CHAPTER 14

Strategies For Firm Growth

Internal Growth strategies involve efforts taken wthin the firm itself, such new product development, other product-related strategies, and international expansion, for the purpose of increasing sales revenue and profitability. Internally generated growth is often called organic growth because it does not rely on outside intervention.

Internal growth strategies :

• New product development  : involves designing, producing, and selling new products (or services) as a means of increasing firm revenues and profitability. In many fast-paced industries, new product development is a competitive necessity. 
• The keys to effective new product and service development :
• Find a need and fill it
• Develop products that add value
• Get quality and pricing right
• Focus on a specific target market
• Conduct ongoing feasibility analysis
• The Top 5 reasons new products fail
• The potential market was overestimated
• Cutomers saw the product as t expensive
• The product was poorly designed
• The product was no different than the competition's
• The costs of developing the product line were too high
• Additional internal product-growth strategies:
• Improving an exiting product/service : enhancing qulity, making it larger or smaller, making it more convenient to use, improving its durability, or making it more up-to-date.
• Increasing the market penetration of an existing product or service : involves actions taken to increase the sales of a product or service through greater marketing efforts or through increased production capacity and efficiency.
• Extending product lines : involves making additional versions of a product so that it will appeal to different clientele or makinng related products to sell to the same clientele.
• Geographic expansion : is another internal growth strategy by simply expanding from their original location to additional geographic sites. The keys to succesful geographic expansion follow :
• Perform succesfully in the initial location
• Establish the legitimacy of the business concept in the expansion
• Don't isolate the expansion location

External growth strategies

Rely on establishing relationships with thirs parties.

• Mergers and acquisitions : A merger is the pooling of interests to combine two or more firms into one. an acquisition is the outright purchase of one firm by another. In an acquisition, the surviving firm is calleds the acquirer, and that is acquired is called the target.

Steps involved in an acquisition 

• Licensing is the granting of permission by one company to another company to use a specific form of its intellectual property under clearly defined conditions. There are  principal types of licensing :
• Technology licensing : is the licensing of proprietary technology that the licensor typically controls by virtue of a utility patent.
• Merchandis and character licensin : is the licensing of a recognized trademark or brand that the licensor typically controls through a registered trademark or copyright.
• Strategic alliance and Joint ventures
• Stategic alliance is a partnership between two or more firms that is developed to achieve a specific goal.
• Joint venture is an entity created when two or more firms pool a portion of their resources to create a separate, jointly owned organization.