Types of SME Growth Strategies - Essay Example

Strategies are defined as the long term plans set up to ensure proper operation of businesses. They act as game-plans for business enterprises and are important for the future wellbeing of any firm whether it is an SME or bigger.  

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2.3.3.4.1 Mintzberg et al. strategies

Mintzberg et al. (2003) defines a strategy by incorporating five P’s:

i. Plan – The stage includes the setting up of long-term objectives and goals and also gathering all the necessary equipment and resources required to implement the goals (Kozan, Oksoy and Ozsoy, 2006).

ii. Ploy – Here the competitive firms are considered in the setting up of plans mainly aimed at outdoing the competitors in the market (Mintzberg et al., 2003).

iii. Pattern – This incorporates the main themes of following the trend of occurrences that affect the business operation, which are not preconceived but are tackled according to the consistencies they show in their happenings (Raddats and Easingwood, 2010).

iv. Position – This focuses on its identity and position to the external environment of the business; the firm sets out to attain a unique position in the market as compared to other firms in the same external environment.

v. Perspective – This concentrates on the internal environment of a firm; the individual’s and organizational mindset is considered such that both are expected to be of a common perception in terms of objectives and goals set out by the firm (Mintzberg et al., 2003).

2.3.3.4.2 The Ansoff Matrix strategies

The matrix is also called the Product/Market Expansion Grid and is the most applied tool for determining the best strategy a specific organization can apply for its growth. The matrix relates categorized growth strategies to a company’s history and expectations of growth (Bachmeier, 2013). Even though the matrix only uses products and markets as the major risk assessment factors, the matrix gives a novel and simple way of addressing growth risks for any organization with maximal turnover. Notably, this matrix is based on the notion that, the most suitable strategy for growth is generated by the decision of selling a new/old product in a new/old market. Figure 4 represents the Ansoff Matrix grid.

 Figure 4: The Ansoff Matrix 

According to Ansoff Matrix (figure 4), the risks increase in the business as it transits from one quadrant to another: the least risky quadrant is the market penetration and the most risky quadrant is the diversification segment (Bachmeier, 2013). The four quadrants represent different organizations status in terms of market and products whereby each quadrant is associated with various strategies to aid growth which are susceptible to different risks and also different opportunities (Moussetis, 2011).

Ø Market Penetration

The strategy is associated with minimal risks since the firm only has to keep selling the same product/service in the same market (Bachmeier, 2013). The strategy thus only needs a maintaining of sales (share) within the market. In most cases, the market in this scenario is gradually growing (Moussetis, 2011). The strategy can thus involve introduction of loyalty schemes, special offers so as to retain and increase customers; buy a competitor company in the same market; or disregard or invest in production of certain products based on their turnover.

Ø Market Development

This strategy involves selling of the same product in a different (new) market venture (Bachmeier, 2013). For instance, the firm may opt to sell in new markets geographically i.e. foreign or local; the firm may opt to employ new direct or online sales channels; or opt to segment the market according to the customers’ age, demographic aspect or gender (Moussetis, 2011).

Ø Product Development Strategy

This strategy involves introduction of a new product into an existing market. In this case, the firm might decide to repackage or develop a variant of a given product such that a related product is developed to increase the sales (Bachmeier, 2013). Service industries such as some of the wedding industries could improve the quality of their services and also the delivery time.

Ø Diversification

In this case, totally new products/services are introduced into completely new market ventures (Bachmeier, 2013). Consequently, the strategy is very risky as it limits the use of initial expertise or even the achievement of economies of scale. However, the firm gains the advantage of having an increased chance of operation even if one of the ventures fails. Mostly, merger and acquisitions result to the need for diversification (Thakor, 2011).

2.3.3.4.3 Miles and Snows Strategy

 This strategy is also referred to as the Prospector-Analyzer-Defender-Reactor strategy (Kess & Isoherranen, 2014). In this case, the strategy is based upon a classification that has everything to do with the following challenges that face a business organization: Entrepreneurial, the engineering and the distribution administration. The three challenges affect the organization’s choice of technologies, the structure and policies of the organization and the product-market framework of the organization. How the organizations respond to these challenges is the basis of this strategy.  

As Kess and Isoherranen (2014) review the strategy, they simplify it into four major responses. These are:

ü Defenders – This entails the organizations that majorly phase the entrepreneurial challenge as they are at their best in stable business environments. Their major competition is based only on the stability of the products or services they produce and therefore they tend to dwell much on the quality and the price of what they offer to the market.

ü Prospectors– this set of industries is also faced by the problem entrepreneurial set of challenges. However. Their major challenge is concentrated in the product-market preferences and thus such organizations are majorly focused on production of new commodities or offering of new services in addition to venturing into new markets.

ü Analyzers– this genre of industries are majorly affected by the entrepreneurial challenges which affect both the prospectors and the defenders. In this case, the organizations in this category set out to maintaining proper sales in their existing markets and at the same time seek to venture into producing new products and at the same time enter into new markets.

ü Reactor– this genre of organizations, though hypothetical, tends not to be proactive to any problems that they encounter. In this case, they only come up with a strategy of dealing with a challenge when it arises. Their strategy is therefore totally dependent on the situation they face at any specific time. The strategy has been considered to be inappropriate for any business organization in the current business world.

2.3.3.5 Critical review of the strategies

The Ansoff Matrix strategy is a consideration that is purely based upon the only two factors of the business environment (Bachmeier, 2013). The Miles and Snow’s Strategy also, on a comparative basis, is based on the product and market factors which are part of a whole array of factors in the business environment (Blackmore and Nesbitt, 2012). Consequently, even though they are both simple to use during the strategizing of any business, they all tend to only provide solutions based on a shallow exposition of the business environment. They do not really consider the internal environment factors that affect a business let alone the external factors; they do not even consider other factors such as financial obtaining strategies. They are therefore prone to limitations for some sets of organizations.

 On the other hand, the Mintzberg et al. strategies are strategies which give a good framework for dealing with the challenges that the business can encounter based on major internal and internal factors (Mintzberg et al., 2003) depending on what result one wishes to obtain for the organization. However the Mintzberg et al. strategies are not simplified and there is no given methodology of applying them; they are quite generalized.

In a nut shell, the three strategies are all applicable to most organizations. Each has its own advantages and disadvantages. Therefore, on a critical level, all the strategies are better off if applied in conjunction with each other. For instance, an organization can consider applying the Mintzberg et al. and the Ansoff Matrix strategies which will definitely develop a better and stronger and even more efficient strategy of fueling the growth of his or her business organization.