Concept Of Business Growth


WHAT IS BUSINESS GROWTH

Business growth is simply the process of improving some measures of a business success, this is the stage where the enterprise reaches the point for expansion thereby seeking additional options to generate more profit. It is a function of the business lifecycle, and the owners desire for equity value creation.

Business is all about growth, movement from former to present and this can be achieve by working towards a goal, having a set goal. All over the world today companies are evolving and expanding their enterprise, you must do the same to keep your company or business running. Businesses all over the world to is working towards growth, so you must do the same.

In this way the main strategies of growth can be listed and explained below:

1. EXPANSION:

This is a form of internal growth of business, it simply means enlargement or increase in the same line of activity. It is the natural growth of a business enterprise taking place in course of time. In the case of expansion the enterprise grows it's own without joining hands with any enterprise. As small business enterprise or any business, expansion is one of the signs of growth in the business.
Expansion can be through market penetration, whereby the enterprise increase the sales of its existing product by enlarging the existing market, In other words, market penetration means making deeper in roads in the existing market.

Expansion can also be through market development which implies exploring new markets for the existing product, In other to increase the sale of existing product, the enterprise makes searches for new customers.

Expansion can also be through product development and modification which implies developing or modifying the existing product to meet the requirement of the customers.

2. DIVERSIFICATION: 

This is the most common form of internal growth of business. Diversification is evolved to overcome the limitations of business growth through expansion, the business can not grow beyond a certain point by concentrating on the existing product/marketing. In other words, it is not always possible for a business to grow beyond a certain point through market penetration, This underlines the need for the adding of new product/ market to the existing one, because the market is changing.

Such an approach to growth by adding new products to the existing production line is what we called  DIVERSIFICATION.

This is necessary because according to the product "life cycle concept" every product have a definite life period, like human beings, products also die/disappear from the markets, so the introduction of new products to the basic product line becomes necessary to keep the business on and on.

3. JOINT VENTURE:

Joint venture is a type of external growth strategy adopted by business firms. This could be considered as an entity resulting from a long-term contractual agreement between two or more parties to undertake mutually beneficial economic activities, exercise joint control and contribute equity and share in profit and loss of the company.

It helps increase competitive strength of the business and makes possible the use of advanced technology and knowledge not available within a firm.

4. MERGERS AND ACQUISITION:

These are yet another forms of external growth strategy, this is the combination of two or more existing enterprise into one. For the enterprise which acquire another, it is known as "acquisition" for the enterprise which is acquired, it is known as "Merger". Thus the merger and acquisition are the two sides of the same coin.

If both organisations dissolve their identity to create a new organization, it is known as "consolidation", the other term for merger and acquisition is takeover.

Reason why seller merge are;
  • To increase the growth rate
  • To acquire resources to stability resources
  • To deal with top management succession problem


I hope this few point of mine was helpful. please share with friends and leave a comment below on the comment box, and please subscribe for notifications on our next article. Thanks

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