How Do I Choose the Best Business Growth Strategy?
Refers to the strategy for the enterprise to develop to a higher level goal on the existing basis. As a type of corporate-level strategy, the growth strategy itself does not have much mystery. However, many scholars are now used to calling growth strategies development strategies.
Decision Model for Growth Strategy
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- Chinese name
- Decision Model for Growth Strategy
- Refers to the strategy for the enterprise to develop to a higher level goal on the existing basis. As a type of corporate-level strategy, the growth strategy itself does not have much mystery. However, many scholars are now used to calling growth strategies development strategies.
The author believes that, in fact, the concept of corporate development strategy should be broader. According to the different development trends, there are three types of development strategies: growth strategy, stability strategy, and contraction strategy. These three strategies together constitute the company's company-level strategy to solve the development situation of products or businesses in different industries in different markets.
The ultimate goal of a growth strategy is to achieve business growth. The reason why companies choose growth is because of the combination of external opportunities and internal advantages, as shown in Figure 1 below.
- Decision Model for Growth Strategy
In the first situation, the company's external environment has opportunities, and the company has relevant advantages, the company should decisively choose a growth strategy.
In the second situation, there are opportunities in the external environment of the company, but the company does not have relevant advantages within the company, and the company can choose a growth strategy. This is often related to the decision-making style of the senior leadership of the company, and many senior leaders of the company tend to choose a growth-oriented development approach. In fact, the rational decision-making thinking should consider whether the company can make up for the internal disadvantages and grasp the development opportunities. If you can make up for it, choose the growth type; if not, then consider the stable strategy.
The third situation is that the company has advantages internally, but external opportunities are not good. It is best for companies to choose less growth strategies, that is, try not to choose growth strategies. Because there is no need for enterprises to increase their investment outside the opportunity, the results often go against expectations and will not lead to corporate growth. In recent years, many domestic industries have formed a stable pattern, and the opportunities for the external environment are not as good as before, such as color TVs, drinking water, and shampoo. However, the pattern remains after every fierce competition. For companies in these industries, the best choice is to maintain stability, save strength, build strength, and wait for development.
In the fourth situation, there is no opportunity outside the company and there is no internal advantage at all, and no growth strategy is chosen.
Once an enterprise determines the direction of a growth strategy, it must choose the path of a growth strategy. Common strategies of diversification, integration, and internationalization are all ways of growth strategy. These strategic approaches are now listed together, as shown in Figure 2 below.
- Decision Model for Growth Strategy
Market penetration is the increase in sales of existing products or services in existing markets through greater marketing efforts. The main situation of companies choosing this approach is that their specific products and services have not yet reached saturation in the current market, and the use rate of products by existing users can be significantly increased, and the increase in enterprise size can bring greater competitive advantages .
Market development refers to expanding existing products or services into new regional markets. The companies that choose this approach are generally very successful in existing areas of operation and have certain market development capability advantages, such as the funds and human resources required to expand operations; in addition, there are undeveloped or unsaturated markets in the industry.
Product development is the enhancement of existing market product sales by improving and changing products or services. The companies that choose this approach often have very strong research and development capabilities in the industry, as well as existing successful products that are in the mature stage of the product life cycle; and the industries in which enterprises compete are high-tech industries with rapid development. .
Integration refers to the strategy by which an enterprise makes full use of its advantages in products, technologies, and markets to develop in depth and breadth in the business field. Enterprises choosing this approach should consider which activities should be carried out within themselves and which can be safely transferred to external companies, rather than blindly horizontal and vertical development. Internationalization is the sale of a company's products outside its home market. One of the main reasons why companies choose to implement an internationalized development path is the existence of new potential opportunities in the international market, such as the ability to transfer their core competitiveness, obtain regional economic benefits, and form the best experience curve.
Diversification is the combined development of multiple businesses. Companies that choose to diversify may be involved in different businesses in different industrial environments. Nowadays, there have been many discussions about diversification. In fact, compared with specialization, corporate diversification itself is more about solving the problem of survival. In other words, this is a path choice made by the enterprise in order to survive and develop at certain stages. Just as many domestic small and medium-sized enterprises have chosen diversification in order to survive in the past, but this is by no means the eternal development of these enterprises. After a certain stage of development, these companies will choose the path of specialization.
There are three main ways for companies to achieve the growth strategy listed above: independent "development", cooperative "development" and mergers and acquisitions.
Independent "development" is also called internal entrepreneurship. It is a company that develops new products or develops new markets through internal innovation. Cooperation "development" is also called cooperative development. It is the cooperation between companies and other companies to develop new products on the basis of mutual benefit and mutual benefit, or to develop new markets together for development. The strategic alliance of common enterprises also belongs to the form of cooperation "development". M & A is the abbreviation of merger and acquisition. Merger refers to the integration of two companies' businesses on the basis of relative equality. Generally, the resources and strengths they have together can produce a stronger competitive advantage than their independent development; Acquisition refers to the acquisition of part or all of the equity of another company by a company, which will acquire the business of the acquired company into its strategic investment portfolio, thereby achieving the purpose of more effectively utilizing its core competitiveness.
When companies consider how to implement different growth strategies, they are often subject to two main factors. The first is whether the company has the development elements of the industry, such as resources such as funds, talents, and brands, and the level of these factors. The second is the degree of control the company has over these key factors, mainly reflected in the company's control of these resources. , And the ability to operate resources, such as financial management, marketing and R & D capabilities. As shown in Figure 3 below.
- Decision Model for Growth Strategy
Enterprises have the elements of the industry's development and have a high degree of control. At the same time, the enterprises have a high degree of control over these factors. Enterprises should choose an independent "development" approach to achieve their relevant growth strategy. Second, the enterprise's development factors The degree of availability is low, but the degree of control of these factors by the enterprise is high. In order to achieve its relevant growth strategy as soon as possible, the company should choose the method of mergers and acquisitions;
Enterprises have low levels of development factors for the industry, and enterprises have low levels of control over these factors. It is best for companies to choose a cooperative "development" approach to achieve relevant growth strategic approaches;
Generally speaking, enterprises have a high degree of development factors in the industry, but the situation that enterprises have low levels of control over these factors does not exist, and their implementation is no longer discussed.
In order to achieve a growth strategy, different enterprises can choose the appropriate method according to the actual situation, and the same enterprise can also choose a combination of the three methods according to the situation of different businesses.