Table of Content:

1. INTRODUCTION 
2. Growth/Expansion Strategy
3. Characteristics of Growth/Expansion Strategy
4. Types of Growth/ Expansion Strategy
5. STRATEGIC OPTIONS
6. Ansoff’s Product Market Growth Matrix
7. ADL Matrix
8. Boston Consulting Group (BCG) Growth-Share Matrix
9. General Electric Matrix [“Stop-Light” Strategy Model]

INTRODUCTION 

Businesses follow different types of strategies to enter the market, to stay relevant and grow in the market. A large number of strategies with different nomenclatures have been employed by different businesses and also suggested by different authors on strategy. For instance, William F Glueck and Lawrence R Jauch discussed four generic strategies including stability, growth, retrenchment and combination. These strategies have also been called Grand Strategies/Directional Strategies by many other authors. Michael E. Porter suggested competitive strategies including Cost Leadership, Differentiation, Focus Cost Leadership and Focus Differentiation which could be used by the corporates for their different business units. Besides these, we come across functional strategies in the literature on Strategic Management and Business Policy. Functional Strategies are meant for strategic management of distinct functions such as Marketing, Financial, Human Resource, Logistics, Production etc.

We can classify the different types of strategies on the basis of levels of the organisation, stages of business life cycle and competition as given in the Table –1.

Above are the various types of strategies available for an organisation to adopt. The organisation adopts either of these depending upon their needs and requirements. For instance, a start-up or a new enterprise might follow either a competitive strategy i.e., entering the market where a number of rivals are already operating, or a collaborative strategy, i.e., enter into a joint venture with an established company. However, majority of startups are launched on a small scale and their main strategy is to penetrate the market and to reach the breakeven stage at the earliest and later pursue growth strategy. While a going concern can continue with the competitive strategy or resort to collaborative strategy to ensure business growth.

The corporate strategies a firm can adopt may be classified into four broad categories:
1. Stability strategy
2. Expansion strategy
3. Retrenchment strategy
4. Combination strategy

Before proceeding further, let us discuss the basic features of all the types of corporate strategies to get the bird’s eye view. The basic features of the corporate strategies are as follows:

Growth/Expansion Strategy

Growth/Expansion strategy is implemented by redefining the business by enlarging the scope of business and substantially increasing investment in the business. It is a strategy that can be equated with dynamism, vigour, promise and success. It is often characterised by significant reformulation of goals and directions, major initiatives and moves involving investments, exploration and onslaught into new products, new technology and new markets, innovative decisions and action programmes and so on. This strategy may take the enterprise along relatively unknown and risky paths, full of promises and pitfalls.

Characteristics of Growth/Expansion Strategy

• Expansion strategy involves a redefinition of the business of the corporation.
• Expansion strategy is the opposite of stability strategy. While in stability strategy, rewards are limited, in expansion strategy they are very high. In the 
  matter of risks, too, the two are the opposites of each other.
• Expansion strategy leads to business growth. A firm with a mammoth growth ambition can meet its objective only through the expansion strategy.
• The process of renewal of the firm through fresh investments and new businesses/products/markets is facilitated only by expansion strategy.
• Expansion strategy is a highly versatile strategy; it offers several permutations and combinations for growth. A firm opting for the expansion strategy can 
  generate many alternatives within the strategy by altering its propositions regarding products, markets and functions and pick the one that suits it most.
• Expansion strategy holds within its fold two major strategy routes: Intensification Diversification. Both of them are growth strategies; the difference lies in the way in which the firm actually pursues the growth.

Types of Growth/ Expansion Strategy

The growth strategies can be classified into two main types:
A. Internal growth strategies 
B. External growth strategies
A. Internal growth strategies 

Internal growth strategies can be further divided into: 
I Expansion through Intensification
II Expansion through Diversification

STRATEGIC OPTIONS

Strategic options need to be carved out from existing products and innovations that are happening in the industry. There are a set of models that help strategists in taking strategic decisions with regard to individual products or businesses in a firm’s portfolio. Primarily used for competitive analysis and corporate strategic planning in multi-product and multi business firms. They may also be used in less￾diversified firms, if these consist of a main business and other minor complementary interests. The main advantage in adopting a portfolio approach in a multi-product, multi-business firm is that resources could be channelised at the corporate level to those businesses that possess the greatest potential.

Ansoff’s Product Market Growth Matrix

The Ansoff’s product market growth matrix (proposed by Igor Ansoff) is a useful tool that helps businesses decide their product and market growth strategy. With the use of this matrix a business can get a fair idea about how its growth depends upon it markets in new or existing products in both new and existing markets. Companies should always be looking to the future. One useful device for identifying growth opportunities for the future is the product/market expansion grid. The product/market growth matrix is a portfolio-planning tool for identifying growth opportunities for the company.

ADL Matrix

The ADL matrix (derived its name from Arthur D. Little) is a portfolio analysis technique that is based on product life cycle. The approach forms a two￾dimensional matrix based on stage of industry maturity and the firms competitive position, environmental assessment and business strength assessment. Stage of industry maturity is an environmental measure that represents a position in industry’s life cycle. Competitive position is a measure of business strengths that helps in categorization of products or SBU’s into one of five competitive positions:

• dominant,
• strong,
• favourable,
• tenable and
• weak 

It is four by five matrix as follows:

 Boston Consulting Group (BCG) Growth-Share Matrix

The BCG growth-share matrix is the simplest way to portray a corporation’s portfolio of investments. Growth share matrix also known for its cow and dog metaphors is popularly used for resource allocation in a diversified company. Using the BCG approach, a company classifies its different businesses on a two￾dimensional growth-share matrix. In the matrix:
 The vertical axis represents market growth rate and provides a measure of market attractiveness.
 The horizontal axis represents relative market share and serves as a measure of company strength in the market.

Using the matrix, organisations can identify four different types of products or SBU as follows:

 Stars are products or SBUs that are growing rapidly. They also need heavy investment to maintain their position and finance their rapid growth potential. They represent best opportunities for expansion.

 Cash Cows are low-growth, high market share businesses or products. They generate cash and have low costs. They are established, successful, and need less investment to maintain their market share. In long run when the growth rate slows down, stars become cash cows.

 Question Marks, sometimes called problem children or wildcats, are low market share business in high-growth markets. They require a lot of cash to hold their share. They need heavy investments with low potential to generate cash. Question marks if left unattended are capable of becoming cash traps. Since growth rate is high, increasing it should be relatively easier. It is for business organisations to turn them stars and then to cash cows when the growth rate reduces.

 Dogs are low-growth, low-share businesses and products. They may generate enough cash to maintain themselves, but do not have much future. Sometimes they may need cash to survive. Dogs should be minimised by means of divestment or liquidation.

General Electric Matrix [“Stop-Light” Strategy Model]

This model has been used by General Electric Company (developed by GE with the assistance of the consulting firm McKinsey and Company). This model is also known as Business Planning Matrix, GE Nine-Cell Matrix and GE Model. The strategic planning approach in this model has been inspired from traffic control lights. The lights that are used at crossings to manage traffic are: green for go, amber or yellow for caution, and red for stop. This model uses two factors while taking strategic decisions: Business Strength and Market Attractiveness.

Understanding the GE Matrix
The vertical axis indicates market attractiveness, and the horizontal axis shows the business strength in the industry. The market attractiveness is measured by a number of factors like:
 Size of the market.
 Market growth rate.
 Industry profitability.
 Competitive intensity.
 Availability of Technology.
 Pricing trends.
 Overall risk of returns in the industry.
 Opportunity for differentiation of products and services.
 Demand variability.
 Distribution structure (e.g. direct marketing, retail, wholesale) etc.Business strength is measured by considering the typical drivers like:
 Market share.
 Market share growth rate.
 Profit margin.
 Distribution efficiency.
 Brand image.
 Ability to compete on price and quality.
 Customer loyalty.
 Production capacity.
 Technological capability.
 Relative cost position.
 Management calibre, etc.

If a product falls in the green section, the business is at advantageous position. To reap the benefits, the strategic decision can be to expand, to invest and grow. If a product is in the amber or yellow zone, it needs caution and managerial discretion is called for making the strategic choices. If a product is in the red zone, it will eventually lead to losses that would make things difficult for organisations. In such cases, the appropriate strategy should be retrenchment, divestment or liquidation.

This model is similar to the BCG growth-share matrix. However, there are differences. Firstly, market attractiveness replaces market growth as the dimension of industry attractiveness and includes a broader range of factors other than just the market growth rate. Secondly, competitive strength replaces market share as the dimension by which the competitive position of each SBU is assessed.