SMEs often tell they want to grow their business when in fact, what they are saying is that they want to stop losing money.
If the challenge you are facing is a lack of sales, lack of profit or lack of customer retention, you need to deal with those issues first before we can talk about growth.
Your business must be successful – AKA profitable – before you can start thinking about growth!
If you are ready to grow, you must understand the 4 types of business growth strategies.
Way back, a man called Igor Ansoff was the first person to explain the 4 main types of business growth strategies. He used what is now called the “Ansoff Matrix” or the growth strategy matrix.
This matrix identifies the 4 main types of business growth strategies.
Market Penetration Strategy
You grow your business by increasing the sales of existing products or services in your existing markets. It is an attempt to increase your market share by attracting more customers.
This is one of the easiest types of business growth strategies.
An example is Coca Cola. Almost anywhere you go in the world, you will find their product.
Market Development Strategy
You grow your business by selling existing products or services in new markets.
For example, if you are a bakery that sells to individuals, your market development strategy could be to start selling the same products to businesses.
Product Development Strategy
You grow your business by selling new products and services to existing markets.
For example, if you sell Huawei phones, you add Samsung and iPhone. Or, if you sell one type of ice cream, you start adding different types.
Diversification Strategy
You grow your business by developing completely new products or services for new markets.
It is the most radical and aggressive business growth strategy. It is also the strategy with the highest risk.
An example of diversification would be if a Sudanese business producing scented soaps for sale in Sudan decided to start designing software for big South African companies.
Diversification is not recommended for small businesses unless you have a lot of experience and large financial reserves. If your business is lacking in these 2 things, it is better to choose one of the other types of business growth strategies.
Conclusion
Which strategy is best for your business depends on your business and your market.
However, generally speaking, it is best to try the easiest types of business growth strategies before attempting the riskier strategies.
That way, you can experiment to see what works for you while keeping your risks low.
When you are ready to test one of these business growth strategies, find out here how to implement it and what the pros and cons of each strategy are.
This article was originally published on LinkedIn.
