Expansion strategies

Types of expansion strategies

1. EXPANSION STRATEGIES

2. The Expansion Strategy is adopted by an organization when it attempts to achieve a high growth as compared to its past achievements. They aim at significant growth. The expansion strategy is adopted by those firms who have managers with a high degree of achievement and recognition. Their aim is to grow, irrespective of the risk and the hurdles coming in the way. This strategy is designed to allow the enterprises to maintain competitive position in rapidly growing national and international markets.

3. REASONS TO PURSUE EXPANSION STRATEGY Create strength : growth company is well known and attracts better management. Necessary for survival : frequent changes in technology. Employee satisfaction : large size -> high executive compensation -> more power and recognition. Increases productivity : better at what it is doing -> reduces cost -> improves productivity.

4. TYPES OF EXPANSION STRATEGIES Concentration strategy -> Market penetration -> Market development -> Product development Integration strategy -> Vertical integration -> Horizontal integration Diversification strategy -> Related or concentric diversification -> Unrelated or conglomerate diversification Internationalisation strategy Cooperation strategy -> Strategic alliances -> Merger -> Acquisition -> Joint ventures

5. CONCENTRATION STRATEGY Also known as Intensive strategies. Trying to grow by competing only within a single industry. Aim : To broaden the market share and to increase the profit by making the existing products more effective and by introducing new and various sets of products in order to increase the market share. Important role is to increase the revenue and sales of the organisation.

6. Market penetration : -> selling more products to same markets -> increase market share of present products and secure dominance in growth markets without making changes in the product or services. EXAMPLE: Airtel promoting its services to penetrate in the Indian market.

7. MARKET DEVELOPMENT -> Selling same products to new markets. -> attracting new customers for existing products. EXAMPLE: L eading footwear firms like Adidas, Nike and Reebok, which have entered international markets for expansion . These companies continue to expand their brands across new global markets .

8. PRODUCT DEVELOPMENT -> selling new products to the same markets. -> introduce newer products in the existing market. EXAMPLE: A utomotive companies are creating electric cars to meet the changing needs of their existing market.

9. INTEGRATION STRATEGY Integration strategies means combining the activities related to the present activity of the company. Condition -> Make or buy decision. Whether to manufacture a product in-house or to purchase it from a third party. Part of diversification strategies as it involves doing something different from what the company has been doing previously.

10. TYPES OF INTEGRATION STRATEGY VERTICAL INTEGRATION: It is a type of growth strategy where new business units are added which are complementary to the existing units. It is an arrangement in which the supply chain of a company is owned by that company. TWO TYPES: forward integration backward integration

11. Forward Integration: Moving closer to the finished products. Also known as downstream development. EXAMPLE: car spare parts manufacturer can manufacture car. Backward Integration: Going back to the source of raw materials. Also known as upstream development. EXAMPLE: T v manufacturers can produce picture tubes and other components.

12. HORIZONTAL INTEGRATION: Horizontal integration is the process of a company increasing production of goods or services at the same part of the supply chain . A company may do this via internal expansion, acquisition or merger . In simple words, it happens when two or more companies which produce the same or similar goods or provide the same/similar services merge together .

13. EXAMPLE: Facebook and Instagram Both Facebook and Instagram operated in the same industry (social media) and shared similar production stages in their photo-sharing services. Facebook thought to strengthen its position in the social sharing space and saw the acquisition of Instagram as an opportunity to grow its market share, reduce competition, and gain access to new audiences. Facebook realized all of these through its acquisition. Instagram is now owned by Facebook but still operates independently as its own social media platform.

14. DIVERSIFICATION STRATEGY Diversification strategies are used to expand firms operations by adding markets, products, services, or stages of production to the existing business. The purpose of diversification is to allow the company to enter lines of business that are different from current operations. TWO TYPES: Related or Concentric Diversification Unrelated or Conglomerate Diversification

15. Related or Concentric Diversification: Adding new but related products or services is widely called concentric diversification . The point of commonality may be similar technology, customer usage, distribution, managerial skills, or product similarity. Concentric diversification occurs when the diversification is in some way related to, but clearly differentiated from, the organization's current business . EXAMPLE: Tv companies like Onida, Sony, Videocon producing DVD players.

16. Unrelated or Conglomerate Diversification: Conglomerate diversification is growth strategy that involves adding new products or services that are significantly different from the organization's present products or services. It occurs when the firm diversifies into an area totally unrelated to the organization current business . EXAMPLE: ITC, a cigarette company diversifying into the hotel industry.