In conference rooms around the country, there are often many hours of high-level meetings taking place on growth strategies, and they are centered around markets and products.
Often, a sudden revenue reduction or a competitor's surprising move initiates these meetings. Too little too late. What has to be taken into consideration are risk and expediency.
In a simplified illustration, I have re-created the growth matrix where we can determine the growth strategy. Our image is based on the Igor Ansoff Matrix from the Harvard Businesses in review, 1957. The Ansoff Matrix has been widely taught as part of business education for over 60 years. It portrays growth options as a 2 x 2 matrix of possibilities, with the X-axis representing products (existing & new) and the Y-axis representing markets (existing & new). While there are some problems with the matrix, as others have pointed out, it is a great foundation to build out a growth strategy where none exists.
Start at the upper left quadrant, which represents less risk, or fast & cheap. The lower right quadrant represents a higher risk or time consuming & expensive.
1. Existing Markets-Existing Products (Market Penetration Strategy)
Selling your current customers more of your products is fast and inexpensive. First, ask yourself if you are selling as much of your existing product as possible to your current customer base. This approach is the fastest and least expensive growth strategy if the answer is no. This strategy also includes upselling and cross-selling. The company seeks increased product sales through more aggressive promotion and distribution in its current markets. This strategy is the least risky growth option.
2. New Markets-Existing Products (Market Development Strategy)
What will it take to get new customers for your current product offering? Ask yourself, "Who else could use our products and services?" Perhaps changes to advertising, trade shows, and pop-ups. This growth strategy is reasonably fast but will come with additional expenses.
In market development strategy, a firm tries to expand into new markets (geographies, countries, etc.) using its existing offerings and minimal product/service development.
This additional quadrant move increases uncertainty and thus increases the risk further.
3. Existing Markets-New Products (Product Development Strategy)
Ask yourself, "What else are my customers buying, and can my company provide that?" Your current customers are often your best source for new product ideas. A company tries to create new products and services targeted at its existing markets to achieve growth in product development strategy. This strategy involves extending the product range available to the firm's existing markets.
These products may be obtained by:
Investment in research and development of additional products;
Acquisition of rights to produce someone else's product;
Buying a product and "badging" it as one's brand;
Joint development with ownership of another company that needs access to the firm's distribution channels or brands.
This strategy also consists of one quadrant move, riskier than market penetration and similar to market development.
4. New Markets-New Products (Diversification Strategy)
This strategy is the riskiest and most expensive if you manufacture your products. This strategy is not a shot in the arm, and you are essentially rebranding your business. In diversification, an organization tries to grow its market share by introducing new offerings in new markets. It is the riskiest strategy because both product and market development is required. Diversification consists of two-quadrant moves, which is considered the riskiest growth option.
In summary, deciding on the right strategy for your company and your situation is a delicate balance of available resources and time.
Roger Pujol is a business improvement consultant and founder of Champion Business Solutions, LLC. He speaks and writes about encounters helping small to medium-sized businesses (SMBs) improve their business operations.
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