There may be more than one possible growth strategy that a business can pursue. The important thing is to carefully evaluate the alternatives and make the best choice possible. The growth possibilities are defined by the size of the target market and potential market share. The cost of growth are marketing, selling and delivering to the desired market. So in order to evaluate the effectiveness of a given strategy these factors must be taken into consideration:
- Know the Size of the Target Market – There is a number of possible customers within any market. In auto repair if the end consumer is the target then this would be the number of vehicle owners that live or work within a specified proximity to the shop. The area this applies to can vary depending on the location. Other target markets would be measured in a similar fashion.
- Define the Anticipated Market Share – This involves realistically calculating the percentage of the available customers that a business can acquire and retain. It means knowing the businesses that will compete for customers in the same market and what their slice of the pie will be. Knowing the potential market share will present a picture of the projected revenue that the strategy will deliver. This is turn will provide the anticipated business growth rate.
- Choose a Marketing Option – Different groups of customers look for providers in different ways. Ultimately the goal is to choose the most effective way to reach the audience.
- Define Sales Requirements – Whether the strategy involves a new market, a new product offering or both how the offering will be sold must be determined. Pricing must be set and training for front line personnel may be required.
- Determine Delivery Requirements – Providing a new service or an existing service to a new market may require different methods, different skills or more resources. It’s important to look at this matter carefully and identify any requirements beyond the current situation.
- Evaluate the Viability of the Strategy – The size of the market and projected market share will allow for revenue projections. Comparing projected revenue to marketing, sales and delivery costs will provide the anticipated profitability of the strategy. If the strategy projects to be profitable it should be considered.
- Choose the Best Strategy – Different strategies will incur different levels of risk and reward. Logically it would seem that the best choice would be the option that delivers the greatest reward for the least amount of risk. This may not always be true depending on the circumstances. Resource constraints may dictate that the only viable alternative is the one that’s the least risky – subsequently offering the least reward. Conversely a business may be in a position to take on more risk which would tend to lessen the impact of this factor. So choosing the best option may differ from situation to situation.