Choosing the best possible growth strategy is critical. This entails identification and evaluation of possible alternatives. Some different types of growth strategies include market penetration, market expansion, product expansion, diversification and acquisition. Each of these will vary in terms of marketing, sales and product delivery requirements. This doesn’t mean that it’s not possible or even desirable to employ more than one strategy simultaneously. Rather it means that understanding these requirements must be part of the decision making process. The following are possible growth strategies that can be employed:
- Market Penetration – Concentration on increasing sales of existing products in the primary target market of a business is classified as a penetration strategy. This equates to earning the business of new customers within the market served by the company. So if the primary focus of an auto repair shop is the individual vehicle owner that lives or works within proximity of the shop then market penetration would involve increasing the number of customers that the shop services.
- Market Expansion – Selling existing products in new markets is referred to as an expansion strategy. In auto repair this means offering existing services to a new target market. For example if the shop services individual vehicle owners a market expansion strategy may involve targeting organizations within the area such as businesses, churches or government entities. It should be noted different types of organizations have different requirements in terms of marketing, sales and delivery and should be considered as such.
- Product Expansion – Selling new products to existing markets is called product expansion. If there are services that existing customers would be interested in then expansion opportunities exist. For example if a tire shop offers only undercar repairs a growth opportunity may exist in offering full service repair.
- Diversification – Selling new products to new markets is referred to as diversification. If there is an opportunity for a new market that requires services that aren’t currently offered then a diversification strategy may be employed. For instance, a repair shop that provides mechanical repair services may choose to offer different types of vehicle services such as restoration.
- Acquisition – The purchase of another existing business is another way for a company to grow. Usually this is predicated on economy of scale in administrative functions. Consolidating management and administrative functions can result in lower overhead.
