Business Growth Strategies: Internal and External Expansion

Internal Growth

Productive investments within the company, resulting in their increased production capacity. Also called asset growth.

Specialization

Aims to improve current products or services and achieve an increase in sales volume. According to the Ansoff matrix, it is presented in three ways:

• Market Penetration: Increase the company's participation in the market with improved products.
• Market Development: Introduce new company products into new markets.
• Product Development: Company growth is based on offering new products in existing markets.

Diversification

Characterized as an expansion strategy of the company that takes place when developing new products and new markets. Following Ansoff, there are several types:

• Horizontal Diversification: Growth is developed through the creation and delivery of improved products that can complement or substitute existing ones.
• Vertical Diversification: Expanding the supply of complementary products or those belonging to the same sector. The company can also become its own supplier or customer.
• Concentric Diversification: Occurs when the company decides to produce and sell new products in similar or different markets.
• Conglomerate Diversification: Happens when products and new markets are unrelated.

External Growth

Carried out by merger, acquisition, participation, and cooperation with existing companies. Also called financial growth.

Mergers and Acquisitions

• Merger: A process of concentration governed by law. A merger is the dissolution of two or more companies.
• Absorption: One company buys the assets of another and integrates them into its own, valuing the acquired assets more.
• Participation in Companies: A set of actions to achieve desired control over the investee.

Cooperation

Aims to eliminate competition that would normally exist. There are four types:

• Franchising: A particular type of cooperation between firms. There are two figures: the franchisor (product owner) and the franchisee (who gets the business idea).
• Outsourcing: Cooperation is formalized through an agreement between a contractor and a subcontractor, where the contractor makes the subcontractor responsible for obtaining certain services.
• Consortia: Cooperation between several contracting companies leading to the creation of a new company responsible for studying and promoting new ventures (e.g., Google).
• Joint Venture: Cooperation between two or more companies involved in an investment agreement to carry out various economic activities, such as the production of goods.