The Sunday Mail
Entrepreneurship Matters
Dr Kudzanai Vere
Organisations are living organisms capable of growing. When a child is born, they are fed and well-kept under favourable growth conditions. Businesses, organisations and institutions are not spared from the same phenomenon. There are certain conditions, strategies and processes that promote business growth.
Most organisations have remained static, while some have registered snailish growth but real growth still remains far-fetched for many though it’s desirable. Though economic conditions are playing against growth efforts, what’s affecting most of those failing to take off and grow are key growth strategies that they are either failing to religiously follow or missing in their daily operations.
It’s a cause for concern when your child remains a toddler when others have since started running around the yard. Likewise, there is every reason for you to be worried when your business keeps doing a marry-go round.
Business growth is deliberate and calls for fortified effort and some form of critical analysis to map it’s growth trajectory and the possible way forward.
This article looked at the key business growth strategies. They might not be the magna carta for growth, but they have proved practical and essential to many organisations.
Organisational growth comes with a number of structural and operational changes that you must be prepared to go through. Growth means increase in capital employed, increase in workforce, you need a strong competitive outlook, good marketing campaign and a strong internal and external communication strategy.
On business growth strategies, Harry Igor Ansoff (1918-2002), a Russian American Mathematician and business manager did some sterling work and become known as the father of strategic management. Ansoff came up with the well-known Ansoff Matrix. A business growth tool that speaks of 4 basic growth strategies, market development, market penetration, product development and diversification.
This article rests on the four strategies but goes on to add partnerships and alliances, and alternative distribution channels as additional growth strategies that has helped a number of distinguished organisations to grow.
For these six strategies to bear fruit, you need these essential growth accessories, focus, consistency, continuous improvement, strong networks and keeping your relevance on the check.
- Market penetration
Doing business is basically exposing your products or services into a market, either existing or new. Ansoff market penetration growth strategy entails introducing the current or available products or services in the existing market. Such a strategy is aimed at increasing the company’s market share.
Your products and services are better off with the consumer or customer than admiring them on your shelves. Sales can only be derived from customers and there should be a deliberate strategy to connect your organisation with the target market or product / service beneficiaries.
Of great importance on every strategy is the execution part. You can penetrate the market through decreasing prices to attract new customers, increasing promotions and distribution efforts and acquiring a competitor in the same marketplace.
Positioning yourself in an established market is relatively easier and carries low risk because it means there is already a need for products in that area. However, it requires strong implementation and execution of strategies around your product positioning, pricing, user experience, and marketing in order to compete and grow alongside existing companies.
Market penetration strategy refers to a process where the company attempts to grow using existing products in existing markets.
Put simply, it’s a means of planning how to grow in an already thriving market where similar products exist, and gaining market share by taking your competitors’ subscribers.
- Market development
It’s cheaper to operate in an already established market offering a generic product or service but you will also get any other person’s share. For you to grow your business, you need to develop into new markets.
In a market development strategy, you enter a new market with your existing product. In this context, expanding into new markets may mean expanding into new geographic regions and customer segments
There is need for some market research if you want to use market development as a growth strategy. You have to carry out a segment analysis of your existing and potential market. Short list those market segments which you feel you should pursue.
Factors such as demographics, customer needs and preferences, interests and lifestyles need to be understood in order for you to effectively execute the strategy.
To succeed on the market development strategy, you need to own proprietary technology that you can leverage on into new markets, potential consumers in the new market must have reasonable disposable income. The customer behaviour in the new market should not deviate too far from that of consumers in the existing market for the strategy to be a success.
The market development strategy may involve one of these approaches, catering to a different customer segment, entering into a new domestic market (expanding regionally), entering into a foreign market (expanding internationally)
Varun beverages entered the carbonated soft drinks market in Zimbabwe which the local giant Delta beverages had already established. Varun had their products, Pepsi, Miranda and other lines they introduced in the new market. That’s market development.
Nyaradzo group recently opened it’s United Kingdom offices to offer almost the same services they are offering to the Zimbabwean market.
- Product development
In a product development strategy, you develop a new product to cater for the existing market. The strategy typically involves extensive research and development and expansion of the company’s product range.
The product development strategy is employed when you have a strong understanding of your current market and are able to provide innovative solutions to meet the needs of the existing market.
Developing a new product for new or existing market calls for a lot of innovation and creativity. You can modify an existing product to suite new customer demands or interests. Depending on the type of product or service that you want to introduce to the market. It’s usually costly as there is a lot of research that need to be done.
The process starts with idea generation, editing and selection of the right ideas since not all of them can result in good products for the market. Once you have your idea handy, you need to develop your prototype of the proposed product or service. Such a prototype is used to determine if the product functions as intended and appeals to the target market.
If the product appeals to the market, you move on to creating or producing the products and commercialise them after going through some market testing.
- Diversification
Diversification as a growth strategy entails entering a new market with a new product. This strategy is the riskiest and most expensive one as both market development and product development kicks in. Such risk can be mitigated depending on the method of diversification used.
This strategy has great potential to boost and increase revenue as it opens up an entirely new revenue stream for the company.
Econet Zimbabwe is one company that almost employed all the Ansoff Matrix’s growth strategies from the introduction of the Econet lines, EcoCash, Mascom in Botswana and other ventures.
Companies diversify to achieve greater profitability and growth. Diversification is used by businesses to help them expand into markets and industries that they haven’t currently explored. This is achieved by adding new products, services, or features that will appeal to the customers in these new markets.
By expanding their reach and appeal, businesses are able to explore new avenues for sales, and in turn, have the potential to vastly increase their profits.
In addition to achieving higher profitability, companies choose to diversify for a variety of other reasons.
For instance, diversification can also allow a company to minimise the risk of an industry downturn, it can boost brand image, and it can also be used as a defense mechanism to protect a company from strong competition.
- Partnerships and alliances
By keeping to yourself as a business you will never realise growth beyond your four walls and at most your geographical boundaries. You’re better off connected to similar players within your industry or outside for you to enjoy every benefit that lies within such mutually beneficial business linkages.
Partnerships and alliances can take various forms including linking up with suppliers of your major raw materials, distributors of your end product or services and financial investors. These partners are meant to enhance productivity, profitability and ultimately the growth of your company.
- Alternative channels
A channel strategy is an organisation’s plan for moving a product or a service through the chain of commerce to the end customer.
What’s important in business growth is improving sales revenue. Everything being equal, the sales and distribution side need to be enhanced. You can expose your products to your target market through direct sales, the use of a retailer, wholesaler, agent or other intensive selective and exclusive distribution channels.
The type of product or service on offer often determines the nature of distribution channel required. During this internet age, ignoring online sales and marketing is like opening a business and keep it to yourself.
You’ll see to it that the Ansoff business growth matrix is indeed an essential growth tool if executed properly. My next article will look into market penetration and development in greater detail.
Determined to engage, inspire and transform generations.
The writer, Dr Kudzanai Vere, the founder of Kudfort, Tengesa Online, Premium Business Network International and the Institute of Entrepreneurs Zimbabwe is an entrepreneur, author and transformational speaker in the areas of entrepreneurship and personal development. Dr Vere has trained over 5000 entrepreneurs globally in the areas of innovation, organisation development, practical business management and ideation. You can contact him on +263719592232 or email [email protected]
