Global growth strategies can be categorized according to whether the company was relying for growth on existing or new products in existing or new markets. The result of this would be to establish four general approaches to growth.
The same framework can be used to examine multinational growth alternatives except that:
(a) Instead of markets, we will refer to countries, and
(b) Instead of existing or new products, we will refer to a narrow versus a broad international product mix.
This results in a model that presents four general growth strategies—market concentration, market extension, product extension and diversification.
1. Market concentration:
Many companies direct single products to one or a few markets. A general food company sells chewing gum in France, ice-cream in Brazil, and pasta in Italy. None of these businesses is large enough to justify sales on a global basis. Therefore, market concentration is a logical strategy if a product can be sold profitably in a limited market.
Another motive for pursuing a strategy of market concentration is the belief that the product appeals to a fairly hom*ogeneous group in a few countries. Playtex markets its hair care line in industrialized countries where women’s hair care needs are relatively hom*ogeneous. The company may feel that extending the line to other markets is too risky. Many cosmetic companies are how targeting India (Figure 9.3).
2. Market extension:
The strategy of market extension is suitable for companies with unique product lines that can appeal to the needs of different customers in different countries. Such a strategy requires a company to have a competitive advantage that permits it to sell a narrow product line on a global basis. Coca-Cola and Pepsi are two ideal examples.
These companies enjoy a competitive advantage that allows their product line to be regarded as superior on a worldwide basis. The Japanese company Honda has successfully pursued a strategy of market extension by developing inexpensive and reliable motorcycles.
Before Honda established a mass market, motorcycles were regarded as an expensive product. A worldwide message and a superior distributor network permitted Honda to outdo its major competitors and expand rapidly in foreign markets.
3. Product extension:
This involves selling a broad product mix in a limited number of foreign markets. This strategy is logical if the multinational firm:
1. Is well entrenched in these markets and views further expansion as risky, and
2. Can achieve economies of scale in advertising and distribution.
Economies of scale in advertising might involve a family brand strategy in which many brands are advertised under the corporate name. The General Electric Company uses a family brand advertising strategy in the international market as well as the domestic American market.
Economies of scale can also be achieved in distribution. By marketing a broad product mix in a few countries, a company can distribute many of its products through the same intermediaries, achieving economies in transport, storage and direct sales. Chevrolet Captiva of General Motors is an attempt by the second largest car manufacturer in the world to make an impression in the second fastest growing car market in the world (Figure 9.4).
4. Diversification:
This is an aggressive growth strategy which involves expansion of both the product mix and foreign markets. Such a strategy can be employed by companies with sufficient resources to accomplish fast entry into many markets on a multi-product basis. The strategy also requires a broader product mix to appeal to many segments in different markets.
A company that is currently pursuing a diversification strategy is Johnson & Johnson. The company markets a broad range of household and personal care products in foreign markets. It currently sells in over 40 countries and is expanding its operations by about two countries every year.
No comments yet.
FAQs
There are four core strategies that make up organic growth. These strategies are known as market penetration, market development, product development, and diversification. Market Penetration: This growth strategy involves selling more of a company's existing products or services to its current customer base.
What are the 4 main growth strategies? ›
Four main strategies for growth, each with their own distinct benefits and risks, are:
- market penetration.
- product development.
- market development.
- diversification.
Academic Igor Ansoff proposed that product marketing strategy was a joint work of four growth areas: market penetration, market development, product development, and diversification. When displayed visually, these four areas create the Ansoff Growth Matrix.
What are the 4 types of corporate strategy? ›
There are four corporate-level strategies - growth, stability, retrenchment, and combination. Growth strategies (market penetration, product development, market development, and diversification) help companies increase market share, or add products and markets for more profitability.
Which of the four 4 growth strategies is important when the market is new and the product is new? ›
Diversification. Diversification is the riskiest of the four growth options. This strategy involves introducing a new product into an entirely new market, where you may need more experience.
What are the four stages of growth? ›
Piaget's four stages of development
| Stage | Age |
|---|
| sensorimotor stage | 0–2 years |
| preoperational stage | 2–7 years |
| concrete operational stage | 7–11 years |
| formal operational stage | 12+ years |
Framework that maps the four growth strategies (Market penetration, market development, product development, and diversification) to a grid based on whether they address new or existing products and markets. Why is a growth strategy important to a company?
What are growth strategies? ›
A growth strategy is an organization's plan for overcoming current and future challenges to realize its goals for expansion. Examples of growth strategy goals include increasing market share and revenue, acquiring assets, and improving the organization's products or services.
What are the three major growth strategies? ›
Three customer growth strategies are presented below: (1) Growing the core business, (2) Growing by sub-segmenting customers and (3) Growing adjacent opportunities.
What is an example of Ansoff's growth model? ›
All of these activities help keep existing customers interested while growing your client base within the existing market for growth. One Ansoff matrix example would be an established global soda brand spending money on partnerships and promotions to grow its customer base in existing markets.
In business strategy, the four quadrants focus on finance, customers, internal processes, and learning & growth.
What is an example of a global strategy? ›
Global Strategy: When businesses define one global brand, making little to zero changes for other markets. Tech giant Apple is a great example of this - the technology is the same (with a few minor changes in keyboards) wherever you go.
What are the three to four key elements of your company's strategy? ›
There are different typologies of strategies yielding different results for companies. In our experience working with more than 30 Fortune 100 companies, executives consider the four dimensions of corporate strategy: analysis, proactiveness, defensiveness and futurity.
What are the 4 four strategy elements in marketing? ›
The 4 Ps of marketing are a collection of four essential elements of a marketing campaign — namely product, price, promotion, and place. Also known as “the marketing mix,” the 4 Ps collectively create a framework for organizing and planning a marketing strategy for a product or service.
What are the 4 strategies used to reach a target market product place price and promotion? ›
The marketing mix in marketing strategy: Product, price, place and promotion. The marketing mix is the set of controllable, tactical marketing tools that a company uses to produce a desired response from its target market. It consists of everything that a company can do to influence demand for its product.
What is the most common growth strategy? ›
Market Penetration Strategy
One of the most common types of business growth strategies is market penetration. Market penetration occurs when a company increases its presence in an already existing market. There are two types of market penetration strategies: horizontal and vertical.
What are the three main methods of growth? ›
Methods of growth
- hiring more staff and equipment to increase its output.
- opening new outlets.
- introducing new products.
Three Strategies of State Economic Development: Entrepreneurial, Industrial Recruitment, and Deregulation Policies in the American States.
