One of the primary reasons a business fails is because they haven’t done enough research and lack a clear business model. Successful enterprises achieve their growth and profitability because they have identified and followed a sustainable growth strategy framework.
Growth strategy frameworks provide invaluable ways to help businesses structure their thinking and guide their companies as they grow. There are various tried and tested growth strategy frameworks to select from, each more suitable to a particular type of organisation, depending on its aims, stage of business, as well as its strengths and weaknesses.
Here are some well-known growth strategy frameworks to consider:
1. The Ansoff Matrix
Igor Ansoff identified four strategies for growth which he summarised in a matrix. The Ansoff model is designed to allow a business to identify potential growth strategies and compare the risks associated with each one. The four strategies are:
- Market penetration (selling more existing products in existing markets). This could include changing store opening hours, cutting order processing times etc.
- Market development (offering existing products to new markets). Assessing demand for products should be backed up with concrete research e.g., checking search intent using Google keyword planner.
- Product development (offering new products to existing markets). This could involve developing new products using cheaper manufacturing processes, or improving on a competitor’s quality and packaging.
- Diversification (launching new products in new markets). This requires a company to have the relevant skills and resources to move into new markets i.e. a strong management team behind the move.
The matrix reveals how risky or non-risky it is for a business to move into each area.
While it will depend on the maturity of a business, product development and diversification are at the risky side of the quadrant – while market penetration and market development are generally less risky growth strategies.
2. BCG Growth-Share Matrix
Boston Consulting Group’s product portfolio matrix helps companies consider growth strategies by reviewing their product portfolios so they can decide where to invest or divest. This matrix is also divided into four quadrants and is based on two factors: market growth and relative market share.
Companies need to divide their products into:
Dogs/ Pets: Low market growth with a low market share.
Question marks: Most companies start here, with a small market share in a high growth market.
Cash Cows: These can be ‘milked’ in order to invest in more promising businesses.
Stars: High market growth with a high market share.
The BCG model is a good strategic tool for analysing a portfolio and identifying areas for growth.
3. Porter’s Five Forces Model
Michael Porter’s model is a very well known and used growth strategy framework, and especially useful for analysing industries. The model helps determine the competitiveness of an industry based on five factors:
- Rivalry between existing competitors.
- Threat of new entrants.
- Threat of alternative products.
- Supplier bargaining power.
- Buyer bargaining power.
If these factors are high competition is strong and a company may wish to reconsider entering a market. Industries with low competition on the other hand may offer greater margins and be more attractive to new entrants.
4. Hambrick and Fredrickson’s Strategy Diamond
The strategy diamond is a good overall framework for examining the elements that make up a strategy. A strategy should have five elements that make up a unified whole. These are:
- Arenas: Which product categories to focus on, as well as which channels, marketing segments, geographic areas and technologies.
- Vehicles: How to achieve goals – whether internally, or via joint ventures, strategic alliances, licensing, merger/acquisition or franchising.
- Differentiators: How to stand out, whether on image, customisation, price, quality or speed to market.
- Staging: What will be the speed of expansion, sequence of initiatives and intervals between events.
- Economic logic: How will returns be made, whether at lowest cost using advantages of scale, at low costs via scope and replication, at premium prices due to trademark features, or at premium prices due to great unmatchable services.
For each of the above elements, choices need to be made on what to do and on what ‘not’ to do. The choices made should reinforce each other in order to achieve a strong, sustainable strategy.
These business growth frameworks each focus on key areas to consider – from analysing risk and competition to assessing market share. It may be that one, or a combination of these models can help you decide on the way forward for your business.
For specific advice on how to grow your business successfully, it could be worth getting in touch with a business growth consultant. They can help you identify the right growth strategy framework for you so that you can achieve your business goals.