Growth Strategy- Meaning, Main Features, Need
Meaning of Growth or Expansion Strategy
A firm turns to expansion strategy when it seeks sizeable growth: A firm tries to grow by exploiting the opportunities in the environment. These opportunities may stem from either existing business of the firm or outside. It means intensification and diversification. In case of intensification, the firm follows the growth within the existing business of it while in case of diversification, the firm follows growth by entering the business that are well outside the existing business of the firm. A company is following an expansion strategy when (i) it serves the public with more products/services with additional markets and finding more customers by enhancing market share, (ii) increases substantially the scope and scale of the existing business by redefining the same with corresponding increases in marketing efforts like promotions product quality and range. Professor William F. Glueck defines a growth strategy as; “A growth strategy is one that an enterprise pursues when it increases its level of objectives upward in significant increment, much higher than an exploration of its past achievement level. The most frequent increase indicating a growth strategy is to raise the market share and or sales objectives upward in significantly.”
Thus, a growth strategy is different from stable growth or stability strategy. When a firm increases the level of objectives higher than what it has achieved in the immediate past in terms of market share, sales revenue or strategic decisions centre round increased functional performance in major respects, it is a case of growth strategy. When new products are added to the existing line or dissimilar products are taken up for production and marketing or the business activities are expanded through acquisition, merger or amalgamation of firm, is a case of growth strategy. In other words, growth strategy differs from stability strategy in the sense that former implies exponential growth while the later implies an extrapolation of growth based on past performance.
Main Features of Expansion Strategy
From what has been said earlier the following points rise which are the characteristic features of growth strategy which describe its nature and scope. These are :
It she Mark of Exponential Growth:
Expansion policy is quite opposite of stable growth strategy. In case of stability strategy, the rewards are limited while they are very high in case of expansion strategy. As rewards are higher, the risks are also higher in case of growth strategy. Expansion strategy is real growth strategy. A firm with a mammoth growth ambition can meet its objective only through expansion strategy:
It Involves Redefinition of the Business:
Expansion strategy calls for a redefinition of die business of the firm. That is, it has to redefine its products, markets and function to achieve the goals. This means that the process of renewal is only possible through fresh does of investments and new businesses or products, markets and functions. It is not capitalizing on resources and the competitive advantages.
It is Highly Versatile strategy:
The expansion strategy is highly versatile. That is, it offers good many permutations and combinations for growth. A firm which is opting for expansion strategy can generate many alternatives within the strategy by altering the variables regarding the products, markets and functions and choose one which is the best from its unique situation.
The Two Routes to Expansion:
The expansion strategy has two branches through which expansion can be achieved. These are intensification and diversification. Both intensification and diversification are growth strategies though the approach differs. With intensification strategy, the firms follows the growth by working with its current business. As opposed to this, diversification strategy involves expansion into new businesses that are outside the current businesses, markets and products.
It is Generic Strategy:
It is very common strategy which is resorted by firm. A firm which has grown, wants to grow further as there is scope for expansion. Nobody can come in a way of expansion as no organization comes in the way of bright prospects for an employee outside the unit, if not inside the unit. What is important is that the firm is after exponential growth than extrapolation growth.
Need for Growth Strategy
Survival Rests on Growth:
Any body can survive in the short run, but not in the long-run necessarily. That is, growth is a must for the very survival of the organization especially when the external environment is troubled or volatile. Any organization which is not growing will be thrown out by the existing and new entrants in the industry. Again, a firm can not take shelter in ‘Status que’ growth strategy because the firm loses profitability as costs go on piling up as material, wages and other overhead costs are going up.
Growth is Imperative for Efficient and Effective Utilization of Resources:
Growth is a source of opportunities. A company which grows either by intensification or diversification or both, will grow bigger ready to grant the economies of large sale in the fields of production, production, marketing, finances and manpower resources. The new opportunities that are flung open by the external environment can be encased only when he companies has strengths in terms of resources and resource utilisation.
Growth is Managerial Motivation:
Managerial motivation plays significant role in getting the work done. The managers who have positive attitude, accepting challenges of change for the better, and believe in actual progress than promise, it is motivation which keeps them on toes to reach new heights. It is only the continuous improvement over what is achieved.
Growth has Intangibles:
An organization which is on the path progress and rising to the newer heights is liked by one and all, Employees, customers, investors, suppliers, lenders, creditors and Government of the nation. It is a growing organization that satisfies all the segments of societies. The creditors and lenders have the guarantee of regular payment of interest and repayment of the principal.
Moving from Loss to Profit Wedge:
Business is a game. Like life game has success or failure. The taste of success will not be understood unless one has faced what is failure? Opposite is also true. The aim of business and business house is to earn the maximum profit through consumer satisfaction. Though a firm is in a lucrative business. However, the company has not really enjoyed the opportunities that guarantee maximum profit and satisfaction.
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