GROWTH STRATEGIES FOR A SMALL BUSINESS
Strategy is a multi dimensional concept that has been defined in various ways by different authors. Porter (2006) defined strategy as the creation of a unique and vulnerable positions of trade offs in competing, involving a set of activities that really fit together, and are consistent, reward each other and ensure optimization of efforts. It can mean a well planned and deliberate course action to achieve specific objectives.
Growth is defined as a progression from simple to more complex forms according to The Advanced English Dictionary. Growth in business can be defined in so many ways, it can mean an increase in production volume, increase in sales volume, increase in production capacity. In simple terms, growth in business means an increase in the size or scale of operations of a firm usually accompanied by increase in its resources and output. It can also be defined as an elaborate and systematic plan of action.
Although, growth is the last stage in starting up a small business yet it is a very important stage and it is a continuous process. No business has grown above improvement, there is still room for improvement even for big businesses.
Robert started his business eight years ago and has been wondering why his business has been stagnant and have not been improving.
Unfortunately today, many entrepreneurs are like Robert that just start a business and leave it that way. If a business does not grow, sooner or later, it will soon be wiped off. It should be noted that no business started big, most businesses started very small and have grown big today because the business owners have the mindset for growth and they acted accordingly. As it is always being said, that growth is a mindset. You must be determined to grow your business and focus on the growth of the business.
WHY MUST I GROW MY BUSINESS?
Interestingly, most entrepreneurs or business owners don’t know why their business must grow or expand. Below are some of the reasons why you must desire your business to grow and work towards it as an entrepreneur;
- To increase your sales volume and in turn increase revenue : When you adopt strategies to grow your business, it increases the volume of your sales which in turn leads to increased revenue and increased profit.
- To attract investors: As a small business, you have to show signs of growth and prove your business worthy to attract investors to finance your business. When you adopt growth strategies for your small business, investors become interested in your business.
- It gives room for healthy competition : When a small business grows or expand, it is able to compete with other similar businesses.
FIVE MAJOR GROWTH STRATEGIES FOR A SMALL BUSINESS
Before a business owner decides to embark on the growth strategies, he or she must have examined some things in the business because most entrepreneurs don’t always know the things to put in place before employing strategies for growth. Some of thethings an entrepreneur should do before embarking on these strategies are listed below;
- Redefine your values : An entrepreneur must redefine his or her business values, because the business value might have changed in the course of the business life, he or she must redefine his or her business goals and values to see if it is still in line.
- Research : Before taking on the growth strategies, a business owner must make his or her research to know the growth strategy he wants to go for, the costs attached to it, the risks involved and other necessary things about the strategy.
The growth strategies available to a small business are listed below;
MARKET PENETRATION STRATEGY
When a business seeks to gain greater authority or potency in the market, it is known as market penetration. It is the ability of a business to penetrate or find its way into the existing market. Most small business use this strategy when it wants to market its old or existing products in the same market but it wants to be dominant.
WAYS IN WHICH A BUSINESS CAN PENETRATE THE MARKET
- Reduction of Price : This is one of the ways a small business can penetrate into the market. By reducing the price of your product or service compared to that of your competitors, you increase your customer base which in turns increases revenue and subsequently increase profit.
- Increase the publicity of your product or service : There are many businesses which offer quality product and services but are not known by potential customers due to lack of publicity. Promotions is a very good way of growing your business, and there are various means in which you can promote your business;
The internet is a very good source for promoting a business. Technology has made a lot of things easier for us. One of the best ways to promote your business is through social media. You can create a blog and update it from time to time with some good articles or write up on your product or service, With that people will know more about your business. You can also register your business with “Google places” so people can easily find it on Google searches most especially on Google Map.
- Through Creative Innovation : A business can penetrate into the market through creative innovations. As a business owner, you have to continually think out of the box and you must be innovative and originative. A good example is Apple, they have the largest part of the market in the cell phone industry because of their creative ability to think outside the box and come up with ideas that no cell phone manufacturer have ever thought of.
- Improve branding and quality of your products : In order for a business to have a reasonable share of the market or be a market leader, such business must improve her branding.
Some the advantages of market penetration are;
- It leads to fast growth, once a business is able to get a fair share( large portion) of the market, it increases the rate at which the business grow.
- It makes a business have an hedge over its competitors: Once a particular brand becomes the market leader, it gives the business an hedge over similar businesses in the industry.
PRODUCT DEVELOPMENT STRATEGY
This strategy allows a business to increase its product base. It is one of the major strategy for growing a small business. A small business can grow by expanding its product, that is, producing more goods or rendering additional service in the existing market. It is also called product expansion strategy. It can also mean adding new or additional features to the existing product. Most times, this strategy is used by small business when their old products are no longer selling in the market. Some ways a business can develop products or improve services are listed below;
- Amend or improve existing products : One of the most efficient way to develop your products is to work on the existing product. A good way to do this is to make use of technology. A business can improve on the quality, branding and packaging of its product. It can also improve on its customer service.
- Create new product or render additional service : Another way for a business to develop its product or service is to create new products in the existing market.
STEPS INVOLVED IN PRODUCT DEVELOPMENT STRATEGY
Identify a need : Whether you are improving an existing product or creating a new one, this is the very first step to take. Consumers don’t just buy anyhow goods, it must either solve a problem or fulfill a need.
Before improving existing products, you must find out what where the product needs improvement, you must be able to carry out your research, ask questions from your customers, get necessary feedback, research on new technology you can make use of. After collecting all these information, then you can go on to work on the improvement.
In the case of a new product, a business owner don’t just wake up one day and start producing new goods or rendering new services, he or she must have identified a pressing need and must be ready to create solution for it. He or she must have research about the particular goods, have a fair knowledge of his market, his potential customers and other necessary information about the products.
Product development strategy helps a business maintain its relevance with customers. It also increase the business creativity, because as they develop their product or improve their service, they will come up with more ideas which will help them to be more innovative. It also creates a form of anxiety in the customers to use your new products.
A company can improve its growth by acquiring other businesses. This is done in order for the company to expand its base though it is a bit risky. A company buys other companies to expand its operations and enter into new markets. A company must know exactly what it wants when using acquisition strategy. Some of the advantages of acquisition strategy are; it gives the business market power which in turn increases the market share of the business, it also gives the business ability to easily acquire or gain more resources. Before a business owner decides to go for acquisition strategy, he or she must have taken some necessary steps because acquisition requires a lot of money, the cost of acquisition is very high. Also, he or she must consider that the returns on acquisition may not be pleasing. He must also consider the fact that the activities of the old and new business may seem difficult to combine .
This strategy is completely different from other strategies and it is the most risky. Here, a company branch out to produce new products and to sell them in new markets. In other words, a small business enters a new market and produces new goods for that market. As earlier said, diversification is the most risky because a business have no idea about the market it is about to enter but it pays off in the long run . Most companies or businesses diversify due to the following reasons;
- Small business expand their services or products by diversifying in order to guard themselves from stiff competitors.
- Business also diversify in order to manage risk in time of economic turndown.
- Diversification increases revenue and sales.
There are different types of diversification strategy:
- Conglomerate Diversification : This type of diversification occur when you include new services or products that are totally not related to your business.
- Concentric Diversification : This occurs when a business takes on new services or products that are closely related to its original business to enter a new market. It is also called convergent diversification.
- Horizontal Diversification : This diversification is more or less a combination of conglomerate and concentric diversification. It occurs when a business takes on products or services that are new compared to its original business but which may appeal to its existing customers. It may require new technology and skills . A good example is a book producing industry that starts producing pens and pencils.
- Vertical Diversification : It occurs when a company goes back to its former stages of production or moves further to increase its production cycle.
Some of the advantages of diversification are;
- Diversification helps business during economic ups and downs. People change their pattern of spending when the economy changes, diversification creates a balance during this period. It is an instrument useful in the long run.
- It also assist in maximizing unutilized resources : When a company or business diversify, it helps them to utilize and maximize their un utilized or under utilized resources.
A business that wish to grow must employ any of the strategy that fits in best into its business goals and objectives.
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