Types of Business Growth
Business Growth is the stage in which the organization reaches the point for growth and thus seeks new avenues to generate more profit for shareholders. Business growth is often a function of managers desire for greater equity value Creation, business cycles, and the business’s competitive position. In addition, the key to business growth is the ability to understand the customers’ needs and motivation for buying. Below are some of the common factors that affect business growth
Strategic Sourcing: Strategic sourcing is a vital component of business growth strategies. This involves obtaining cost savings from suppliers or clients in order to reduce operating costs and/or increase cash flow. Strategic sourcing is typically a long-term arrangement involving suppliers who will provide goods and services at discount prices or at wholesale prices. While sourcing is important to suppliers, many businesses view strategic sourcing as an unnecessary expense and substitute for market research. A successful business must determine if strategic sourcing is a feasible option and how it will impact their business life cycle.
Revenue Growth: Growth in revenue is considered a good sign for any business, especially when there is little competition. For businesses in which revenue is the primary indicator of overall business growth, revenue growth helps companies show they are making money while they focus on customer acquisition. However, revenue growth is also important for companies looking to obtain credit or loans from financial institutions. The key to revenue growth is the ability to forecast and plan for future revenue streams. A company must be able to grow its revenue over the long term and must apply sound financial practices to ensure it doesn’t exceed its means and fall into debt.
Market Research: Many companies fail to obtain long-term benefits from their capital investments by not conducting market research. Doing market research provides a company with information about consumer spending habits. Without market research, a company cannot plan its products or services and is at the mercy of what consumers will purchase. In addition, without market research, a business owner risks investing more funds than are needed to run the business profitably. With a large amount of capital invested in product development, marketing, operations, production and distribution, a company’s return on investment can be very volatile.
Organic Growth: Growth in revenue is always organic and refers to increases in business size and sales that occur without any significant outside financing. Organic growth is usually influenced by demand among customers, competitive advantages, product features, quality and service delivery and other factors. Growth in organic business growth happens gradually over time, and a company must analyze and measure factors such as market competition, management strategy and business development. The most common forms of organic growth include increased net income, profit margins, market share and customer loyalty. An example of organic growth is the expansion of a manufacturing operation from one location to another. Other examples of organic growth include the expansion of an existing sales force into new locations, the growth of one office staff into two or more, the increase of suppliers from one area to another and so on.
Market Expansion: Growth in sales typically results from market expansion. A market expansion strategy is one that makes use of existing customer, supplier, and place of operation contacts and leverages those contacts to expand into new markets. This strategy can involve the acquisition of new customers or suppliers, as well as expansion into existing markets through new selling points or service points. There are many types of market expansion including mergers and acquisitions, investments in technology, new building developments, and so on. While these strategies can result in growth in revenues, a business must ensure that expansion will not deplete available capital and that future growth will be contributed to existing profits.
