the pooling of interests to combine two or more firms into one. An acquisition is the outright purchase of one firm by another. Acquiring another business can fulfill several of a company's needs, such as expanding its product line, gaining access to distribution channels, achieving economies of scale, gaining access to technology that will enhance its current offerings, or gaining access to talented employees.

➳ Finding an Appropriate Acquisition Candidate

There are typically two steps involved in finding an appropriate target firm. The first is to survey the marketplace and make a "short list" of promising candidates. The second is to carefully screen each candidate to determine its suitability for acquisition.

➳ The Process of Completing the Acquisition of Another Firm

Schedule a meeting with the target firm's executives ➲ Evaluate the feelings of the target firm's executives about the acquisition ➲ Determine how to most appropriately finance the acquisition ➲ Actively negotiate with the target firm ➲ Make an offer if negotiations indicate that doing so is appropriate ➲ Develop a non compete agreement with key target firm employees who will be retained ➲ Hire an attorney to prepare the closing documents ➲ As soon as practical, meet with all employees to explain the acquisition ➲ Move forward with the plan for adding the acquired firm to the organization.

🔮 Licensing

Licensing is the granting of permission by one company to another company to use a specific form of its intellectual property under clearly defined conditions. Licensing also works well for firms that create novel products but do not have the resources to build manufacturing capabilities or distribution networks, which other firms may already have in place. A license can be exclusive, nonexclusive, for a specific purpose, and for a specific geographic area. The two principal types of licensing are:

⤷ Technology Licensing
Technology licensing is the licensing of proprietary technology that the licensor typically controls by virtue of a utility patent.

⤷ Merchandise and Character Licensing

Merchandise and character licensing is the licensing of a recognized trademark or copyright. Example: Harley Davidson licenses its trademark to multiple companies that place the Harley trademark on T-shirts, jackets, collectibles, gift items, jewelry, watches, and so on. The key to merchandise and character licensing is to resist the temptation to license a trademark too widely and o restrict licensing to product categories that have relevance and that appeal to a company's customers.

🔮 Strategic Alliances and Joint Ventures

➻ Strategic Alliances

A strategic alliance is a partnership between two or more firms that is developed to achieve a specific goal. Participation in alliances can boost a firm's rate of patenting, product innovation, and foreign sales. Alliances tend to be informal and don't involve the creation of a new entity. Technological alliances feature cooperation in research and development, engineering, and manufacturing. By pooling their complementary assets, these firms can typically produce a product and bring it to market faster and cheaper than either firm could alone. Marketing alliances typically match a company that has a distribution system with a company that has a product to sell in order to increase sales of a product or service. 

➻ Joint Ventures

A joint venture is an entity created when two or more firms pool a portion of their resources to create a separate, jointly owned organization. Joint venture typically consists of the firm trying to reach a foreign market and one or more local partners. In a scale joint venture, the partners collaborate at a single point in the value chain to gain economies of scale in production or distribution. In a link joint venture, the position of the parties is not symmetrical, and the objectives of the partners may diverge.