Strategic Business Growth: Planning, Downsizing, and Corporate Culture

Assessing Growth Opportunities

Assessing growth opportunities includes planning new businesses, downsizing, and terminating older businesses. If there is a gap between future desired sales and projected sales, corporate management will need to develop or acquire new businesses to fill it.

The scope of strategic planning involves:

• Developing new business opportunities.
• Downsizing and eliminating older businesses.

The Strategic Planning Gap

This is a strategic planning gap for a major manufacturer of blank compact disks called Musicale (name disguised). The lowest curve projects the expected sales over the next five years from the current business portfolio. The highest describes desired sales over the same period. Evidently, the company wants to grow much faster than its current businesses will permit. How can it fill this strategic planning gap?

Management can pursue three primary options to bridge this gap:

1. Identify opportunities for growth within current businesses (Intensive Opportunities).
2. Identify opportunities to build or acquire businesses related to current businesses (Integrative Opportunities).
3. Identify opportunities to add attractive unrelated businesses (Diversification Opportunities).

Intensive Growth Strategies

Corporate management’s first course of action should be a review of opportunities for improving existing businesses. One useful framework for detecting new intensive growth opportunities is the Product-Market Expansion Grid. It considers the strategic growth opportunities for a firm in terms of current and new products and markets.

Ansoff’s Matrix outlines four strategies:

• Market Penetration Strategy
• Market Development Strategy
• Product Development Strategy
• Diversification Strategy

Integrative Growth Strategies

A business can increase sales and profits through backward, forward, or horizontal integration within its industry.

Diversification Growth Strategies

Diversification growth makes sense when good opportunities exist outside the present businesses—the industry is highly attractive and the company has the right mix of business strengths to succeed.

Downsizing and Divesting Older Businesses

Companies must carefully prune, harvest, or divest tired old businesses to release needed resources for other uses and reduce costs.

Organization and Organizational Culture

A company’s organization consists of its structures, policies, and corporate culture, all of which can become dysfunctional in a rapidly changing business environment.

Defining Corporate Culture

Corporate Culture: The shared experiences, stories, beliefs, and norms that characterize an organization.