The growth of a business is measured by profits and market share. Strategies are required to face different financial situations and competition capacity building.
- Organic business growth
Organic growth is one of the most basic in the business world. It requires several combinations of strategies that encourage building a larger company. An example of this growth model is adding new distribution channels or selling a new product that increases your vertical and is offered to your current customer base.
Obtaining results can be achieved through increased financing from shareholders or by investing profits in the business. And although it is functional, its main disadvantage is that, as it takes longer, it gives competitors the opportunity to expand their competitive advantages.
- External business growth
This growth model is carried out over the long term and involves mergers and acquisitions. It occurs when companies have reached the limit of their organic business growth, so they require a new market; for example, creating additional products to add to existing inventory.
This type of growth consists of the search for external financing or acquisitions, in order to achieve expansion. It is clear that there is a risk that the company will be left in the hands of shareholders or another organization. However, it results in faster growth than the organic model.
Although it is a very functional growth model, the fact of sharing shares and percentages with a counterpart can generate cultural or organizational differences , disagreements in processes or tactics or an increase in the complexity of human resource management.
- Growth by merger
When two corporations integrate to form a new one, as in the recently announced case of Microsoft and Activision Blizzard , we speak of a merger. There are several types of fusion and, although we will not delve into each of them, we are going to list them:
Conglomerate
Vertical merger
Horizontal fusion
In general, a business merger involves the integration of the assets of two independent companies to form a new entity. The problem with mergers is that they can incur monopolization or evasion of tax obligations, when one of the parties is located in a country with a very different tax policy.
The merger allows, among many other things:
Access new markets
Compete internationally
Reduce costs thanks to the synergies of other companies
Integrate new methodologies, strategies and learning
Greater credit capacity
- Strategic growth
Strategic growth refers to the search for strategies different from those used by the competition to try to position yourself in the market. This type of growth involves long-term analysis to identify opportunities, depending on the industry, business model, and financial capacity of the company.
To understand the strategic potential of a company, you must study aspects such as:
The long-term objectives of the business
Risks and measures to mitigate them
Strategic Alliances
Potential acquisitions
Value chain transformation
Market trends in the medium and long term
Diversification of productive activities
To the extent we have a clear idea of where a corporation can go, it will be easier to determine the strategies that will make that goal a reality.