5 Stages of Growth Strategies Used in Business – Discussed! (2024)

Before we discuss growth strategies in small business, let us first know the stages of growth in the context of small-scale enterprises. We know that human beings pass through different stages from birth to death. We have also studied and know that products also pass through different stages in their lives; this is called in marketing terminology “Product Life Cycle (PLC)”. Similarly, new and small business enterprises also pass through certain stages in their lives.

This is called ‘Enterprise Life Cycle (ELC)’. Enterprise life cycle is broadly classified into five stages: Start Up, Growth, Expansion, Maturity, and Decline. Even though it is not always necessary to follow this classical path, most enterprises show enough evidence of having passed through more or less similar phases during their growth stages.

Each stage has distinct characteristics as enterprises develop and grow in course of time. The strategies required to effectively cope-with each stage also vary. This calls for a proper understanding of each stage to enable entrepreneurs to adopt the right strategies for growth.

A brief description of each of the five stages follows:

1. Introduction Stage:

The introduction stage starts when the new product is first launched. Therefore, this stage is also known as ‘start-up stage.’ Introduction stage takes time; production takes place in limited scale; sale is apt to be slow and that too limited to a small area.

The enterprise is not faced with any type of competition during this stage. In this stage, as compared to other stages, profits are negative or low because of the low sales and high distribution and promotion expenses. Even profits may not be earned during the start up stage.

The main concern of entrepreneur in this stage is to try to get more and more customers for the product. Therefore, more and more money is spent in promotional activities like sales promotion and advertising. Also much money is required to attract distributors to one’s product and build inventories.

Promotional measures are designed especially to inform the prospective consumers of the new product and influence them to get ready to try it. The product is being just launched, hence no concern is shown on the refinement of the product. The entrepreneur lays more focus on those buyers who are the most ready to buy the product.

Since well begun is considered half success, an entrepreneur should, therefore, launch his/her enterprise with great consideration and concern. He/she should realize that the initial strategy is just the first step in a grander marketing plan for the product’s entire life cycle.

If the pioneer chooses its launch strategy to make money over night, he/she is likely to sacrifice long-run revenue for the sake of short-run gain. The entrepreneur also needs to design different marketing strategies at different stages of product life cycle. The marketing strategy at the introduction stage is characterized as “try my product.”

2. Growth Stage:

If the new product satisfies the market, then the product enters into the next stage called ‘growth stage.’ During this stage, the enterprise is known to and accepted by the market. The early adopters keep continuing to buy the product and the prospective buyers start following their lead, especially if they hear favorable word of mouth from the existing buyers.

As a result, production increases and sales start climbing quickly but supply falls far short of demand for the product produced by the entrepreneur. More production provides the benefit of economies of scale by reducing per unit cost of the product. As a result, profits increase.

Attracted by the opportunities for profit, the new competitors enter the market. In order to survive and thrive in the competitive market, the competitors will introduce the product with new features. This will lead to market expansion and also increase in the number of distribution outlets.

Sales jumps almost with the same price where it was or falls slightly. Promotional expenses remain almost at the same level or a slightly higher level. Educating the market remains still a major goal, but now the entrepreneur also needs to meet the competition in the market. Therefore, the entrepreneur at this stage tries to change its business strategy ‘buy my product to try my product’.

The entrepreneur uses several strategies like improving product quality, adding new product features and models, and shifting advertising focus from building product awareness to building product conviction and purchase. By following above strategies, the entrepreneur can capture a dominant position in the product market and earns the maximum profits.

3. Expansion Stage:

This is the stage in which the entrepreneur makes efforts to expand his / her business by way of opening its branches and introducing new product lines. The enterprise is transformed from a single-line enterprise operating in a limited market to a multi-line company penetrating new markets with new products and services. Product and service lines are broadened through innovation and development.

Business activities at this stage are diversified to reap the maximum benefits from the business opportunities available in the market. Delegation of authority ensues during the expansion stage. Entrepreneur needs to be able to accept leadership roles quite different from their founding roles. One such role requires leadership vision evidenced through a higher level of aggressiveness.

4. Maturity Stage:

At some point of product life cycle, the product’s sale starts slowing down mainly due to increasing competition. As a result, profits tend to decline. Such a stage is called ‘maturity stage.’ The maturity stage normally lasts longer than the previous stages. As such, majority of enterprises are found in maturity stage.

In such stage, marginal enterprises which find difficult to withstand the competition start dropping out and finally leave the market. Different enterprises adopt different marketing strategies to overcome the challenges posed by the maturity stage. Some enterprises adopt methods such as ‘trading in’ to survive for some more time in the market.

Enterprises can try to redesign their marketing mix-improving. They can improve sales by changing some elements of marketing mix. They can also slash down the prices of their products to attract new customers and competitors’ customers. They can develop and launch a better advertising campaign or use aggressive sales promotions like trade deals, and contests.

The enterprises can also move into larger market channels by way of using mass merchandisers, if these channels are growing. Finally, the enterprises can offer new or improved services to their buyers compared to what the competitors have been offering. Although many products in the maturity stage appear to remain unchanged for long periods.

Most of the enterprises in this stage actually try to evolve to meet changing consumer needs. Product managers should do more than simply ride along with or defend their mature products – a good offense is the best defense. They should consider modifying the market, product, and marketing mix.

In modifying the market, the enterprise tries to increase the consumption of the current product. It looks for new users and market segments, as was done by Johnson & Johnson by targeting the adult market with its baby powder and shampoo. Amazon.com does differently by sending permission-based e-mails to its regular customers letting them know when their favorite authors or performers publish new books or CDs.

Yet another way to increase sale of one’s product is by modifying the product-changing characteristics such as quality, features, or style to attract new users and to inspire more usage. It might improve the product’s quality and performance, its durability, reliability, speed, and taste.

It can also improve the product’s styling and attractiveness. For example, Hyandai a car manufacturing company restyles its i10 car to attract buyers who want a new look. Similarly, the producers of consumer food and household products introduce new flavors, colors, ingredients, or packages to revitalize consumer buying.

Even the company might add new features that expand the product’s usefulness, safety, or convenience. For example, Sony keeps adding new styles and features to its Walkman and Discman lines, and Volvo adds new safety features to its cars.

5. Decline Stage:

This is the final/last stage of product life cycle of an enterprise. At this stage, the enterprises find it difficult to survive either due to the gradual replacement of enterprise product or due to some new innovations on account of change in customer behaviour. The sales of the most of the products abruptly falls and brands eventually dip.

The decline may be slow, as in the case of oatmeal cereal or rapid, as in the case of phonograph records. Sales may plunge to zero, or they may drop to such a low level where they continue for many years. Sales may decline for more than one reason like technological advances, shifts in consumer tastes, and increased competition. Enterprises start incurring losses at an increasing rate.

In such situations, some entrepreneurs prefer to withdraw from the market and close their shutters. This is characterized as the ‘decline stage.’ Some remaining entrepreneurs may initiate pruning their product offerings. They may also opt for cut in promotional measures and reduce the prices of their products to remain in the market.

There may be entrepreneurs who decide to maintain their product brands without change in the hope that some of the competitors will leave the market. Procter & Gamble presents one such example which made good profits by remaining in the declining liquid soap business as some of the competitors withdrew themselves from the market.

The most of the entrepreneurs drop the products reached to their weak position, i.e. decline in sale. The reason is that carrying a weak product over the period may cause one type or other costs to the entrepreneur. While decline or negative cost is open and easily perceptible, there are hidden costs as well.

These may include too much of management’s time, frequent price and inventory adjustments, more attention to sales promotion, and most importantly a product’s failing reputation can cause customer concerns about the enterprise and its offerings.

Thus, carrying on a weak product’s biggest cost may well lie in the future. Besides, keeping weak products also delays the replacements of products, creates a lopsided product mix, impinges upon the current profits, and weakens the enterprise’s foothold to stand in the market in future.

It is not necessary that all products will pass through the above life cycle stages and will remain for the same period at each stage. It is found that most of enterprises dissolve in the initial stages of the first and second stages.

It is reported that like human infant mortality, small enterprises also experience a high infant mortality rate. Some pass through some stage within a short period of time while other stays at the stage for a quite longer period. It is also not necessary that all enterprises exactly follow the life cycle stages in the sequence as discussed above.

If we depict these stages of growth in a diagram, these follow S-shaped curve as shown in Figure 33.1.

The characteristics, objectives, and strategies at each stage of product life cycle are now juxtaposed in the following Table 33.1.

Table 33.1: Summary of Product Life Cycle Characteristics, Objectives, and Strategies:

Thus, we notice that the metamorphoses take place in an enterprise at every stage of its growth. An entrepreneur faces critical problems at every stage and, therefore, requires distinct strategies to overcome the problems. Growth and expansion stages can be clubbed together as Growth Strategies.

It deserves mention here that the time period for which an enterprise remains in each of the stages varies widely from enterprise to enterprise depending upon their flexibility to respond to the type of environment in existence.

Some enterprises take years together to pass through the start up stage, while others may pass through or be accepted in a few weeks only. It is also possible that an enterprise like salt producing may remain in maturity stage for ever. In brief, the time taken for all enterprises to move from one stage to another is not the same but varies widely from enterprise to enterprise.