Growth is no longer an aim for businesses but is now a crucial necessity according to market research. To achieve business growth, an effective business growth strategy is vital. But what is a business growth strategy and which types of business growth strategies are the most effective? Keep reading to learn more.
This comprehensive guide will walk you through the 7 most effective types of business growth strategies, and help you map out a successful course to business growth.
What is a Business Growth Strategy?
A business growth strategy is a plan to help a business expand and develop. It can involve specific projects, new products or services, mergers and acquisitions, partnerships, diversification into new markets, promotion of the product line or service – or some combination of these methods. You can develop a business growth strategy using market research, or use a tried and tested business growth strategy for maximum impact.
There are three levels of business strategy, according to industry experts. A great business growth strategy will impact every level of business, so it’s important to understand each level and the role it plays in implementing a great business growth strategy. The three levels of business strategy are:
- The Corporate Level defines the organisation’s main purpose and will therefore direct all other downstream decision-making.
- The Business Unit Level defines the specific tactics and strategies needed for each market the organisation is involved in.
- The Functional Level defines the day-to-day company actions required to meet corporate targets and align with business-unit strategies.
Related Reading: What are the Levels of Business Strategy?
What are the Benefits of an Effective Business Growth Strategy?
A company can be affected in a variety of ways by its growth strategies, and as such there are many benefits to having an effective business growth strategy. These benefits can include:
- Growing income – Companies can generally achieve an increase in sales and revenue through the successful implementation of a business growth strategy, which will lead to an increase in profit.
- Increased shareholder value – A company that has successfully implemented an effective business growth strategy should ideally see its share price rise, leading to increased investor confidence and support.
- Boosted market share – This is especially likely if new products or services are introduced as part of an effective business growth strategy. The new product might appeal to a different demographic than existing products, allowing the company to increase its share in that market.
- Specialised skill sets – A successful business growth strategy could lead to a company requiring employees with specialised skill sets, which may have been previously unnecessary within the firm.
7 Types of Business Growth Strategies
1. Market Penetration Strategy
One of the most common types of business growth strategies is market penetration. Market penetration occurs when a company increases its presence in an already existing market. There are two types of market penetration strategies: horizontal and vertical. Horizontal market penetration means that a company will do things such as spread their brand name to other products, increase advertising, or create a better product. Vertical penetration means a company will do things such as increase production, lower prices, or create new products. Examples of companies that have implemented market penetration strategies are Apple, McDonald’s, and Kellogg’s.
2. Market Development Strategy
A market development strategy is a business growth strategy that focuses on developing new markets to ensure that there are continuous opportunities for growth. This can be done by researching potential customers, developing brand awareness and understanding the value of your product or service, building relationships with trade partners, determining customer needs, and developing a strategic plan.
3. Product Development Strategy
This is one of the most effective ways to increase sales and grow your business. By adding and developing new products, you can attract customers who may not know about you yet. Introducing new products or diversifying your product line will help extend the length of time you can stay competitive in your industry. Product differentiation or development is an effective method of market penetration because it allows a company to distinguish itself from other companies in the same industry.
4. Diversification Strategy
Diversification can be another great way to increase sales by expanding your customer base. This strategy includes entering new markets or introducing products in related but new areas of business so you can attract customers who may not necessarily be familiar with your business. Diversification can be very effective for businesses that anticipate a slowdown or downturn in their primary market.
5. Business Partnership Strategy
A partnership is the joining of two or more businesses for a specific purpose or project. Partnerships allow you to complete work that would otherwise be too expensive or take too long to do alone, allowing your business to grow in an efficient way. Sometimes partnerships are formed when one business owner believes they need additional skills to achieve their goals, and they find a business that already possesses the necessary skills to work with.
6. International Expansion Strategy
International expansion has many benefits for a business. One of the benefits is that it can help with diversifying your revenue and expand your market share and operations. If done correctly, you could be able to increase profitability while at the same time reducing risk.
Another benefit is expanding your alternative assets/funding opportunities so if one way of funding were to dry up, you have another way of getting the funds needed for your business. You can also expand and develop your company culture while going abroad so it will be more inclusive and embrace diversity. It also allows you to embrace international financial incentives to start a business there. For example, in recent years India slashed its corporation tax from 30% to 22%. As one of the fastest-growing tech markets in the world, this could be extremely useful for businesses to utilise.
7. Alternative Channels Strategy
Alternative channels are a great business growth strategy because they diversify the customer base, giving you more opportunities to grow your consumer network. As well as this, there is less competition for these customers, which means that it is easier for you to stand out from the crowd and really capture their attention.
For example: having an online store and a physical store-front would be considered an alternative channel. Much online business is currently going through the rise of being able to have both, so you could achieve this and still have a steady customer base from your traditional brick-and-mortar stores.
Related Reading: 6 Powerful Internal Business Growth Strategies For 2022
What Makes an Effective Business Growth Strategy?
There are both internal and external factors that can impact the success or failure of a business’s growth strategies.
Internal factors include things like ensuring a strong strategy, having enough capital, effective management capabilities, and the capacity to quickly adapt. External factors include market demand, competition in the industry, government regulation, and other variables that can determine whether or not a company thrives or fails.
As you work on your business growth strategy, make sure to always keep in mind exactly what makes an effective strategy, to ensure you have as much control as possible over the internal factors of your business success. Let’s take a look at the key features of an effective growth strategy to ensure that you can make the right choices for your company.
A great business growth strategy will always include a component of innovation. New products or services, new distribution methods and more should all be included in your business growth strategy to stimulate innovative growth in your company.
If you’re already established in your current market with an effective presence, then expanding into related existing markets may prove to be the best choice for an effective business growth strategy.
Since so many of us rely on word-of-mouth promotion for our businesses, it is critical that we maintain the trust of our current customers and clients. Ensure that your business growth strategy reflects integrity in every aspect of the development process. Brand awareness is a huge part of increasing your brand integrity, so focusing efforts here may be useful for customer acquisition.
Business growth strategies must be imaginative. Every company should aim to offer something new and different. This can be difficult for some companies, especially those that are already well-established with their existing products and their relationships with clients or customers. A good business growth strategy will always include an element of imagination.
As you develop your business growth strategy, keep in mind that one size does not fit all when it comes to business growth. Businesses are different, their goals are different, and therefore they need different types of strategies for business growth. It is important to understand how your company will be impacted by its business growth strategy so you can make the right choices when devising a strategy.
Appeal to Existing and Potential Customers/Clients
A good business growth strategy will always take into account the needs and wants of your current and potential customers/clients. Your business growth strategies should reflect their needs and desires, and be tailored to meet their expectations. Make sure that you know what they want before developing a business growth strategy, so you can create a plan that fulfils their needs and helps your business grow.
Focus on Organic Growth
Organic business growth is generally the best type of business growth strategy. In fact, most successful companies will do extensive research into their target market in order to generate growth organically and sustainably.
One of the benefits of organic growth is that it has a strong impact on brand awareness. Even when companies use external growth strategies to help develop their businesses, they usually integrate an organic marketing strategy in order to reach their target market and generate awareness for their company.
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7 Business Growth Strategy Examples
Carrying Out Extensive Market Research To Improve Practices
One growth strategy example would be carrying out a survey amongst existing and potential customers to understand their needs and motivations.
You can then base further marketing activities that address those issues and communicate with your customers in the way they find most relevant. This is important as it allows you to know the right tactics for communicating with different types of audiences in order to stay in touch with customer preferences whilst also increasing brand awareness.
Targeting New Customers in a New Market
For this growth strategy example, you can target the market that isn’t currently being targeted in your existing activities. You could use marketing methods such as social media platforms to increase brand awareness and also carry out PR activities to attract attention from new customers.
Improving Customer Acquisition in Your Current Market
For this growth strategy example, you could carry out activities that assist in improving the current customer base by finding ways to better attract them. You can do this by carrying out activities such as A/B testing on your website, improving your checkout process and checking if any word choices are affecting your bounce rate.
Improving Existing Business Processes
If you want to improve business processes, one of the best growth strategies is to carry out process reengineering. This means that you redo all activities and procedures in order to make them more efficient and effective. Process reengineering allows for more work to be done with fewer resources by making existing operations more suitable.
Attract New Customers and Retain Existing Ones
For this growth strategy example, you could come up with new products that would appeal to current customers in addition to attracting new ones. Not only is this beneficial in terms of increasing revenue but it is also an effective way to retain existing customers by offering them value for money.
Lowering Prices in the Same Market
Lowering prices in your current market is another strategy that can be used to attract new customers and retain existing ones. People are more likely to purchase products if the price is lower, especially if there is no compromise on quality or service.
However, if you decide to utilise this strategy example, proceed with caution. It’s important to ensure that you aren’t undercutting the market and that your prices are still profitable for your business.
Building On Existing Successes
Another business growth strategy example would be to build upon what already works well for your business. You could do this by improving existing systems and processes, or creating a new product that builds upon the success of your current product range.
It’s important to analyse your previous successes as their replication can be the key to finding future success. You could also consider looking at your competitors and see how you can better them. This is a good way of finding weaknesses in the market which you can use to improve and grow your business.
This strategy example is effective as it can have a positive effect on your existing customers whilst retaining them and attracting new ones from the same market.
How Can a Business Growth Consultant Improve Your Business Growth Efforts & Strategies?
An expert business strategy consultant can provide invaluable expertise to your company as it tries to develop its own effective business growth strategy. A consultant will be able to help you make sense of some of the more complicated aspects of growing a business, from finding the right market for expansion to implementing effective financial strategies.
At Growth Idea, we live and breathe business growth. With the help of our industry-leading Business Growth Programme, our clients have been able to increase their growth an average of 168% in 18 months. With our expert growth consultancy services, you can find an industry expert to inform and advise you on how to achieve your goals and implement these key strategies.
Unsure if your business growth strategy is right for you? Book a Business Strategy Review Today and find out all you need to know!