Plan Now to Maximize Profits in 2012
Most small business owners and CEOs plan to grow their business and increase sales and profits. However, there are certain methods companies must use for implementing a growth strategy. The method a company uses to expand its business is largely contingent upon its financial situation, the competition and specific goals of the CEO, as well as other functions. Some common growth strategies in business include market penetration, market expansion, product expansion, diversification and acquisition.
One growth strategy in business is market penetration. A small business uses a market penetration strategy when it decides to market existing products and services within the same market. The only way to grow using existing products and markets is to increase market share. Market share is the percent of unit and dollar sales a company holds within a certain market vs. all other competitors.
A market expansion growth strategy involves selling current products and services in new markets. There are several reasons why companies consider a market expansion strategy. First, the competition may be such that there is little room for growth within the current market. If a business does not find new markets for its products, it cannot grow or increase sales or profits - in fact, profits will decline over time. A small business may also use a market expansion strategy if it finds new uses for its product and services.
A business may also expand its product line or add new features to increase its sales and profits. When small companies employ a product expansion strategy they continue selling within the existing market. A product expansion growth strategy often works well when technology starts to change. A small business may also be forced to add new products as older ones become obsolete.
Growth strategies in business also include diversification, where a small company will sell new products to new markets. This type of strategy can be very risky and companies will need to plan carefully when using a diversification growth strategy. Marketing research is essential because a company will need to determine if customers in the new market will potentially like, need and purchase the new products.
The above strategies focus on organic growth, and most small business owners focus solely on this strategy. Growth strategies in business can also include mergers and acquisitions. With acquisitions, a company purchases another company, or purchases the assets of a company without taking on the liabilities to expand and grow. A small business may also use this type of strategy to expand its product line and enter new markets.
An acquisition growth strategy can be risky, but not as risky as a diversification strategy. One reason is that the products and market are already established. A company must know exactly what it wants to achieve when using an acquisition strategy, mainly because of the investment required to implement it.
CEO Advisor specializes in advising and implementing growth strategies to grow small businesses to the next level. Contact Mark Hartsell today at (949) 759-8676 or email MHartsell@CEOAdvisor.com for a free initial consultation.