53. Growth Strategies

With very few exceptions, every company wants year-over-year growth that is realized through increases in sales and market share. If the goal is rapid growth, it is best achieved through a strategy such as the acquisition of another company. Organic growth is upward business growth achieved incrementally with the successful execution of selling more products, establishing new target markets, or expanding geographical reach. Businesses that pursue organic growth are usually established companies in a mature market, or businesses that desire slower growth for a number of good reasons such as access to capital.

Exponential growth is a harder strategy to execute and takes focus. If your goal is to achieve rapid growth, consider the following strategies:

• Acquisition

• Strategic Alliances and Partnerships

• New Distribution Channels

• New Markets

• New Customers

• New Products

Acquisition

Acquisition is the fastest way for companies to grow and quickly capture market share. It is also a good strategy for businesses that would like to enter new industries or expand into new target market segments because they can buy knowledge, expertise, brand, and customers instantly.

Crocs bought Finproject NA—the Canadian company that manufactured Crocs and owned the formula for Croslite—the unique, odor-resisting, spongy resin of which Crocs are made. This acquisition gave Crocs control over manufacturing and timing, lending a hand to their unique distribution system, which compared to most shoe companies is quick and customized. Retailers receive only the style they want at the quantity and color wanted, delivered in a few weeks. This method ensures that retailers aren’t left with unsold Crocs, meaning they’re never sold at a discount.¹

If a merger or acquisition sounds easy, don’t be fooled. The result is not always win/win and it takes considerable time, effort, and money to make them successful. The vast majority of acquisitions fail because company cultures are mismatched.

Strategic Alliances and Partnerships

New alliances pave the way for entry into new target markets, geographies, and vertical markets. Like acquisitions, alliances provide access to an existing customer base, although this access will take cooperation and effort from both companies. Each company in the alliance benefits from the ability to offer a more robust product or service that will attract new customers, provide complementary services that offer greater customer benefits, and extend brand equity and good will to business partners.

New Distribution Channels

The addition of different types of distribution channels can add significantly to a company’s growth. VARs (value added resellers) and resellers can sell products through channels they have already established. In consumer markets, distribution into mass retailers like Wal-Mart, Costco, or Target can turn a product into a superstar in a very short period of time.

In Section III, “Analyze,” you analyzed different types of distributors to reach new target markets and expand geographic coverage. Evaluate your distribution strategy to consider every possible path to market. Analyze the entire network in the value chain and how you can create strategies to expand awareness and sales. In some companies, a value network can literally comprise of hundreds of network partners who contribute to the delivery of a product. For example, Cisco Systems’ value network is comprised of manufacturers, VARs, resellers, user groups, government entities, school systems and universities, and dozens of other partners.

New Markets

Rapid growth can be achieved by entering new geographical locations (local, regional, national, or international), new target markets that reach new buyers, or new industry vertical markets. Growth into new markets always looks attractive, but it also means additional costs to customize a product, increased resources to provide operational support, and extra marketing and promotion expenses to make a new market aware of a product.

The following case study “Adobe Makes Lemonade Out of Lemons” describes how Adobe Systems created new markets for a beleaguered software product.²

New Customers

In addition to targeting new markets and buyers, you can quickly expand your business by targeting and closing one or two key customer accounts. Securing a prestigious top-tier customer has the added benefit of attracting other customers similar in size and profile, which add to the reputation of a business. This can catapult a company into new levels of brand awareness and business growth.

The one precaution to keep in mind is the risk associated with putting too many eggs in one customer basket. It can deplete precious resources, and for smaller companies, the risk of losing one customer that contributes the majority of sales can be devastating. If you pursue this strategy, make sure you have the resources to fulfill demand and service needs. Then you can leverage this success and focus business development efforts on acquiring additional tier-one customers.

New Products

The introduction of a new product that captures the hearts and minds of customers can result in an explosion of growth and sales. It can also lead to additional sales from other products and services your company offers.

Under Armour, the successful athletic-wear manufacturer, created a breakaway new product category that has evolved from founder and CEO Kevin Plank’s grandmother’s house to the shelf of 6,500 athletic retailers. Plank, tired of his cotton football shirts’ moisture retention, commissioned a tailor to make tight-fitting undershirts from the same moisture-wicking material of which many cycling and football undershorts were made. Plank began marketing to college athletic teams, but his eyes were on the retail market. To attract big retailers, such as Dick’s Sporting Goods, Plank tirelessly pitched to college and NFL football teams with the idea that their acceptance would provide Under Armour an “authenticity that advertising alone [couldn’t] create.”³, ⁴ This strategy worked and sales grew from $17,000 in 1996 to an astonishing $55 million by 2005. By 2008, Under Armour’s revenues grew to over $200 million and captured 75 percent of the $416 million market for tight-fitting athletic garments.⁵

Under Armour’s initial strategy was niche-market penetration. Marketing was targeted to football teams, and then spread to other male athletes, women, youth, and in 2006, the $9 billion footwear market. The footwear market represents a very different and competitive market, so again Under Armour entered the market with a a highly specialized product: football cleats. It chose this comparatively small market ($250 million in the U.S.) because competing with Adidas and Nike in soccer shoes, for example, would be suicidal. Plank says Under Armour’s primary goal in its release of football cleats was to authenticate itself as a footwear brand. By May 2008, Under Armour captured a 20 percent share in football cleats. They next gleaned an 11 percent share in the baseball and softball cleat market. The company recently expanded into the cross-training market, in direct competition with Nike. Under Armour released its first line of running shoes in early 2009, stimulating a new wave of competition.

In summary, the challenge—especially for disruptive companies that create new industries—is to grow beyond its niche and develop new products and innovations that capture new customers. At the same time, it requires tremendous focus to not be all things to all people.