There are many strategies that companies use to enhance organizational growth. Growth is brought about when a company expands its market share either by entering new markets, increasing market share in existing market, creating new products or diversifying the product range.
This in theory is known as the Ansoff Matrix which is a marketing tool used in the development of growth strategies. Other than these strategies, modern companies are looking for easier methods of achieving growth. This is achieved through the use of mergers and acquisitions which enable the purchasing company to gain additional markets and product range without individually altering their product or market strategies.
IBM acquired Mainspring in 2001 while Oracle acquired PeopleSoft in 2004 (Hitt, Ireland and Hoskisson, 2011). Growth through mergers and acquisitions is a delicate strategy which can easily fail if approached without considering factors such as cultural diversity, employee conflict and consumer perceptions.
The Ansoff Matrix explains four options that companies have when pursuing growth (Ray, 2010). They can either approach the challenge by focusing on the product aspect or the market. The options available include creating a new product/ market or developing the existing market/ product range. When applying this theory, a company can create a new product and use it to increase its existing market share.
This is called product diversification which involves creation of differentiated/ new products so as to appeal to a different customer segment. The same company can also use the existing products to enter into new markets which have not been tapped or flooded by competitor goods. With focus on the market, the company can increase market share either by entering new markets or through market penetration which involves the use of aggressive marketing techniques to increase sales in the existing market.
Market penetration approach was used by Intel when the company made one the most remembered come backs in the business world. Intel was facing the risk of collapse due to excessive competition and difficulty of consumers to differentiate Intel products from those of competitors. Instead of giving in to obliteration due to these factors, Intel went back to the drawing board and decided to use marketing strategies to lift itself from the situation.
Amongst the growth strategies available Intel chose market penetration strategy so as to increase its market share which had dwindled due to increased use of competitor goods. Intel began branding their products after the use of codes failed to guarantee copyright protection since engineering numbers could not be trademarked (Kotler, Keller and Burton, 2009). In order to popularise its Pentium brand and fight competition, Intel used the Intel Inside marketing campaign to advertise the company in the minds of consumers.
The market penetration strategy is well explained by the approach used by Intel to increase market share in a market which was slowly being taken over by competitors. The company was willing to use which ever marketing opportunity that was available to appeal to consumers. They assisted computer makers to advertise themselves provided that they placed a sticker that indicated that the Intel microprocessor was inside the PC or laptop.
Intel also used TV adverts to popularise its products in its twelve largest markets globally through mass media. To supplement television as a medium for mass media advertising, Intel also used print, outdoor advertising and online marketing to carry out their marketing campaigns. These efforts have paid off since Intel is now one of the most valued brands globally with a value exceeding the 2006 figure of US$ 32 Billion (Kotler, Keller and Burton, 2009).
Summary
- All companies desire to obtain growth which is seen to be an indication of prosperity.
- Growth is brought about when a company expands its market share either by entering new markets, increasing market share in existing market, creating new products or diversifying the product range.
- Growth strategies revolve around a new product/ market or the existing product/ market.
- Other companies have used mergers and acquisitions to generate growth since they are able to gain from the market share of existing companies.
Reference List
Hitt, MA, Ireland, RD & Hoskisson, RE, 2011, Strategic management: competitiveness & globalization Concepts, South-Western Cengage Learning, Mason OH
Kotler, P, Keller, KL & Burton, S 2009, Marketing Management (1st edition), Pearson Education Australia, Frenchs Forest NSW
Ray, KG 2010, Mergers and Acquisitions, PHI Learning Pvt. Ltd, New Delhi