Growing a business requires time, patience, commitment, and many times a lot of money. Still, there are tried and tested principles for those out there interested in doing it. Here are four strategies to consider.
Expansion from the Core
In today’s hyper-competitive labor environment, few things are more important than having transferable skills. Examples include communication skills, presentation ability, and negotiations. If you know how to speak well in front of an audience, you can do it regardless of the company or industry in which you are in. Experts in sales and negotiation tactics can convince prospective customers to buy anything.
For businesses looking to grow, one of the best strategies to put in place is expanding from the core. Like transferable skills, it represents using what you know to do something else. It could be a wide variety of things, including intangibles like know-how and expertise, or tangibles like technology and infrastructure.
For example, let us imagine your company manufactures smartphones. In this case, expanding from the core would be using existing technology to make televisions, laptops, or even batteries. Another option would be to look into the provision of related services such as repairing screens or issues dealing with software configuration for smart devices.
Mergers and Acquisitions
In layman’s terms, a merger is when two companies become one. An example is when oil giants Exxon and Mobil joined forced in 1999 to become Exxon Mobil.
An acquisition is a bit different. A larger corporation will purchase a smaller one. In most cases, when this happens, either the smaller business loses its name, or neither the big one nor the small one does. A relatively recent instance of this is when Vodafone bought German industrial conglomerate Mannesmann in 2000. With a price tag of close to 203 billion dollars, the UK telecommunications multinational became the world’s biggest mobile operator.
There are many reasons why mergers and acquisitions take place. Among others, upper management will decide on marrying another organization in the hopes of expanding market share. If company A has a strong presence in China, a market of close to two billion people, it would be in company B’s best interests to acquire it. By doing so, not only is company B gaining access to this market, but it is also saving enormous amounts of cash in advertising, competition, and brand-building.
Joint Ventures
A joint venture is another well-known type of collaboration. However, it differs from a merger or an acquisition in the fact that both partners remain independent. Company A will continue to be company A, and company B will do the same. When there is a joint venture, the alliance between both firms is often based on the project’s timeline or scope.
For instance, two or more businesses will decide on working together for a period of one or two years. When it comes to project scope, they can create an association based on a single product or service in a specific locale.
Once again, let us look at an example to illustrate this in more detail. Imagine that Johnny’s Chicken House is a fast food restaurant in Spain. Mary’s Pizza Delight is a Portuguese pizzeria hoping to penetrate the Spanish market. Instead of competing against Johnny, Mary can decide to use his existing delivery network and POS infrastructure in Spain. In return, Johnny can do the same in Portugal.
In this simple scenario, both companies are gaining market share and potential revenue without spending extra euros on market penetration strategies.
Innovating and External Opportunities
The last growth strategy we will look into involves improving something, creating something new but similar, or diving into a completely different field.
A phone with longer battery life is an example of incremental innovation. The basic product is the same, but it has added features to it. A tablet is a different product but with similar characteristics. It also has a touch screen, you can download apps, and there is a cloud-storage service. Finally, if you are Apple and decide on embarking into the underwear business, this would obviously be a completely different field.
As far-fetched as the last one might sound, there are more than few cases of it happening. Did you know that famous tobacco company Lucky Strike also makes furniture, golf clubs, and cabinets?
Sometimes the best solution is the most radical. In business, taking risks is more often than not an essential factor to success.
Expanding from the core, partaking in an M&A, choosing to get involved in a joint venture, and looking for external opportunities are four ways to grow.
If you are a starting entrepreneur looking to expand, choose one of them and start doing the research. There isn’t a moment to waste.