What All Comprises The Market Growth Strategy?

Growth strategies

Growth of a business is critical for business success, so using strategies such as horizontal integration, vertical integration, diversification and intensification will all benefit a business’s growth, be it long term or short term. Refer to Ansoff’s Matrix for a simpler explanation of the various growth strategies if those mentioned below are difficult to understand.

Horizontal integration

Horizontal integration is the degree at which employees are specialized and integrated in. There are low horizontal levels which show that employees are specialized in their work and high horizontal levels which show that employees are integrated in their work. A business’s horizontal boundaries can determine the quantities and changes of products that are produced by two or more businesses that have been merged producing the same product as one business . Some benefits of the horizontal integration strategy is that it is good for fast changing work environments as well as providing a broad knowledge base for the business and employees.

High levels of horizontal integration leads to high levels of communication within the business. Another benefit of using this strategy is that it leads to a larger market for merged businesses, and it is easier to build good reputations for a business when using this strategy. A disadvantage of using the horizontal integration strategy is that this limits and restricts the field of interest that the business is expanding the new products into.Horizontal integration can affect a business’s reputation, especially after a merge has happened between two or more businesses. There are three main benefits to a business’s reputation after a merge.

A larger business helps the reputation and increases the severity of the punishment. As well as the merge of information after a merge has happened, this increases the knowledge of the business and marketing area they are focused on. The last benefit is more opportunities for deviation to occur in merged businesses rather than independent businesses.

Vertical integration

Vertical integration is when business is expanded through the vertical production line on one business. An example of a vertically integrated business could be Apple. Apple owns all their own software, hardware, designs and operating systems instead of relying on other businesses to supply these.By having a highly vertically integrated business this creates different economies therefore creating a positive performance for the business.

Vertical integration is seen as a business controlling the inputs of supplies and outputs of products as well as the distribution of the final product.Some benefits of using a Vertical integration strategy is that costs may be reduced because of the reducing transaction costs which include finding, selling, monitoring, contracting and negotiating with other firms. Also by decreasing outside businesses input it will increase the efficient use of inputs into the business. Another benefit of vertical integration is that it improves the exchange if information through the different stages of the production line. Some competitive advantages could include; avoiding foreclosures, improving the business marketing intelligence, and opens up opportunities to create different products for the market.

Some disadvantages of using a Vertical Integration Strategy include the internal costs for the business and the need for overhead costs. Also if the business is not well organised and fully equipped and prepared the business will struggle using this strategy. There are also competitive disadvantages as well, which include; creates barriers for the business, and loses access to information from suppliers and distributors.

Diversification

Diversification is an area included in the Ansoff Matrix strategy, where the most risk for a business is situated. This is due to the use of a new product being introduced to a new market, so there are no already existing target markets or competition. There are two types of diversification, vertical and horizontal. Horizontal diversification is when a new product is introduced but doesn’t contribute to the already existing product line.

Meaning horizontal diversification focuses more on product that the business has knowledge about, whereas vertical diversification focuses more on the introduction of new product onto new markets, where the business could have less knowledge of the  market.A benefit of horizontal diversification is that it is an open platform for a business to expand and build away from the already existing market.

A disadvantage of using a Diversification strategy is that the benefits could take a while to start showing, which could lead the business to believing that the strategy doesn’t work.Another disadvantage or risk is, it has been shown that using the horizontal diversification method has become harmful for stock value, but using the vertical diversification had the best effects.