So, you have survived the first couple of years of starting up your business and now your attention turns to expanding what you have started. Successful leaders know that their company needs to expand in order to increase profits and reach new customers. There are many ways to achieve this and they all present a new set of challenges and risks. You can do one or all depending on your business and the risks your willing to take.
According to the Ansoff Matrix, there are four strategies to grow your company, each with a different level of risk. Market penetration is the safest course to take because you already know the products and the market that you will be targeting. Selling more products to an exciting customer, finding new customers within these markets or widening the range of exciting products requires little research and risk, but can it achieve your businesses growth objectives. Lowering prices to compete with competitors may not work for everyone like it has done for Walmart and Costco. Apple uses aggressive marketing campaigns for selling more iPhones and iPads to their current market. According to Panmore Institute, Market penetration is Apples second most intensive strategy for growth.
Apple’s foremost strategy is product development, new products and models generate an increase in revenue for the company. Product development is a little riskier as it is uncertain how the market will take to it. Insights into the needs of the customer are imperative as well as successful innovation. Coca-Cola launched Coke Light in 2013, a low calorie and low sugar alternative. A few years later it was taken off the shelves, Coca-Cola explained it was to simplify customer options as they already had Diet Coke and Coke Zero.
The risk extends further with market development. The world is your oyster and going global offers opportunity aplenty. In fact, there are so many international opportunities that it can be a bit bewildering. The obvious markets of Canada, Mexico, Europe and Japan only scratch the surface. Most successful companies have gone global from Apple to Coca-Cola, Volkswagen to McDonald’s. The perils come from chasing too many opportunities as well as currency fluctuation. A lot of research is required for this strategy as cultural differences can shape the market you are targeting, assuming your product will be excepted there. A U.K supermarket, Tesco, tried to infiltrate the U.S market but failed due to timing. Ordering takeout or preparing a meal from scratch was more appealing than a takeaway meal from a supermarket.
Market development doesn’t have to be globalization, it could be another store 100 miles down the road or using e-commerce and mail order. Whichever route you take, do not forget functioning speed. You need to be able to keep up with the requests of your new customers. This does not just mean employing the right staff but ensuring manufacturing can handle the extra order.
Diversification presents the most risk of all four strategies. It is going into the unknown with new products into a new market and there is little chance of using any existing expertise. Samsung is well known for their mobile phones and televisions, but they started in sugar refining, textiles, banking and insurance. Now they have expanded further into making apartments, ships and manufacturing military hardware.
Even those who have done it before can fail. Virgin taking on the biggest drinks brand in the world is a lesson for everyone to pick their wars wisely.
Though it is daunting, expansion is essential for development not just within a business but for the future. It encourages innovation and progress, as well as increases employment opportunities. In the words of Benjamin Franklin “Without continual growth and progress, such words as improvement, achievement and success have no meaning.”