There are various strategies that can be used to grow new businesses. One option is to identify opportunities to achieve further growth within the company’s current businesses (intensive growth opportunities). A second option is to identify opportunities to build or acquire businesses that are related to the company’s current businesses (integrative growth opportunities). A third option is to identify opportunities to add attractive businesses that are unrelated to the company’s current businesses (diversification growth opportunities).
Using this strategy, the company first considers whether it could gain more market share with its current products in current markets (market-penetration strategy) by encouraging current customers to buy more, attracting competitors’ customers, or convincing nonusers to start buying its products. Next, it considers whether it can find or develop new markets for its current products (market-development strategy). Then it considers whether it can develop new products for its current markets (product-development strategy). Later it will also review opportunities to develop new products for new markets (diversification strategy).
Often a business’s sales and profits can be increased through backward integration (acquiring a supplier), forward integration (acquiring a distributor), or horizontal integration (acquiring a competitor).
1 . Horizontal. This growth strategy would involve buying a competing business or businesses. Employing such a strategy not only adds to your company’s growth, it also eliminates another barrier standing in your way of future growth—namely, a real or potential competitor..
2. Backward. A backward integrative growth strategy would involve buying one of your suppliers as a way to better control your supply chain. Doing so could help you to develop new products faster and potentially more cheaply.
3. Forward. Acquisitions can also be focused on buying component companies that are part of your distribution chain. For instance, if you were a garment manufacturer like Chicos, which is based in Fort Myers, Florida, you could begin buying up retail stores as a means to pushing your product at the expense of your competition.
This makes sense when good opportunities exist outside the present businesses. Three types of diversification are possible. The company could seek new products that have technological or marketing synergies with existing product lines, even though the new products themselves may appeal to a different group of customers (concentric diversification strategy). Second, the company might search for new products that appeal to its current customers but are technologically unrelated to the current product line (horizontal diversification strategy). Finally,
the company might seek new businesses that have no relationship to the company’s current technology, products, or markets (conglomerate diversification strategy).
In conclusion, companies must not only develop new businesses, but also prune, harvest, or divest tired, old businesses in order to release needed resources and reduce costs. Weak businesses require a disproportionate amount of managerial attention; managers should therefore focus on growth opportunities rather than wasting energy and resources trying to save hemorrhaging businesses.