Growth Strategy - Methods of Development

Author: Jim Riley Last updated: Sunday 23 September, 2012

In your business & management studies you have probably looked at some alternative directions a business could take in relation to its marketing strategies. Specifically you are likely to have covered two important models which help businesses determine their strategic direction:

Porter’s Generic Strategies

Porter suggested four "generic" strategies that could be adopted in order to gain competitive advantage. The strategies relate to the extent to which the scope of a business' activities are narrow versus broad and the extent to which a business seeks to differentiate its products.

Ansoff’s Matrix

Ansoff’s product/market growth matrix suggests that a business’ attempts to grow depend on whether it markets new or existing products in new or existing markets. The output from the Ansoff matrix is a series of suggested growth strategies which set the direction for the business strategy.

For each of the directions suggested by the above models, there are different methods of development.

According to Johnson & Scholes, a development method is the means by which a strategic direction is pursued.

For example, when pursuing a growth strategy, a business is often faced with making a choice between three development methods

Internal development (often called “organic growth” in business textbooks)
Acquisitions (occasionally, and often incorrectly called “mergers”)
Joint ventures and alliances

Internal development is where strategies are developed that build on the business’ own capabilities and resources.

For most businesses, this is the only development method used. Internal development involves approaches such as:

Designing and developing new product ranges
Implementing marketing plans to launch existing products directly into new markets (e.g. exporting)
Opening new business locations – either in the domestic market or overseas
Investing in research and development to support new product development
Investing in additional production capacity or new technology to allow increased output and sales volumes
Training employees to help the best acquire new skills and address new technology

Whilst these approaches are not easy, they are generally considered to be lower risk than the alternative – acquisitions or joint ventures. However, the major downside of focusing on internal development is that the speed of change or growth in the business may be too slow.