Organic Growth

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Del curso dictado por Ludwig-Maximilians-Universität München (LMU)

Advanced Competitive Strategy

492 calificaciones

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Ludwig-Maximilians-Universität München (LMU)

Advanced Competitive Strategy

492 calificaciones

Curso 2 de 4 en SpecializationCompetitive Strategy and Organization Design

Advanced Competitive Strategy will introduce new topics and modules with even more real world examples and opportunities for student interaction than in the previous course Competitive Strategy (https://www.coursera.org/learn/competitivestrategy). In Advanced Competitive Strategy, we will look at how companies can build up and maintain their customer base by increasing switching costs and facilitating strategic customer lock-ins. We will find out how firms can increase their profits by pursuing suitable price discrimination and product differentiation strategies. We will look at examples of what is acceptable behavior under the premises of EU competition and US antitrust policies and discover exciting ways of how companies can increase their returns by strategically making use of network effects and economies of size. We will further intensify our newly acquired knowledge about network effects and discuss strategies that are explicitly tailored to network markets. We will analyze the workings of mergers and acquisitions and, moreover, support you in considering alternative strategies that can help companies grow organically.

De la lección

Grow Organically

In this special bonus module, we will discuss the relationship between profitability and growth on the one hand and the limitations that are faced by small companies on the other. We will learn what organic growth is and that it can be achieved by either protecting and building up our existing customer base and product lines, or by developing new products or markets – or, in turn, by diversifying our products portfolio. We will acknowledge and address external and internal limitations to growth and – as a final consideration – will look into the possibilities of international strategies for growth.

Growth and Profitability3:15

Organic Growth6:08

Conoce a los instructores

Tobias Kretschmer
Professor
Institute for Strategy, Technology and Organization

We're now going to learn about the nature of organic growth

and we'll take a look at four different ways in which you can achieve it.

Okay so let's now have a look at organic growth,

when it's most likely, what it is, and how it basically happens.

Achieving organic growth means that

you are going to have to look for the instances under which organic growth is most likely.

It's especially likely, it's especially prevalent,

it's the chosen mode of growth during the early stages of a firm,

when you are still trying to build new markets and new products are being developed.

It's also often safer than in-organic,

meaning it's externally generating growth,

because it might be more difficult to acquire

and to integrate other existing businesses into an existing company.

It's also slower typically than in-organic growth, right?

So you can't just double the size of your company just by buying another firm,

so organic growth simply takes a lot of time to achieve.

Organic growth can be achieved by either acquiring

new customers, so you simply grow your consumer base,

you increase the sales of existing products and services.

You introduce new products and services.

And you move into new geographic markets,

and you diversify.

So these are basically four different modes of organic growth, right?

So either grow your existing consumer base,

you introduce new products and services.

You move into new markets.

Or you diversify into completely different businesses.

So to classify this we are going to

have a look at Igor Ansoff's matrix of markets and products.

So Strategy A in this case,

Strategy A of organic growth, would be to protect and to build.

This is looking at an existing market and selling existing products.

So you consolidate and you stabilize your position.

You leverage existing resources and capabilities.

So whatever you can do well you're going to do more of,

and you penetrate the market that you're already active in.

So that would be the protect strategy or the building strategy.

Strategy B which is looking at existing markets

but introducing new products, is simply product development.

So, again, you're using existing competences and markets.

You introduce new competencies, i.e. introduce new product.

And this is going to mean it's automatically a higher risk, than in Strategy A, right?

So in Strategy A you are relying on what you already can do.

In strategy B, product development,

you have to introduce something new, which might work or it might not work.

Market development is looking at new markets, but with existing products.

This is looking at new segments of the market, looking at new territories,

i.e. you have to try to internationalize or geographically diversify.

And you're trying to achieve new uses for your existing products.

This is of course a good strategy if the core competencies are product related.

So if you are very good at producing particular kind of product

or you're very good at delivering one special kind of service,

then this strategy works very well

because you're simply leveraging the existing competencies into new markets.

Of course again it's a higher risk strategy than strategy A,

the protect or build strategy.

Now finally lets look at the last strategy, diversification.

This of course means that you going into new markets with new products.

This looks beyond current expectations, beyond of what you can currently expect.

It basically means that both your product and the the markett hat you want to be active in,

lie outside the firm's core competencies.

So you're really going out on the limb here.

It's definitely going to be riskier than all the existing strategies.

And however, it may reduce overall business portfolio risk,

if you are successful in the new market with a new product

because the fluctuations are going to be

less linked to the existing success of your other products.

So let's just look at a couple of examples here.

Diversification would be product-related horizontal diversification.

The strategy is going to be based on brand loyalty.

So for example, Montblanc pens and sunglasses.

So you're looking into new markets and a new product

but at the same time the existing brand is going to be leveraged to a large extent.

You could also diversify in terms of process or technology related activities.

So the strategy here is based on product categorization.

For example Bosch and it's selection of household appliances,

they repeatedly entered new markets with new products

but at the same time they used technology related and process diversification.

Another strategy is simply an unrelated or conglomerate diversification.

So this strategy is based on having a product portfolio that's as broad as possible.

Examples would be the Tata Group of India,

the Virgin Group founded by Richard Branson.

These basically are active in businesses that have very little to do with each other.

Great, so what's keeping us from implementing our expansion program?

Well there are a couple of limitations.

And find out what they are and how you can overcome them in the next video.

END

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