Business Growth Strategy Framework – May 24, 2017October 23, 2018 Lars de Bruin 0 Comments Ansoff, Ansoff Matrix, BCG Matrix, Hambrick and Fredrickson, Porter, Porter’s Five Forces, Strategy Diamond, Treacy and Wiersema, Value Discipline
Business frameworks are useful tools that help you analyze business problems and structure your thinking. Strategy consultants and business analysts often use these frameworks to clearly communicate their recommendations to their clients. There are thousands of scholarly articles that attempt to present innovative and useful frameworks in business, management, and strategy. This article covers the five most used and most useful frameworks in the business world today, according to strategy consultants.
Business Growth Strategy Framework
Michael Porter’s Five Forces model is probably the best strategic framework out there. It is especially used in industry analysis. The five forces model helps determine how competitive an industry is based on five different factors: rivalry with existing competitors, threat of new entrants (potential competitors), threat of substitute products (substitutes), bargaining power of suppliers, and bargaining power of buyers. If these forces are strong, competition can be considered high. In such a case, a company may want to think twice before entering that particular industry. According to this framework, industries with less competition allow for higher margins and are therefore more attractive to enter. For more information and examples of using Porter’s Five Forces, click here.
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Unfortunately, Hambrick and Fredrickson’s Diamond Strategy has not received the attention it deserves. The Strategy Diamond is an attempt to explain what strategy is and is a good framework for identifying the various elements that make up a good strategy. According to this model, a strategy consists of five essential parts that must form a unified whole: Arenas, Vehicles, Differentiators, Staging and Economic Logic. Specific and deliberate choices must be made about what to do and, more importantly, what not to do for each element. In addition, the choices made in one element must reinforce and match the choices made in the other four elements. Only then can companies achieve a sound and sustainable strategy. More information and examples of using Strategy Diamonds can be found here.
The framework of the value discipline is built on the main message of Porter’s generic strategies (ie, companies should have a clear focus on what they want to be known for and what they want to be good at). If a company tries to excel in multiple (often conflicting) disciplines, it will likely end up somewhere in the middle. Treacy and Wiersema suggest three value disciplines that companies can choose to become market leaders: product leadership (offering the best and most innovative products), operational efficiency (lowest-cost products through cost-effective production process), and proximity to the customer (exceptional customer service and customer relationships). management). The choice of each discipline has enormous consequences for how the company should operate in terms of structure, process and culture. More information on value topics can be found here.
There are different ways to grow a business. Igor Ansoff identified four strategies for growth and summarized them in the so-called Ansoff Matrix. The Ansoff Matrix (also known as the Product/Market Expansion Grid) allows managers to quickly summarize these potential growth strategies and compare them to the risk associated with each. The four growth strategies are market penetration (offering more existing products in existing markets), market development (offering existing products in new markets), product development (increasing offering new products in existing markets), and diversification (launching new products in new markets). ) The idea is that every time you move to a new square (horizontally or vertically), the risk increases. More information on the Ansoff Matrix can be found here.
The Boston Consulting Group’s Product Portfolio Matrix (also known as the BCG Growth-Share Matrix) is designed to help companies consider growth opportunities by examining its product portfolio or business units to identify where to invest and where to divest. The matrix is divided into four quadrants based on two factors: market growth and relative market share. The four types of business units (or products) are dogs, question marks, cash cows, and stars. Many business units start as question marks with a relatively small market share in a high growth market. Depending on how well the unit and the industry do, it could end up as a Staror dog. Eventually as industry growth declines, the unit becomes a cash cow that can be ‘milked’ to invest in more promising businesses. The BCG Matrix is a powerful tool for portfolio analysis and corporate strategy. More information and examples of using the BCG Matrix can be found here.
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Together, these five frameworks cover the various objectives of strategic management consulting. For a more complete list of business frameworks, see this page. Let us know what your favorite business framework is in the comments section below, and maybe next time we’ll cover yours! The growth strategy or revenue growth case interview is a common type that you will see in your first round and second round. Roundtable interviews. This type of case interview can:
Your client, Coca-Cola, is looking for new opportunities to grow after years of flat growth. They hired you to determine the best way to grow.
In this article, we’ll cover a comprehensive framework you can use to build the different ways a company can grow. We’ll also show you the five steps you need to take to solve any growth strategy or revenue growth case.
The most common growth followed by companies is organic growth, which is growth by expanding production or engaging in internal activities. In other words, the company grows through its own capabilities and efforts.
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Growth in current sources of revenue is driven by either an increase in the number of units sold or an increase in the average price per unit sold.
Remember that changing prices affects the number of units sold, so it’s important to look at the net effect of price changes on revenue.
The first way a company can grow organically is by acquiring another company. It gives the acquiring company all the revenue generated by the acquisition target. In addition, there may be revenue ties that the acquiring company may realize.
Acquiring a company provides access to the distribution channels, customers, and products of the acquisition target. The acquiring company can increase revenue by cross-selling products, up-selling products, or bundling products.
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The advantages of the acquisition are that the company immediately increases its revenue. They also have full control over how they want to manage and operate the acquired company.
The main disadvantage is that acquisitions are expensive and there may be difficulties in fully integrating the acquired company.
In a joint venture, two or more companies enter into a business arrangement in which they pool resources and share the risk of undertaking a task. Each company in the joint venture is responsible for the profits, losses and costs associated with the project.
Joint ventures benefit companies because they can share resources, share expertise, and reduce costs due to scale. Additionally, joint ventures are cheaper than acquisitions.
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A disadvantage of a joint venture is that it takes time to generate revenue. Also, the company does not have full control over the operations of its partners.
A joint venture is a relationship between two or more companies that provides some type of benefit to each partner. It is slightly different from a joint venture because in a joint venture the companies do not necessarily combine resources or efforts. They want to connect with each other.
One of the advantages of a partnership is that it is often cheaper than a partnership because resources do not have to be contributed. Also, all partners benefit from their partners’ brands and customer access.
Similar to partnerships, one of the disadvantages of a partnership is that it takes time to generate income. Also, companies do not have full control over the operations of their partners.
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Follow these five steps and you’ll be able to tackle any growth or revenue growth strategy that comes your way.
The first step in solving any growth strategy is to determine what the company is trying to grow. Are they trying to grow revenue, income, customer base, or something else?
Growing profits versus growing profits can lead to different strategies. Understanding what the company is trying to grow will help determine which growth strategies will be most effective.
Interviewer: Your client, Coca-Cola, is looking for new opportunities to grow after years of flat growth. They hired you to determine the best way to grow.
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Next, you need to calculate the goal or target that the company is aiming for. For example, if the company wants to grow revenue, how much revenue growth do they expect? At what time are they trying to accomplish this?
You: How much revenue does Coca-Cola expect to grow? And by what time do they expect to achieve this?