Corporate Growth Strategies
Growth strategies are extremely popular because most executives tend to equate growth with success. Howevere, in order for an organization to grow, it must generate surplus. This surplus can be used in many ways. For example, it can be used to augment worker and management wages, salaries, and bonuses or held in income-generating reserve. Surplus can also be distributed in dividends to stockholders, or it could be used to reduce future prices of goods or services. Finally, surplus can be used for either internal or external growth.
Internal growth may take place through increasing sales, by introducing new products and services while retaining the old. Horizontal internal growth involves creating new companies that operate in the same business as the original firm, in related businesses, or in unrelated businesses. Vertical internal growth refers to creating businesses within the firm's vertical channel of distribution and takes the form of supplier-customer relationships.
External growth can be accomplished through merger or acquisition, joint venture, and vertical integration. Firms may select a growth strategy; this growth can refer to any of the following:
- growth in profits;
- growth in market share;
- growth in size as measured by assets or sales;
- growth in geographical area;
- growth in the number of businesses or products.
In the following sections, several growth strategy options are described.