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INTEGRATIVE GROWTH STRATEGY
PRIYA TALWARSHALINI SINGHMANISHA GAUTAMTAJINDER KAURSOURABH HARJAISHIVAMLAXMIKANT SHARMAIMRAN KHAN
Learning Objectives Explore strategic innovation as a growth
strategy. Discuss intensive growth strategies—
growing within the current market. Explain integrative growth strategies—
growing within the industry. Examine diversification growth
strategies—growing outside the industry.
Consider growing by going global.
Factors affecting growth decision: Demand for product/service Size of the market Leadership success
To Grow or Not to Grow
Stages of Growth and Company Focus
Startup Early Growth
High Growth
Stable Growth
Capital Customer Distribution
Cash Flow Marketing
Resources Capital Management
Innovation Maintaining Success
Factors That Affect Growth
Market factors: Size and Characteristics Competition Intellectual-property rights Predictability
Management factors: Ability to adapt and change the business
over time even if the business is successful Re-evaluation of key metrics
Problematic leadership tendencies: Loyalty to the original founding team Task orientation–Focus Single-mindedness of vision–Discipline Working in isolation
Scaling factors: Inability to understand and respond to the
business environment
A Framework for Growth
Framework for growth Scan and assess the environment Plan the growth strategy Hire for growth Create a growth culture Build a strategy advisory board
Growth Strategies Strategic Innovation strategies: change the
game in an industry or market Intensive growth strategies: exploit
opportunity in the current market Integrative growth strategies: exploit growth
within the industry as a whole Diversification strategies: exploit opportunities
outside the current market/industry Global strategies: exploit opportunities in the
international arena
STRATEGIC INNOVATION New concepts are not generally
attractive to established companies in the early stages because: They break the mold. The early markets are generally small with
low margins. Large companies typically wait to see how
the new model fares in the market and then they either change their model or attempt to acquire the entrepreneur’s company.
Growing within the Current Market
Market penetration Increase sales through effective
marketing strategies within the current target market
Gradually expand Promoting additional uses for products Attract customers from competitors by
advertising advantage over competitor Go after noncustomers
Market development Take product or service to a broader
geographic area Franchising
Dealerships Service franchises Product franchises
Market development (cont’d) Licensing- steps for a successful
transaction: Decide exactly what will be licensed Understand/define the benefits the buyer will
receive from the transaction Conduct thorough market research Conduct due diligence on potential licensees Determine the value of the license agreement Create a license agreement
Product development Develop new products/services for
existing customers or offer new versions of existing products
Breakthrough products may come through unplanned means (i.e. brainstorming, problem-solving, etc.)
Growing Within the Industry Vertical integration strategies
Growing forward/backward within the distribution channel
Horizontal integration strategies Buying up competitors or starting a
competing business Modular or network strategies
Focus on core competencies and outsource the rest
Diversification Growth Strategies Investing in or acquiring products/businesses
which are outside the core competencies and industries
Use when all other growth strategies within the current market/industry have been exhausted
Synergistic strategy Acquire products/services unrelated to the
company’s core products/services Conglomerate diversification-acquiring businesses
that are unrelated to the company’s current business
Growing by Going Global
Born global – a company that generates at least 25% of its sales in the first three years from international marketplace and derives competitive advantage from outsourcing and selling in several countries
Characteristics of successful globalization: A global vision from the start Internationally experienced managers Strong international business networks Preemptive technology A unique intangible asset Closely linked product/service extensions A closely coordinated organization on a world-
wide basis
Finding the Best Global Market
Information sources: International Trade Statistics
yearbook of the United States International Trade Administration
offices in Washington, D.C. and at district levels
Department of Commerce
INTEGRATIVE GROWTH STRATEGY FOLLOWED BY APPLE Inc.
The iPad Mini was launched last month, although it is still called “iPad” and just looks like a smaller version of iPad, it is a totally new Apple product and indicating that Apple is entering small tablet market.
Apple is pursuing a diversification growth strategy through the creation of iPad mini. Because it shares the same distribution resources, use the same information system and provide same application downloads, this is a related diversification opportunity.
Its strategy is based on the fact of the shrinking PC market and the growing tablet market, and is led by the ongoing “bring-your-own-device” (BYOD) trend.
Tim Cook also described Chinese market as an “extremely exciting” one, which currently makes up 26% of Apple’s revenue.
It gains great popularity and good word of mouth through its premium pricing, excellent design and innovative culture. In China, Apple is now definitely a premium brand that labels good quality and good taste.
Export Financing Sources:
Bank financing Internal cash flow Venture capital or private investor
capital Prepayment, down payment, or
progress payment from foreign client Assurances:
The Import-Export Bank
Foreign agents, distributors, and trading companies
Choosing an intermediary Due diligence work to assure the right
partner Choosing a freight forwarder
Handles all aspects of delivering the product
New Venture Action Plan Identify market, management, and scale
factors that may affect the growth of the business.
Determine which growth strategy is most appropriate for the business.
Indentify potential international markets for the product or service.
Develop a plan for globalization of the company at some point in the future.