Small companies or businesses always look for ways to grow their business and increase sales and profits. There are probable techniques that companies must use for executing a growth strategy. The technique used by a company to expand a business is highly dependent upon its financial situation, the competition, and even government regulations and policies.
Some common growth strategies marked in small scale business are −
- Market penetration
- Market expansion
- Product expansion
One of the growth strategies reported in business is market penetration. A small company uses a market penetration strategy when it agrees to market existing products within the same market. Increasing market share is the only way of growing through existing products and markets.
Market share is the share of unit and dollar sales a company acquires within a certain market when compared to all other competitors. The best way to increase market share is by lowering the prices of the commodities.
Market expansion is another remarkable growth strategy, which is often referred to as market development that involves selling current products in a new market. There are different reasons explaining why a company needs to consider a market expansion strategy.
Competition may be such that there is no scope for growth within the current market. If an entrepreneur is unable to search for new markets, then it is not possible to increase sales or profits. A small company considers using a market expansion strategy if it successfully finds the use of its product in a new market.
A small scale company can expand its line of products or add new features to increase sales and profits. When small companies use a product expansion technique, it is also referred to as product development.
The selling continues within the current market. A product expansion growth strategy basically works well when there is a change in technology. Companies may also be compelled to add new products as older ones become outdated.
Growth strategies in business involve diversification. By diversification, we mean a company selling new products in new markets. This type of strategy is highly prone to risk and losses.
A small company acknowledges the plan carefully while utilizing a diversification growth strategy. Marketing research is important to identify if consumers in the new market will potentially like as well as buy new products.
Growth strategies or method to expand business also engages the acquisition of other businesses. In an acquisition, a company purchases another company to expand its functions. A small company uses this type of strategy to bolster its product line and enter new markets.
An acquisition growth strategy is very risky, but not as risky as a diversification strategy, as in this case the products and market are already authorized. A company must have complete knowledge of exactly what it wants to achieve when using an acquisition strategy, mainly due to the significant investment required to execute it.