Growth Strategies are basically about decisions related to allocating available resources among different target markets and retail formats, transferring resources from one set of merchandise to others and managing and nurturing a portfolio of business in such a way that the overall organizations objectives are obtained.
Growth is a positive and reflects that the firm is delivering customer value. Yet, there are many paths to take to drive growth. At its most basic level, they can be evaluated as penetration, expansion, development, and diversification. The easiest way to think about this is by imagining a simple matrix.
Firms can grow with their current customer target and current business by increasing penetration levels. For retailers this means capturing a larger share of their shoppers’ spending by increasing the frequency of trips or size of transactions. What’s important to understand here is that the firm stays within its current scope of capabilities, and customer target.
- Market Penetration:
A market penetration opportunity exists when a retail company penetrates its existing market with same product range but with attractive offers. Under market penetration, retailers usually try to attract competitors’ customers or those who come to store but do not buy merchandise.
The underlying objectives are:
(i) To increase/broaden the existing customer base
(ii) To gain competitive edge
(iii) To restructure a market that has reached its maturity stage in its product life cycle
(iv) To increase the usage of merchandise offered by its existing customers; for example, by offering loyalty programmes.
- Market Expansion:
A market expansion opportunity exists when a retailer sells the same product range with no/some alteration in the new market. It means that merchandise will remain the same but will be marketed to a new customer group.
How to expand market:
(i) By searching a new market to sell, either by exporting or by entering into a totally new market.
(ii) By introducing new product packaging or dimensions with regard to colour and size.
(iii) By using new means of distribution and selling.
(iv) By developing different price policies for different customer groups.
- Format Development:
Retail format opportunity is the name given to a strategy where a business offers a new retail format with some sort of new retail mix to the same target market. For example, Amazon.com began selling electronic items such as CDs, videos, pen drives and other electronic items in addition to books and literature.
In India, one example of retail format development opportunity is when ‘Big Bazaar’, a leading retailer started providing home services like plumber, electrician, furniture, kitchen interiors besides general merchandise. The main advantage of such retail strategy is that instead of developing a new retail format, here retailers offer new goods and services in addition to their regular merchandise that comparatively involves less investment.
In retailing, diversification is a much used and much talked about set of strategies. A diversification strategy may involve related or unrelated dimensions. Essentially, diversification opportunity involves a substantial change in the business definition individually or jointly in terms of customer functions, alternative technologies or customer groups.
In short, a diversification opportunity is when a retailer introduces a new retail format directed toward a market segment that is so far not served. Diversification may take form of related or unrelated diversification.