BUS501: Strategic Management

Growth platforms are specifically named initiatives selected by a business organization to fuel revenue and earnings growth.

LEARNING OBJECTIVES

• Identify ways in which new markets can result in organic growth for an organization
• Distinguish between the varying integrations and diversifications that allow businesses to pursue strategic growth
  
  

KEY POINTS

• Strategic growth platforms are long-term initiatives for high-scale revenue increases. Generic examples of commonly selected strategic-growth platforms include pursuing specific and new product areas or entering new distribution channels.
• Diversification is a form of corporate strategy that seeks to increase profitability through greater sales volume obtained from new products or new markets.
• Market development strategy entails expanding the current incumbent market through new users or new uses.
• Market penetration occurs when a company penetrates a market in which current products already exist, enabling the business to compete head to head with incumbents in the market.
• New product development (NPD) is the internal process of bringing a new product to market.
• Integration, either horizontal or vertical, is a merger or acquisition process of entering new, related industries (for example, acquiring a supplier or a competitor in a related industry).
  
  

TERMS

• vertical integration

  The integrating of successive stages in the production and marketing process under the ownership or control of a single management organization.

• diversification

  A corporate strategy in which a company acquires or establishes a business other than that of its current product.

• horizontal integration

  The merger or acquisition of new business operations.

 

Growth platforms are specifically named initiatives selected by a business organization to fuel revenue and earnings growth. Growth platforms may be strategic or tactical. Strategic growth platforms are longer-term initiatives for high-scale revenue increases. Generic examples of commonly selected strategic growth platforms include the pursuit of specific and new product areas, entry into new distribution channels, vertical or horizontal integration, and new product development. Illustrative examples of growth platforms include:

• Apple Computer's targeting of "personal music systems" to accelerate growth faster than with its personal computer business alone.
• IBM's coining of the term "e-business", and its subsequent use as the organizing theme for all that the company did in the late 1990s.
• Google's entry into the operating system and laptop realms.

 

Types of Strategies

There are a number of different growth strategies, but the most common are:

• Horizontal integration – The merger or acquisition of new business operations. An example of horizontal integration would be Apple entering the search-engine market or a new industry related to laptops and smartphones.
• Vertical integration – Integrating successive stages in the production and marketing process under the ownership or control of a single management organization. An example might include a gas-station company acquiring an oil refinery.
• Diversification – A corporate strategy in which a company acquires or establishes a business other than that of its current product. Diversification can occur either at the business-unit level or at the corporate level. At the business-unit level, diversification is most likely to involve expansion into a new segment of an industry in which the business already competes. At the corporate level, it generally means entrance into a promising business outside the scope of the existing business unit.
  

Other Product / Market Growth Types

Market Penetration

Market penetration occurs when a company penetrates a market in which current products already exist. This strategy generally requires great competitive strength, a strong brand, or both, as most market penetrations demand actively taking market share from current incumbents. It is an aggressive and often risky approach to growth.

 

Market Development Strategy

Market development strategy entails expanding the potential market through new users or new uses for a product. The strategy is best accomplished through identifying unique niche needs in a specific type of user and filling those needs. Market research is critical in development strategies. New users can be defined as new geographic segments, new demographic segments, new institutional segments, or new psychographic segments.

 

New Product Development

In business and engineering, new product development (NPD) is the process of developing, researching, and bringing a new product to market. A product is a set of benefits offered for exchange and can be tangible (that is, something physical you can touch) or intangible (for example, a service, experience, or belief). Identifying new needs or new ways of filling them and developing a new process or product that accomplishes this aim are the goal of this growth strategy. NPD requires investment in research and development, usually over the long term, and extensive trial and error.

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Source: Boundless
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