Question

Wahda had made a successful IPO. The entrepreneurs are now thinking about expansion of their business. Guide them by explaining in your own words various growth strategies

Answer 1

There are broadly four types of growth strategy

· Market penetration: Market penetration is when you are selling the existing product to the current market where you are operating but your focus is on increasing the market share. For this strategy the company use tactics like advertising or cut in product price to acquire more customer base.

· Market expansion: Market expansion is when you are trying to expand the current product sale to different markets to increase the revenue as well as customer base. Let’s say a company is operating in one country say US market now it decides to export those goods to India as well this would be an example of market expansion.

· Product expansion: The product expansion is a strategy where either you are adding a new line of product or adding a similar line of product to your current product to increase the customer and revenue base. This is quite a good strategy when you realize that the product for current market is saturated and cannot be further increased.

· Growth through diversification or acquisition: The diversification is a strategy where you are not relying on one product or one sector for your entire revenue source because it is risky, if in one cycle that segment did not do well then your entire business would not do well and it can cause significant financial impact to the company. Diversification can be by entering into a new product manufacturing or by acquisition of companies which will add value to your current segment.