Kyle Hersey, Stefan Dimitrov, Kasey Darling, Lauren D’Amato & Khaleel Jhungeer

Growth  Growth strategies are used to increase and expand a company’s operations  Growth is often necessary for the long- term survival of thriving companies

Strategies  Concentration  Diversification  Vertical Integration

 Involves growth by expanding existing businesses  Focuses efforts towards a single market

Concentrated Companies  McDonalds, Wal-Mart and Starbucks  All growing by concentrating on their primary business areas and domestic expansion

Example McDonald’s locations by country

Advantages  Reduces resources needed to increase market share  Low risk in growing markets  Allows companies to specialize in specific markets  Less change and easier decision making

Disadvantages  Limited domestic growth  Can be high risk as you are putting all your eggs in one basket  Very dependant on domestic economy

 Involves adding products, services, locations, customers, and markets to your company’s portfolio  Allows companies to reach new audiences

Types of Diversification  Concentric – new venture strategically related to existing business  Conglomerate – new venture that has no strategic fit or relationship with existing business

Concentric Diversification  Coca-Cola’s acquisition of Minute Maid

Conglomerate Diversification  Nestlé’s acquisition of Georgio Armani

Advantages  Control of inputs leading to continuity  Provides better risk control  Provides movement away from declining activities  Take advantage of existing expertise  Reach new markets

Disadvantages  May result in slowed growth in its core business  Adding management costs  Losses may be incurred during market consolidation  Cross-nation diversification may be met with varying, political and legal, requirements.

 Form of diversification  Involves growth by acquiring companies up or down the supply chain  Backwards, Forwards or Balanced

Backwards Vertical Integration  Acquiring suppliers Tire Company Glass Company Metal Company

Forward Vertical Integration  Acquiring distributors Bottler Coke Machines

Balanced Vertical Integration  Acquiring distributors & suppliers Design Production Retail Stores Distribution Advertising

Advantages  Lower transactional costs  Synchronization of Supply & Demand  Quality assurance  Strategic Independence

Disadvantages  Higher coordination costs  Monopolization of markets  Higher costs when switching suppliers/ buyers

Lets Review

Concentration  Growth by focusing on expanding a primary business in a single market  Can involve international expansion but mostly concentrated on domestic

Diversity  Growth by expanding the markets, products, locations or services a company offers  Concentric: acquiring related companies  Conglomerate: acquiring unrelated companies

Vertical Integration  Growth by acquiring companies backwards or forwards in the supply chain  Forwards: acquire distributors  Backwards: acquire suppliers