The right strategies for growth markets will boost your companyís revenue.
Strategies for growth markets are different than other types of markets. The product concept stage is completed and buyers are accepting the product.
The emerging industry expands into the growth stage and looks to employ its growth strategy based on market conditions. In this post, I assume a rapid growth rate and market expansion strategy to be deployed. Recognizing that various rates of growth may occur.
Rapid growth often follows the initial development of a new product market. This stage of market development creates several important strategic and business strategy issues.
Strategies for business growth are what keeps the company’s doors open.
During this stage, the company uses several strategies to sustain rapid market growth as long as possible:
The company that pursues these market expanding strategies will strengthen its competitive position and market penetration. However, this improvement comes at an additional cost. The company in the growth stage faces a trade-off between high market share and high current profit.
By spending money on product Improvement, promotions, and distribution, it can capture a dominant position. It forgoes the maximum current profit in the hope of making an even greater profit in the next stage. The next stage is the maturity stage.
Market Definition and Analysis
The general assumption is that a rapidly growing market presents an attractive opportunity for existing firms and potential market on entrants. Moreover, growth involves change and creates and certainties.
In the growth stage, strategies for growth show that buyers have experience with the product and sales response patterns have developed. Since the market is not stable, further changes are likely to occur.
The growth stage product market is better defined and there is less than certainty then is present in the emerging stage. The size and scope of the market are better defined than in the earlier stage. The risk is reduced, providing management obtains and uses market knowledge to guy decisions.
Identification of the factors and influence market trends is important in evaluating the current and future attractiveness of the market. Business and marketing planning efforts should be closely coordinated.
Since opportunity varies across the segments in the product market, market segment identification and analysis become critical as the target market moves through its life cycle.Click To Tweet
If not already beginning to develop in the emerging market, the segment should start to form in the growth stage. Customers with homogeneous needs begin to be identified.
This allows marketing efforts to be targeted more precisely. Furthermore, experience with existing products, product development process, and technologies leads to greater efficiency and increase standardization.
The market environment is moving from highly uncertain to moderately uncertain. A further change is likely. But the direction of change is toward a better knowledge about the forces that influence the size and composition of the market.
At a minimum, a broad basis of segmentation should be feasible during the growth stage. Patterns of use can be identified in the characteristics of buyers related to use patterns.
The buyer’s journey begins to form. Segmentation by type of industry may be feasible and industrial markets.
Characteristics such as income, age, and family size identify broad segments for consumer products such as food and other consumer goods. Analysis of existing buyers may indicate market potential guidelines.
Industry Structure and Competition
In general, the assumption is that high-growth markets are very attractive and that early entry offers important competitive advantages. Moreover, there are potential problems for industry players:
First, the visible growth market can attract too many competitors. The market and its distribution channels cannot support them. The intensity of competition is accelerated when growth fails to match expectations or eventually slows.
Second, the early entrants are unable to cope when key success factors or technologies change. Because it lacks financial skills or organizational skills.
Success is found by making the right decisions to exploit the opportunities and avoid the risk in a rapidly expanding product market.
Generalizations about industry structure and growth markets are difficult. As the number of competitors increases more business failures are likely. This is due to the crowding of opportunities and the lack of skills and resources needed to gain a competitive advantage.
Large, established firms are more likely to enter growth markets rather than emerging markets. The larger businesses are not able to move as quickly as small, specialized firms in exploiting the opportunities in the emerging markets. This could seem with IBM, Oracle, and Microsoft in the early 2000s.
Large firms have skills and resource advantages for achieving market leadership, overcoming some timing advantages of the market pioneers. They also have the advantage of evaluating the attractiveness of the product market during its initial development.
Competitive Advantage and Strategies for Growth
A framework for the strategic analysis of different product market life cycle stages is shown in Exhibit 1.
Your strategies for growth need to build an arsenal of competitive advantages.
The developing market category corresponds to the growth stage under discussion in this post. Analysis of the past performance of a successful strategy suggests that the K-generalist are often the best performers in developing markets.
These firms are early followers with established businesses and related markets. Dell and Lenovo entry into the personal computer market is illustrative. These firms have the experience that can be applied in the growth product market.
Survival analysis of companies in the microcomputer industry shows how the performance characteristics of these firms displayed in the rapid growth stage of the product market.
And they are as follows:
My research suggests that survival requires aggressive actions by firms that seek more market share. But other successful competitors are likely to be more successful using market selectivity strategies. This is also known as niche marketing.
Targeting and Positioning Strategies
The targeting strategy in a growth market is influenced by several factors. These factors include:
As Exhibit 1 implies three possible targeting strategies. These include the following:
Strategies Growth Markets: Narrow Market Scope
The targeting strategy is feasible when buyers’ needs are differentiated or when product differentiation is feasible. Segments not served by large competitors provide an opportunity for a small firms to gain a competitive advantage.
The market leaders may not find small segments attractive. Therefore they will not allocate the skills and resources necessary to gain a competitive position in the segment. Itís just too small. If the buyers display similar needs, a small company making an advantage through product specialization. This strategy would concentrate on a specific product or component.
Broad Market Scope
The objective of this targeting strategy is to cover a large portion of the buyers in the product market. The number of specific targets depends on the segment in the market. During the growth stage of the business market for personal computers, the three major segments were small, medium, and large companies.
Segments are likely to be few and number and identified by one or a few general characteristics. When segments are not apparent, extensive targeting is designed by a general profile of buyers. This profile becomes the target.
To develop these into actionable targets, we use demographic and psychographic analysis. The deliverable is an ideal customer profile, buyer persona(s), and the buyer’s journey map.
Positioning Strategy and Strategies for Growth
The positioning strategy use will vary according to the targeting strategy the company selects. Several general characteristics of positioning strategies and growth markets are shown in Exhibit 2.
These strategies are examples since many factors may influence the choice of a given strategy. For example, major differences often occur in the position and components used for consumer and industrial markets.
Personal selling is often used when businesses are targeted because the number of buyers is small as compared to consumer markets.
Advertising consumes a much larger portion of the marketing budget than personal selling in many consumer product companies. these companies include Ben & Jerry’s, New Belgium Brewery, Apple, and many other CPG companies.
Wrap up Strategies for Growth Markets
Marketing strategy is affected by various situational factors. This is illustrated by considering strategies for entering a new, growth, immature product markets.
The growth stage shows a rapid climb in sales revenue. The early adopters like the product, the middle majority consumers, start buying the product. New competitors enter the market, attracted by the opportunities for large-scale production and profit.
They introduce new product features, and this moves further expands the market. The increasing number of competitors leads to an increase in the number of distribution channels. Company sales jumped to fill the distribution pipeline.
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Some popular growth strategies in business include market penetration, market expansion, product expansion, diversification, and acquisition.
1. Market Penetration Strategy.
2. Market Expansion or Development.
3. Product Expansion Strategy.
4. Growth Through Diversification.
5. Acquisition of Other Companies.
What are the growth strategies?
The growth strategy†goals are to gain more market share, even at the expense of short-term earnings. Four broad†growth strategies†are diversification, product development, market penetration, and market development.
Why are growth strategies important?
A†growth strategy†gives your company purpose, and it answers questions about your long-term plans.†Growth strategies†are†important†because they keep your company working towards goals that go beyond what’s happening in the market today.