Chapter 8
Growth Strategies
Objective: to determine the direction within the firm’s current
products and markets or growth in related or unrelated
businesses.
Grand or Growth Strategies
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For a multi-business firm (both corporate and business
level), the primary focus of strategic marketing is on
grand (or growth) strategies which concern the
products and services that will be offered, the market
or markets for which the firm will compete, and the
timing of new product/service introductions or
market additions (both customer segment and
geographic markets). These strategies are so important
that they determine how the business will be known.
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For a single business (business level strategies), the
primary aims of strategic marketing are (1) to
maximize the firm’s position (image in the mind’s of
consumers relative to competitors), (2) to determine
what factors are necessary for the firm to attain its
strongest position, (3) to allow the firm to specialize in
an area where it can either be the best of its
competitive segment or one of the best, (4) to provide
managers with a target on which their efforts can be
focused, and (5) to continuously learn from experience
and seek ways of improving the firm’s position.
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There are normally very few changes in a firm’s grand
strategies, but there may well be many minor ones. E.g.
a midscale hotel would not consider to upgrade to a
luxury one, but it would consider to add new customer
or market segments, find new ways of promoting to
existing customers, renovate the hotel, or add new
products or services. Based on the firm’s grand
strategies, marketing strategies and action plans are
determined depending on their time frame. The time
frame for the plan and its implementation will vary by
need and importance. Some areas of the plan would be
focused on the immediate future; others would be
planned for several years in the future.
Steps Involved
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When a firm decides to incorporate any form of grand
strategies into the plan, the firm also needs to decide
“what” specific marketing mix variables (product, price,
place, promotion) will be used to accomplish them. The
marketing mix variables in this context are referred to
as “strategies” since they guide the strategic direction
of the firm. However, then these strategies are required
to be turned into “tactics”; “how” exactly they will be
used, which are known as marketing action plans.
Intensive Strategies
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Intensive strategies are concerned with improving the
performance of existing businesses. Here, most
activities relate to increasing the frequency of present
customers, increasing their average amount spent, or
attracting new customers (either competitors customers
or those from a different market segment).
1. Concentration or penetration – focusing on the current market
2.
3.
with the current product
Product and service development – focusing on the new
products and services targeted at existing markets
Market development – focusing on new markets (customer
segment or geographic markets with existing products)
Concentration or Penetration
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For existing products and services in existing markets;
selling more of present products or services (or slightly
modified versions) to the existing customer base, or
simply doing a better job of what is currently being
done.
Advantage of concentration is that the company is
doing what it does best.
Disadvantage; if a company becomes overconfident in
its present product/service mix, it may lose touch with
shifts in demand or the environment which may require
improvements. This may cost the firm a lot.
Product and Service
Development
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This includes the development of new or modified
products/services for “existing customers”.
Most often, product or service additions are
modifications of existing offerings. If competition is
strong or the product/service has reached the end of
its life cycle, then an entirely new or innovative
product/service may be needed.
However, when a company adds a new
product/service, it may also add customers from other
market segments as well.
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When the goal of new products/services is specifically to
bring in new market segments, it is called “diversification”,
or more properly “intensive diversification” (diversifying
the product offering).
When a fine dining restaurant or luxury hotel adds almost
any product/service to its product/service mix, this could
be considered a pure product development, since these
firms generally have only one target market, and are not
usually concerned about attracting new ones.
However, keep in mind that the primary goal of product
development is that increasing brand loyalty of “existing
customers” by developing new products/services.
Attraction of new market segments would be a secondary
purpose.
Market Development
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This includes selling existing products to new customer
segments.
This is done in two ways: the new customers would be
new market segments (market segment development) or
customers in new locations (geographic development).
When a firm opens new stores in new cities, the strategy
is considered to be market development, however, when
the firm opens new locations in the same city, in trade
areas with similar target customers, the strategy would
be considered penetration – trying to sell more to
existing customers. The firm is trying to penetrate its
market.
Market Segment Development:
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Market targeting; the primary purpose of segmentation is
to learn enough about the various segments of the
market to be able to determine which will be have good
potential.
Selecting target markets; the decision must be made on
whether or not to target one market, a new markets, or
several markets.
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Single-market targeting: allows the firm to focus on just one
market. The reason to focus on a single market is that the firm
would decide to be the “best” alternative for the target group.
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Another reason would be is to locate a niche which will
probably increase in importance in the future.
Selective targeting: or targeting a limited number of markets,
expands the business’s opportunities and limits its dependence
on a single market (to fill rooms or seat at off-peak times).
Extensive targeting or full marketing coverage: is attempting to
gain a large market share by targeting the majority of the
potential users of one’s products/services. This mass-market
targeting strategy can be approached in two ways. (1)
differentiated market targeting: developing different concepts
for each market segment within a product or service category.
E.g. different concepts of chains. (2) undifferentiated market
targeting: offering one product/service to all market segments.
The objective in that is to reduce costs by focusing on larger
markets.
Geographic Market Development
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This concerns opening new locations of the same
business in other areas – generally other cities.
The new geographic markets would normally be
located and identified in the customer analysis, and
occasionally in the competitor analysis.
Companies should be careful to expand too quickly out
of one’s area of strength. For restaurants, it is generally
better to focus on penetrating a single geographic area
first and then to expand to nearby areas.
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For hotels, the decision to expand to new geographic
locations depends on whether the hotel gets the
majority of its business from walk-ins or reservations.
Chain hotels with excellent name recognition and
reservation systems can open a hotel in almost any
location that is in need of more or newer rooms. Small
chains or independents should generally penetrate their
current market first, then focus expansion on nearby
markets.
Grand Strategy Selection Matrix
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Grand strategy selection matrix can be used to
graphically display grand strategy options or to
inspire brainstorming.
With the grand strategies, the main objective is
to increase sales. There are three primary ways
to do this;
by raising average checks
 by getting customers to come back more often
 by attracting new customers
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Diversification
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This involves developing a new product for a new
market.
It concerns adding businesses that will increase the firm’s
competitive advantage.
There are two ways to diversify;
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Extensive diversification: refers to opening a new business
outside the current business of the firm. Here the categories
include horizontal, concentric, and conglomerate
diversification.
Intensive diversification: is either getting into a new business
similar to the existing business of the firm, into one within the
same industry but in a different segment, or into a new type of
business altogether.
Horizontal Diversification:
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This category includes opening another business
that competes for the same customer, or
purchasing a primary competitor; basically
getting into a business in the same level of the
marketing channel. E.g. a midscale hotel
purchasing another midscale hotel, or a fastfood restaurant chain acquiring a competing
fast-food chain.
Concentric Diversification:
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This involves the acquisition of a business that
is related to the hospitality business or that
would use similar skills. E.g. a restaurant buying
a specialty grocery store. Horizontal
diversification and vertical integration could be
included in this category.
Conglomerate Diversification:
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This category includes the purchase of unrelated
businesses. This strategy rarely works
successfully because of the lack of synergy of
skills. E.g. a restaurant owner is better to stay
away from printing business.
Vertical Integration:
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This consists of opening or purchasing a supplier to
one’s business – backward vertical integration – or
purchasing an organization that is a customer to one’s
business – forward vertical integration. The act of
integration is counted as a type of diversification, since it
involves acquisition of a new business or it involves
combination of two or more components of the
marketing channel. There are many ways of utilizing
backward integration. E.g. a restaurant or hotel gets into
the bakery, linen, or produce an equipment. Forward
integration is not common in hospitality. E.g. a hotel
purchasing a travel agency or reservation system.
Other Grand Strategies
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Often, firms that want to pursue diversification
or integration strategies do not have adequate
funds or expertise. Common options include;
Joint venture; is the combining of resources with
another company for mutual benefit
 Strategic alliance; occurs when a smaller company,
generally with expertise, time, and little money, joins
with a larger company with money or available
credit, business background or knowhow.
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Franchising; is the licensing of others to operate a
business using the firm’s operating system and brand
name.
 Management contracts; include a variety of
agreements between those that have the expertise
and reputation for successfully operating a particular
type of business and those that own the business.
 Acquisitions; are basically the outright purchase of
another business that may continue to operate under
its own name.
 Mergers; occur when two or more firms are
combined to create one firm.
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However, when serious problems exist or there
is an opportunity to sell the business at a profit,
the following strategies should be considered.
Turnaround; when a major effort is required to
correct the downward direction of sales, profits, or
operational performance, a form of concentration
strategy referred to as a turnaround should be
implemented.
 Divestment; selling the business as an ongoing
concern. It is best for a business to be sold, while it
is operating.
 Liquidation; selling the business in parts.
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