Growth Strategies to Achieve Competitive Advantage - Essay Example

Growth strategies to achieve competitive advantage: A Case study of XYZ Power Utility pursuing growth objectives Table of Contents Abstract 2 Introduction 2 Literature Review 3 Proposed Methods 5 Reflections 7 Conclusion 8 References 9 Bibliography 10 11 Abstract Adopting growth strategies is one of the biggest challenges for any business organization irrespective of its nature. This paper is all about possible growth strategies for the XYZ power utility company which owned by the government company based in a developing state of southern Africa. There are various strategic models like McKinsey model, Ansoff model that could be followed by the company in the process of adopting growth strategy. The paper analyses all the possible models that could be followed for this company. McKinsey and Ansoff are the two models that would be effective in the context of XYZ power utility company. The paper include a detail analysis of these two models and their implications in this case. Introduction Business growth is nothing but a double edged sword. If it is well managed and properly controlled, it would definitely provide remarkable rewards to the shareholders as well as to the leaders of the emerging organization. But when growth is uncontrolled and poorly planned it might results to financial misery and failure (Sherman, A. J. July 13 2006). Effective planning and management is crucial for sustaining the growth for a long time. Lack of effective planning and management would result to attack by the creditors, competitors, creative takeover specialists and hostile employees. Central question that need to be asked regarding this topic is what strategies ought to be followed in facilitating growth. Apart from this central question there could be various sub questions which would be associated with the business structure, availability of the capital, time and market condition. The central question focus on the strategies that is required for growth. Without proper strategy no management can keep the organization in the growth track. These strategies would be based on the structure of the organization, availability of the capital, time and market condition. As a result these factors would be the main focus of the sub questions. Literature Review XYZ power utility company is operating in a developing state of Southern Africa. Company is a state operated company; as a result there is lack of efficiency in company’s operation. There could be various growth strategies for such a company. Ansoff matrix is one of the most useful growth strategies which are widely used in the industry. [Source: Tutor2u] There are four strategies in Ansoff matrix. These are market penetration, product development, Market development, and diversification. In market penetration strategy organization tries to grow with its existing product within its existing market. In product development strategy firm introduces a new product in the existing market. In market development strategy firm identifies a new market for its existing product and finally in diversification strategy firm introduce a new product in a totally new market (Valuebasedmanagement.net, n.d.). Apart from Ansoff matrix, company can adopt McKinsey’s model in the process of adopting growth strategy. McKinsey model is quite similar to Ansoff model but here growth strategies are adopted by looking from a different perspective. According to McKinsey model growth strategies are based on operational skills, growth skills, privileged assets and special relationship. This model also tells that there are seven ways of attaining growth. These are increasing sales of the existing products in the existing market, offering existing products to the new customers, introducing new products and services, adopting new delivery methods, targeting new geographic areas, establishing a new structure and finally identifying new competitive areas. In this case of XYZ power utility company McKinsey’s growth model would be very effective. A detail analysis of this model in regards to this company is provided in the following sections. Apart from Ansoff and McKinsey models PEST and SWOT analysis would be required to perform in order to find out proper growth strategies. SWOT analysis refers to an extensive analysis of company’s external and internal environment (Learnmarketing, n.d.). XYZ’s internal strength, weaknesses and external opportunities and threat would be determined by the SWOT analysis. PEST analysis would provide a detail understanding of political, economical, social and technological environment XYZ’s operating countries. Apart from these analysis Porter’s five forces analysis would be effective for XYZ utility company for determining its competitive environment. Proposed Methods It is already mentioned that there are various strategic models for adopting proper growth strategy. McKinsey’s growth pyramid is one of the most useful strategic model in the context of XYZ electric supply company, because by using this model the company would have several strategic options. Each of these options is needed to be analyzed in order to decide the best suited options. But analyzing various options and making decisions on them would require extensive market survey in order to gather all the required data to analyze and make decisions. Apart from this market survey, company also needs to perform a quantitative marketing research which would provide some concrete information to the company. Market survey and quantitative marketing research are two proposed methods in the context of XYZ power Supply Company. These methods are widely used in the industry as they provide the required information effectively. This information is further analyzed for making strategic decisions. There are various tools like questionnaire, short interviews etc. that would be used in these two methods of research. According to McKinsey model organization can achieve growth by considering various business opportunities which are based on different dimensions (Tutor2u, n.d.). It is clear from the model given below that there are seven ways to achieve growth. XYZ electricity supply could follow these strategies for business growth. But all of these strategies would not be effective for the organization. Each of these strategies and what kind of data would be required for these strategies are explained below. Analysis of each of these seven strategies would require different data. XYZ would need to find out whether there is any further opportunity of increasing sales within existing market. A proper market survey of the existing market would provide enough information regarding this. XYZ would also require finding out whether there is any opportunity of creating a new customer base with the existing products and services. It would also be important to find out what kind of new products and services customers require today, what is the market trend etc. A questionnaire based market survey and a general market survey would be appropriate for gathering required data. The company would also require exploring new opportunities in terms of new geographic areas. Reflections There could be various difficulties in practice while adopting the growth strategies using McKinsey model and Ansoff matrix. These difficulties could be in the process of gathering data. Like any other market research, there could be problem regarding accessing people, there could be problem in questionnaire etc. Since the company is operating in southern Africa, there could be even problem of shortage of data which is required to perform the analysis. If each of the seven growth strategies of McKinsey model are analysed in the context of XYZ electricity Supply Company then it would be clear that only two strategies would be practically effective for the company. Since XYZ is electric supply company it would be difficult to increase business within the existing market and existing customers. Electricity is not consumed by individually like any consumer goods, as a result places where already have this service of the company would not require any such service in near future. As a result XYZ would likely to difficulties to increase business in the existing market. But the company can target new customers in the existing market for achieving growth. Probably the best growth strategy for XYZ would be to provide new value added products and services. XYZ is only involved only in core electricity supplying. As a result providing some additional services would definitely act as a driver of growth. Company, with the help of these additional services can attract new customers within its own territory. This extra services could in the form of quick customer services, online bill payments etc. Adopting new delivery approaches could be another growth strategy but in case of XYZ it would be a difficult process, because it is a government owned company and adopting new delivery method would involve lot of political and legal complications. Expanding into new geographic areas could be an effective growth strategy but being a government owned company it might face some problem in adopting this strategy as there could be some legal problems. XYZ might have to face intense competition if it decides to enter into new geographic areas. Moreover there would be lot cost involved in it. As a result considering all the problems that are likely to occur providing new services and targeting new customers would be the two most effective growth strategies for XYZ electric supply company. Conclusion Every business organization needs to focus on its growth strategies as it is the only way to stay ahead in the business for long time. XYZ power utility company is a government owned company. As a result there might be some problems in the process of appropriate growth strategies. There are various strategic models like McKinsey model, Ansoff model that could be used by the company in the process of making any strategic decisions regarding company’s future growth. It is quite clear from the above discussion that McKinsey model would be the best model for XYZ to follow. References Fulmer, R. M. Vicere, A. A. 1998, Leadership by design, Harvard Business School Press Learnmarketing, No Date, SWOT analysis, [online] Available at: http://www.learnmarketing.net/swot.htm [Accessed on November 26, 2009] Kotler, P. Keller, K. L. 2007, Marketing Management, Pearson Education Sherman, A. J. July 13 2006, Choosing the Right Growth Strategy, American Management Association, [online] Available at: http://www.amanet.org/training/articles/Choosing-the-Right-Growth-Strategy.aspx [Accessed on November 26, 2009] Tutor2u, No Date, mckinsey growth pyramid, [online] Available at: http://tutor2u.net/business/strategy/mckinsey_pyramid.htm [Accessed on November 26, 2009] Valuebasedmanagement.net, No Date, Product/market grid Ansoff business unit strategy model, Product/market grid – Ansoff, [online] Available at: http://www.valuebasedmanagement.net/methods_productmarketgrid.html [Accessed on November 26, 2009] Bibliography Govindarajan, V. Trimble, C. No Date, Ten Rules for Strategic Innovators: From Idea to Execution, Themanager.org, [online] Available at: http://www.themanager.org/Knowledgebase/Strategy/Growth.htm [Accessed on November 26, 2009] International Council for Small Businesses, No Date, Ansoff Matrix, [online] Available at: http://www.icsb.org/wiki/index.php?title=Ansoff_Matrix [Accessed on November 26, 2009] Internationalselfhelp, No Date, Ansoff Matrix, [online] Available at: http://www.internationalselfhelp.org/self-help/analysis/ansoff-matrix [Accessed on November 26, 2009] Tutor2u, No Date, ansoff's product / market matrix, [online] Available at: http://tutor2u.net/business/strategy/ansoff_matrix.htm [Accessed on November 26, 2009] Wisconsin School of Business, No Date, Porter's Five Forces, Assessing the Balance of Power in a Business Situation, [online] Available at: http://research3.bus.wisc.edu/file.php/139/Toolkit/Content/Porter_forces_1.pdf [Accessed on November 26, 2009] Read More