Market Penetration
Quite perfect for small firms, a market penetration strategy is practical when the company is aspiring to increase its market share within the same market. A great method often utilized is lowering of prices when products have very little to no differentiation. This is intended to attract the consumers and increase the market share in turn. A great way to achieve this also is by creating more promotions like specials, discounts or promotional blitz simply to grab attention quickly and sell the products just as fast as well. How is it measured? Since market share is a percent of unit and dollar sales, by selling more than the competitor can increase the market share and build confidence in the industry in which the business operates.
Market Expansion
Unlike Market Penetration, an expansion strategy entails attracting customers in a new market. This market development strategy entails selling the same products out of the usual market space especially when the current market is saturated and there is no scope for increasing the market share. A penetration strategy wouldn’t work in this case and it is therefore time to explore new markets and expand. Also referred to as a Market Development strategy, the main aim is to grow by expanding the market size. Companies can successfully enter a new market through franchise for example. Although such a strategy can be risky as it involves entering an entirely new territory, market research becomes even more integral to ensure the move will be lucrative in the long run.
Product Expansion
As the name suggests, a Product Expansion also known as a Product Development, can be defined as the expansion of a product line or the addition of new features to a product line to ultimately increase its sales and profits. Companies usually continue selling in the same market. Most often, such a strategy is embraced when technological advancements force the company to adapt or become a relic. Being able to keep up with the fast pace and demands of the market is imperative. Some areas a company should look at would include expanding the product line by developing new products, adding additional features to existing products or updating features when they become obsolete.
Diversification
Another well-known growth strategy is that of Diversification. New products will now be sold to new markets where a calculated risk is factored in this approach. An incredible amount of market research and planning is essential to ensure the viability of the new product in the new market. As these are new customers, conducting a customer profile is a key component as the business now has to get to know the new consumer as well. Companies can undertake a Conglomerate Diversification; diversifying into an area not related to beef up profits e.g. children shoe company acquires a liquor store, or, Concentric Diversification; diversifying the current products by adding related products or markets related to current market e.g. same children shoe company acquiring a women’s shoe and apparel store.
Acquisition
Another dynamic approach is acquiring another company. Tapping into new markets and products lines can be achieved with an acquisition growth strategy. Although quite a risky approach, a firm must ensure it has a clear vision and mission before embarking on this approach as it comes with a hefty investment to implement. A small business could use an Upstream Acquisition; by merging with a larger company in the same field to consolidate market forces, Downstream Acquisition; outright purchase of another company where the company would not exist after the transaction, or lastly Lateral Acquisition; with two companies of similar size joining forces to create an entirely new company – major company.