Growth strategies of the firm

An important function of marketing is to drive growth in sales and revenue for a company. Marketing is especially adept at doing so for a new product with many competitive advantages and much potential. Good marketing can help to induce trial and promote word of mouth and diffusion. Marketing in more mature markets can be more challenging. In some cases, fighting over market share is less productive than expanding the size of the market as a whole.

1. GROWTH STRATEGIES

Chapter 2 introduced how companies can grow through expansion with new products and new markets, the detailed focus of Chapters 8 and 15. Along those lines, Phil and Milton Kotler stress the following strategies:²

• Grow by building your market share
• Grow by developing committed customers and stakeholders
• Grow by building a powerful brand
• Grow by innovating new products, services, and experiences
• Grow by international expansion
• Grow by acquisitions, mergers, and alliances
• Grow by building an outstanding reputation for social responsibility
• Grow by partnering with government and NGOs

Consider how Under Armour has grown in recent years.³

UNDER ARMOUR In his days as a University of Maryland football player, Kevin Plank had been dis­satisfied with cotton T-shirts that retained water and became heavy during practice. Under Armour was born when, with $500 and several yards of coat lining, Plank worked with a local tailor to create seven prototypes of snug-fitting T-shirts that absorbed perspiration and kept athletes dry. With a focus on performance and authenticity and backed by intense, in-your-face advertising, the brand quickly became a favorite at high schools, colleges, and universities, later introducing a wide range of athletic apparel as well as football cleats, basketball shoes, and running shoes. By 2009, it was squarely in competition with formidable opponents Nike and Adidas. A traditionally male-oriented brand, Under Armour soon rec­ognized the value of a new target demographic—women. Not wanting to fall back on a “shrink it and pink it” approach, the company united its marketing, product design, and consumer insights departments to develop focused solutions for women. The fully integrated “What’s Beautiful” media campaign—with its tagline urging women to “No Matter What, Sweat Every Day”—and the success of its footwear lines have helped the women’s division become the fastest-growing Under Armour business. The company is also looking to expand internationally, focusing initially on Europe and Latin America. While Nike and Adidas both generate about 60 percent of their revenue outside their home regions, Under Armour generates only 6 percent outside North America, with very little of that in fast-growing emerging markets like India, China, and Brazil.

2. GROWING THE CORE

Although many different growth strategies are available to firms, some of the best opportunities come from grow­ing the core—focusing on their most successful existing products and markets. Marketers must avoid the trap of thinking the “grass is always greener” and overestimating the upside of new ventures that stretch the company into uncharted territory.

Often a firm’s unique capabilities don’t effectively translate to a new industry. Mattel’s disastrous acquisition of the Learning Company in 1999 failed in part because the toy company’s expertise was not as valuable in the interactive-learning market. Further, an industry that is red-hot today may be ice-cold tomorrow.⁴

Growing the core can be a less risky alternative than expansion into new product categories. It strengthens a brand’s credentials as a source of authority and credibility and can yield economies of scale. Through improved revenues and lower costs, growing the core can also lead to greater profits. UK marketing guru David Taylor advo­cates three main strategies, citing these examples:⁵

1. Make the core of the brand as distinctive as possible. Galaxy chocolate has successfully competed with Cadbury by positioning itself as “your partner in chocolate indulgence” and featuring smoother product shapes, more refined taste, and sleeker packaging,
2. Drive distribution through both existing and new channels. Costa Coffee, the number-one coffee shop in the United Kingdom, has found new distribution routes using drive-through outlets, vending machines at service stations, and in-school coffee shops.
3. Offer the core product in new formats or versions. WD40 offers a Smart Straw version of its popular multi­purpose lubricant with a built-in straw that pops up for use.

Many firms are seeking success by focusing on their core businesses. London-based Aegis Group sold market research firm Synovate in order to focus on becoming media and digital communciation specialists.⁶ Levi Strauss phased out its Denizen brand in Asia to focus on its core Levi’s brand.⁷

Growth strategies are not necessarily “either/or” propositions. A focus on core businesses does not mean forego­ing new market opportunities. Vancouver, Canada’s Fortuna Silver Mines has focused on its two fully owned, fully integrated silver mines in Peru and Mexico to spur organic growth while looking for a third mine to drive further growth.⁸ And sometimes the core business is just not expandable. With personal computer sales steadily declining, leading PC maker Lenovo began to look at smart phones as a new source of business for its brand.⁹

Source: Kotler Philip T., Keller Kevin Lane (2015), Marketing Management, Pearson; 15th Edition.