BUSINESS POLICIES & STRATEGIC MANAGEMENT

A PRESENTATION

ON

“GROWTH STRATEGIES”

By: ZEBA RUKHSAR

DEPARTMENT OF BUSINESS ADMINISTRATION,UTKAL UNIVERSITY

BHUBANESWAR,ODISHA,INDIA.

GROWTH STRATEGIES

GROWTH STRATEGIES ‘Growth Strategy’ refers to a strategic plan

formulated and implemented for expanding a firm’s business.

Organisations select a growth strategy : to increase their profits to increase their market share or sales to increase their scale of operations to reduce the production cost per unit .

These strategies are adopted to broaden the scope of their customer groups,customer functions and alternative technologies.

1.INTERNAL GROWTH STRATEGY

Internal growth strategy refers to the growth within the organisation by using internal resources.

Internal growth strategy is achieved through increasing the firm’s production capacity,employees & sale. It focuses on developing new products, hiring more employees, growing the customer base, opening new company-owned locations,better marketing, etc.

Benefit- Firms prefer this stategy as it preserves their efficiency, quality & image unlike external growth strategies.

2.CONCENTRATION STRATEGIES

A firm can gain a competitive advantage by concentrating on a specific technology,product or market. A firm can use one, two, or all these three as part of their efforts to excel within an industry.

Examples- McDonald’s, Starbucks, and Subway are three firms that have relied heavily on concentration strategies to become dominant players.

CONCENTRATION STRATEGIES ARE OF 3 TYPES:

3.CONGLOMERATE DIVERSIFICATION

When a firm diversifies into business, which is not related to its existing business ,both in terms of marketing and technology , it is called conglomerate diversification.

The purpose of diversification is to allow the company to enter new lines of business that are different from current operations. Firms enter new & unrelated portfolios of business.

Example- Tata Group established Tata Steel, Tata Consultancy Services(TCS), Tata Teleservices, Tata Tea,etc.

BENEFITS OF CONGLOMERATE DIVERSIFICATION

Firms pursue this strategy for several reasons:

1. Reduction of risk2. Increase in profits3. Attain managerial competence4. Financial Stability5. Achieve higher growth rate6. Continue to grow after a core business has

matured or started to decline.

4.VERTICAL INTEGRATION

Vertical Integration is where new products or services , complementary to the existing product or service lines, are added.

Vertical Integration canbe-i. Backward integrationii. Forward integration

i. Backward vertical integration occurs when the firms acquire or create the company that supply the firm- raw materials and other inputs.

Example: 1) Indian Railways established their own production units like Rail Wheel Factory, Rail Coach Factory,Diesel Locomotive Works,etc.

2) Despite of being the leaders in Textiles, to strengthen his Position, Dhirubhai Ambani decided to integrate backwards and produce fibres.

ii. Forward vertical integration occurs when the firms acquire or create the company that purchases its products and/or services.

Example : 1) Indian Railways also established Catering & Tourism Corporation.

2) New Zealand based Natural healthcare products company ‘Comvita’ purchased its Hong Kong distributor GreenLife Ltd. Thus it achieved forward integration by having access to Greenlife’s retail stores, sales staff and in store promoters.

ADVANTAGES OF VERTICAL INTEGRATIONi. Firms adopting this strategy can have

a regular and uninterrupted supply of raw materials and inputs.

ii. Firms can acquire greater control over sales and prices.

iii. Firms can reduce their overall costs.iv. Firms can earn higher rate of return on

investment.v. Firms can improve their competitive

position.

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