Business growth strategies for taking your business to the next level

A company’s growth is the basis for its survival, a necessary and common goal for any company seeking long-term success and to thrive in a highly competitive market, but finding ways to expand business can be challenging for a high-growth company. This makes an early assessment of the business growth strategy that the company will pursue particularly critical.

What is a business growth strategy?

A business growth strategy is a plan based on actions to increase the company’s market share and gain competitive advantages to earn higher revenue.

Objectives may cover increasing average sales, growing the customer base, gaining a larger share of the national or international market, breaking into a new segment, or increasing productivity. To this end, it is helpful to analyse several factors that have an impact on business growth, such as innovation, human capital, cost control and process optimisation. Together, these factors help to increase margins and make it possible to develop new services and products on a regular basis. They also set new market trends and help a company stand out from the competition.

What types of business growth are there?

It is a good idea to know what types of business growth exist, how they are classified and their pros and cons before opting for a particular strategy. The strategy you choose will depend on the life cycle of the project, the business’s commercial characteristics and needs, the level of competition, the available resources and the market situation.

• Organic growth. This refers to things that are done in-house, such as opening new locations and increasing production capacity. These strategies make it easier to deploy technology solutions and allow for a slower pace of growth, while also providing internal data that can be used to improve productivity.
• Inorganic growth. This refers to the creation of external partnerships that increase overall production or distribution capacity, as well as size and competitiveness. How? By purchasing a company (acquisition), for example, or by merging two companies to create a larger company (merger). These strategies involve a high initial investment and open the way for faster growth. In general, they allow for more feedback, which helps to improve the quality of goods and services.

Five effective strategies for boosting business

There are several types of business strategies, depending on your company’s objectives, type of growth required and business conditions:

Market penetration

This strategy involves growth by expanding market share using an existing business model that the company is already familiar with. The goal is to draw customers away from competitors, to encourage existing customers to purchase more, and to attract potential customers who have not yet entered this business segment. Companies can do this, for example, by increasing the number of stores, lowering prices and stepping up their marketing and promotion strategies.

This strategy is less risky, but cannot always be applied, because sometimes the life cycle of a product reaches its maturity and growth is difficult to sustain unless there is a strong competitive advantage. This advantage can be based on production prices, quality and product features that stand out among consumers, allowing the company to continue to grow its customer base.

Market development

This involves entering new markets or niches to offer existing or new products. This can happen through new distribution channels, entering new countries, establishing a franchising system, and through mergers or acquisitions. This strategy is used when there is intense competition in the current market with no room to grow, when new product applications are discovered, or when profitability in the markets where the company operates makes it possible for the company to expand into other markets and bring in new revenues.

Product development

This strategy is geared towards making the most out of existing products or services and involves upgrading and adapting them for the purpose of increasing sales. The evolution of customer needs and tastes drives the company to innovate with its products (higher quality, distinctive features, upgrades, price changes, etc.) or to create new, similar products. This strategy can be a natural evolution of market penetration since it is helpful when products show signs of becoming obsolete. This strategy is ideal for companies that want to innovate and have the resources to do so.

Diversification

Diversification strategies are an option for growth in several situations. For example, they are used if the market can no longer support further growth, the product is out of stock or the returns are less than ideal. At other times, a company may decide to diversify to continue to drive growth by reinvesting profits to develop new products.

• Adjacent activities. In this case, the strategy is to expand product and service offerings by creating new goods within the same sector. Growth is pursued in neighbouring territories and industries, where existing offerings can be adapted to serve new customer segments by going beyond the core portfolio.
• Emerging markets. Diversify to exploit completely original opportunities. New companies can be created or companies in other sectors can be acquired to build new business units. This is the riskiest strategy since it involves starting from scratch and developing new products and new markets at the same time. It is also often used for strategic reasons and in business model changes, which makes preliminary market research particularly important.

Integration

There are two types of integration strategies that favour economies of scale:

• Vertical integration. The company starts to perform other activities in the product or service value chain. This can be either backward vertical integration, where it starts to produce goods that it previously purchased from its suppliers; or forward vertical integration, which involves acquiring a business further up in the chain, like distribution. Put simply, the company becomes its own supplier or customer and streamlines the production process.
• Horizontal integration. In this strategy, the company incorporates different product lines or services to supplement its offering at the same stage of the value chain, gaining a better market position while improving the production process.

Blue ocean

Blue ocean is an industry term to describe a new, unknown market with little competition. This strategy involves the simultaneous search for differentiation to break into a new market and generate fresh demand. Whereas the red ocean refers to the existing market, with its competition and known barriers but also information and demand, the blue ocean represents the unknown market, or the market that does not yet exist, which means there are no rules and no competition.

This is what Netflix did, which shifted from a DVD rental and sales company to offering streamed movies. When its competitors applied the same strategy, it decided to launch its own series and films, tapping into its own blue ocean strategy.

Whatever strategy you choose, we recommend that you constantly revisit your plan and invest in strategies that help your company prepare for growth by planning ahead.