How to develop your business? Where to move, what to do next?
Only half of startups “survive” after 5 years of development, and only a third continue to work after 10 years. What to do to keep your company afloat for a long time? To stand out and develop quickly in your market? The answer to this question will help you choose the right development strategy for your business.
Reference or basic development strategies of the company are considered the most famous and proven in practice.
What is the essence of reference strategies?
They reflect 4 different approaches to the development and growth of the company, they are also associated with a change in the state of one (several) elements, such as:
Each element can be in the following states:
- Current condition;
- New condition.
For example, a company may decide to produce/sell the same product or start production/sale of a new product.
Four groups of business development strategies
These are strategies that are aimed at changing the manufactured product and the market in which this product is presented and at the same time does not affect the other elements.
What do I mean?
The company aims to change the product for the better or to manufacture/sell a new product without changing the industry.
In the case of the market: the company is looking for opportunities to improve its position in the existing market or decides to enter a new market.
Types of concentrated growth strategies:
In the first type of strategy, companies devote all their resources to “winning” the best positions in the existing market.
The second type of strategy means finding new markets for an existing product.
The third type is the production/sale of a new product in the old market.
The goal of this strategy is to expand the company by adding new structures. The company can expand either through the acquisition of property, or expand from the inside. All these processes take place within the industry.
Types of integrated growth strategies:
The first type of strategy is aimed at enhanced control over suppliers, as well as the creation of subsidiaries that provide procurement. This leads to the growth of the company.
The second type is aimed at tightened control over the structures that stand between the company and the end-user.
These strategies are implemented only when the company can no longer develop with the existing product in this market in the familiar industry. When the company has already reached the limit in the market with the product.
The main strategies of this group:
Briefly on diversified growth strategies:
- Search for the latest opportunities to produce the latest product in an existing business.
- Search for growth opportunities for the company with the help of new products, which in turn need new technology.
- The company will expand through the production/sale of technologically unrelated products that will be sold in new markets.
Companies, after a long period of growth, or companies that need to increase efficiency (when changes in the economy are visible) need a regrouping of forces.
The main types of strategies of this group are:
- he first strategy is applied when the company already has the ability to conduct its business.
- The second strategy is aimed at obtaining the highest possible income in the short term. This strategy is suitable for a business that can no longer be sold profitably, but it is possible to “harvest”. Reduced production with the sale of existing products.
- The third strategy involves the closure or sale of one of its units.
- The latter strategy is aimed at finding ways to reduce costs.
Intensive growth strategy
Growth strategies are reminiscent of a staircase, where smaller steps represent less risk, but also less development. Beginning entrepreneurs must overcome the lowest steps in order to gradually move to new levels of development. Look at these steps. Each strategy brings more opportunities, but also a greater risk:
- Market penetration. The least risky strategy. With it, you can sell more of your product. Show how you can use your product differently, show its new features.
- Market development. This is the next step. Find a way to sell as many products as possible to a similar market. Or to a neighboring city/country where you have not heard about. Experts say that large companies have lately relied on market development as their main growth strategy.
- Alternative channels. This strategy involves finding customers on channels that you have not used before. For example, using the Internet to sell your goods/services. Or offer additional products. For example, a laptop bag when buying a laptop.
- New products for new customers. Sometimes market conditions tell you that you should create new products for new customers. For example, you sell sleds. But this year there was no snow and is not predicted. You need to come up with something new. Offer something relevant to your customers. For example, start producing scooters. Apple used this strategy when it introduced the iPod to the market. This product was not on the market; it represented some alternatives to slot machines. In addition, they were sold independently of Apple computers.
If you decide to use a strategy of intensive growth, then you first need to choose one single step. And gradually you can introduce new technologies for promotion and expansion. Remember that every step brings risk. Sometimes you have no choice but to take risks with renewed vigor.
Integrative Growth Strategy
There are three ways to apply an integrative growth strategy:
- Horizontal This strategy involves the purchase of a competitor. This step not only increases your company but also removes one barrier to your development – a competitor.
- Reverse. This strategy involves the purchase of one of your suppliers. This helps you better control your supply chain, develop new products faster, and possibly reduce your costs.
- Advancement. This strategy is aimed at acquiring companies that are part of your distribution chain. For example, if you produce clothes, you could buy several retail stores in a nearby town.
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