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Most companies have plans to grow their business and increase sales and profits. There are certain methods companies must use for implementing a growth strategy. The method a company uses to expand its business is largely contingent upon its financial situation, the competition, and even government regulation. Some common growth strategies in business include the following:
The company uses a market penetration strategy when it decides to market existing products within the same market it has been using. The only way to grow using existing products and markets is to increase market share, according to small business experts. Market share is the percent of unit and dollar sales a company holds within a certain market vs. all other competitors.
A market expansion growth strategy, often called market development, entails selling current products in a new market. There several reasons why a company may consider a market expansion strategy. First, the competition may be such that there is no room for growth within the current market. If a business does not find new markets for its products, it cannot increase sales or profits.
Companies may also expand their product line or add new features to increase their sales and profits. When companies employ a product expansion strategy, also known as product development, they continue selling within the existing market. A product expansion growth strategy often works well when technology starts to change. A small company may also be forced to add new products as older ones become outmoded.
Growth strategies in business also include diversification, where a company will sell new products to new markets. This type of strategy can be very risky. Companies will need to plan carefully when using a diversification growth strategy. Marketing research is essential because a company will need to determine if consumers in the new market will potentially like new products.
Growth strategies in business can also include an acquisition. In an acquisition, a company purchases another company to expand its operations. Companies may use this type of strategy to expand its product line and enter new markets.