creasing sales force activities.

This strategy is moderately

risky and entails nding new
markets for existing products/
services. It is appropriate when
the core competency of the
company lies in its product/
service.
Companies follow this strat-
egy by targeting different ge-
ographical markets at home or
abroad using different sales
channels (such as e-commerce
or modern trade) and targeting
different groups of people
(based on age, gender, demo-
graphics or psychographic
factors).
For example, Nike was rst
known for running shoes. Lat-
er, it moved into shoes for bas-
ketball, tennis, football and
now, most leading sports shoe
companies have re-segmented
the whole market to address
the casual user who, inciden-
tally, is the largest customer
group. GSK has taken Horlicks
from being a bedtime drink in
the UK to an all-day, all-ages
drink in India.
PRODUCT DEVELOPMENT
This strategy is also moderate-
ly risky and involves develop-
ing new products/services for
existing markets/customers. It
is often most appropriate
where the strength of the busi-
ness lies in its relationship with
customers.
Crisil (a subsidiary of S&P)
has used this strategy to start
offering research and analytics
services to its nancial services
Shyam Pattabiraman
N
othing excites
markets more
than growth plans
announced by list-
ed companies but investors
need to understand that every
growth strategy comes with a
certain degree of risk, which is
what separates expectation
from actual results at the end of
the day. One of the oldest, yet
most widely used framework
for evaluating growth strate-
gies, is the Ansoff matrix (refer
table).
MARKET PENETRATION
This is the least risky strategy
since it merely involves selling
more of the same products/
services to the same customers
or nding new customers with-
in existing markets.
For example, educating peo-
ple about brushing twice daily,
attending to sensitive teeth,
shaving every day or washing
hands often could potentially
increase the sale of tooth-
pastes, razors and handwash-
es/sanitisers.
GSK Consumer, Colgate and
HUL continue to use this strat-
egy to increase market share.
In the wristwatch business, Ti-
tan has managed to increase
market penetration by encou-
raging the trend of owning
multiple wristwatches for vari-
ous occasions.
A few ways in which compa-
nies increase market penetra-
tion are by advertising,
introducing loyalty schemes,
launching price or other spe-
cial offer promotions, and in-
clients. L&T has expanded to
offer a wide gamut of infras-
tructure/construction/core
engineering-related products/
services to clients.
DIVERSIFICATION
This strategy is considered
high risk since it involves mul-
tiple unknowns, that is, both
getting into entirely new mar-
kets and entirely new products.
The common risks seen in get-
ting into unrelated businesses
is lack of synergy, execution
risk and sub-optimal resource
utilisation so much so that
markets usually discount the
valuations of such diversied
listed entities.
However, a few business
groups such as Virgin and Tata
have deed the perception by
using their brands as the large-
st synergy providers. Their
strong brands have helped in
diversication. These con-
glomerates have also managed
to cultivate a strong managerial
talent pool that is fungible
across their companies.
M&AS
In addition to these growth
strategies in the Ansoff matrix,
companies often consider ac-
quisitions horizontal, for-
ward or backward. But despite
the expectation that acquisi-
tions could fast-track growth,
they are usually fraught with
risks such as winners curse
(over-paying) and post-merger
integration. Statistics estimate
that nearly 80 per cent of merg-
ers and acquisitions fail to de-
liver value. Needless to say,
ex-ante all companies that pur-
sue acquisition-led growth be-
lieve they belong to the
remaining 20 per cent.
Chasing growth
A company can
expand using
various strategies
such as increasing
market penetration,
diversifying
products and
through M&As.
(The author is a business
consultant. Feedback can be sent
to perspective@thehindu.co.in)
Nike... Making strides to deliver value. Reuters