Reliance adopted different strategies to scale up their business after they took the plunge and disrupted the telecom sector and Reliance Jio’s case study is a great example of using market penetration as a Growth Strategy. While the competitors were busy in the war for voice calls as approximately 60 per cent revenue was being generated from voice calls and were charging heavily on mobile data, Reliance Jio understood this at a very early stage that there is an opportunity to penetrate in the new market and made their way through investing in the mobile data as there was no price war against it.
Reliance Jio came up with new technology with a huge amount of investment in Internet data because there was a big scope of opportunity in internet data/mobile data, unlike voice calls as it was a saturated market already. Jio’s investment was much more than the combined investment of all its competitors who were in the market with the old technology of 2G/3G. It entered the market with the new optical fibers with 4G technology and provided the internet speed at a very revolutionary price.
It captured huge market share (more than 80 per cent) by high-speed technology at a pocket-friendly price, affordable by all sections of the society, free calls, free SMS, Free roaming. Free SIM cards were distributed along with a 4G technology handset using a loss-leading strategy to attract the customers to capture huge market share. This is a great example of a market penetration strategy which we will discuss in the below section. Before we dive further to discuss different growth strategies, let us understand the meaning and concept of Strategy and the definition of “Growth Strategy” which any organization may adopt to scale up their business. A strategy is a choice, a plan and a vision of business leaders or top management have for an organization. When the vision and strategy are linked to the growth of an organisation or you wish to take the company from where you are today to where you want it to be, it is termed as “Growth Strategy.” Growth Strategy is a part of corporate strategy and it aims to win over its competitors. And a leadership team plays a vital role in the formulation and execution of the strategy to reach the desired business goal.
You may have a similar vision to get your business to the next level and may have already learnt about various types of business strategies. Let us go through some of these which you may apply at different times and levels to survive, sustain and grow the business or to remain relevant in the market and achieve your long term objectives: At a corporate level, you would find companies adopting to Stability Strategy, Expansion Strategy, Retrenchment or Combination Strategy. An organization shall adopt any of these depending on their business requirement. Please see the below section for further division of these strategies:
Growth Strategy is a part of corporate strategy and it aims to win over its competitors. And a leadership team plays a vital role in the formulation and execution of the strategy to reach the desired business goal.
I. Stability Growth Strategy
When the organisation main focus is on incremental growth. This is adopting by small scale businesses who do not want to take up risks and are quite satisfied with their company performance.
1. Change Strategy – As a part of stability strategy, no-change means a conscious decision to not to do anything new and continuing with the existing business operations and the business practises. The firm may decide to continue its current position and focus on the present market and the products. The organization and leaders are quite satisfied with the way the business is running.
2.Profit Strategy – This strategy is followed when an organisation aims to earn profit either by reducing the investments, developing the product and reducing the expenditures. However, it can only be done for short term as it is a temporary fix to any arising business need. It’s not a sustainable strategy in case of serious business situation.
3. Proceed with Caution Strategy – In this, companies may take some time or pause to think and observe the new strategy to evaluate the future of the company. It is done consciously by the companies. This strategy is mostly followed by manufacturing sectors to study the market conditions carefully before launching their product in the market.
II. Expansion Growth Strategy
As the name suggests, when an organisation wants to scale up, achieve high growth by widening its scope of business operations for better survival, gain higher profits or capture larger market share. The expansion of the company may be possible by following any of the below expansion strategies’ listed below to meet their business objective:
Expansion through Concentration –
In this expansion strategy, a business may invest its resources in its product line to cater to existing market needs. The expansion of the business through concertation means by
1. Market penetration strategy – This involves intense focus on existing market and existing product but reach out to more customers via different distribution channels like Swiggy, Zomato
2. Market development – It focuses on attracting new customers i.e. the new market for an existing product. For instance, the franchise like Mc Donald’s, Subway
3. Product development – This strategy focuses on developing new products for the existing market or change in existing product i.e. introducing new products to get more revenue from the existing customers). The best example is of the companies who sell mobile phones. For instance, they come up with new models every 6 months
Expansion through Diversification –
This is a form of the internal growth strategy which allow companies to enter new lines of business, developing a new product or/and new market individually or jointly with any new company to overcome their economic slumps. Diversification could be an addition of parallel products to the existing product line to expand the market area and to cut down competition or addition of new product or services which are complementary to present line or service
Expansion through Integration –
This means combining the present operation of a business with no change in the customer base through a value chain which includes the interlinked activities performed in an organisation. Thus, focusing on the needs of the customers. Integration widens the scope of business and is a part of a grand expansion strategy. Integration can be vertical or horizontal.
Expansion through Cooperation –
It involves mergers, strategic alliances, takeovers or joint ventures. This strategy is followed when an organisation enters into a mutual agreement with the competitor to carry out the operation and compete with one another at the same time.
Expansion through Internationalisation –
When any organisation aims to expand beyond the national market as they have explored and exhausted all the potential to expand domestically. Well, there are quality standards and stringent benchmarks of price and delivery deadlines which an organisation has to comply with so an organisation can go global.
III. Retrenchment Growth Strategy
This strategy is adopted when an organisation objective is to reduce one or more business line, cut down on expenses and to reach a more stable financial position by spending less. The firm may restructure its business operations or may require to discontinue it. Hence, the firm may follow any of the three retrenchment strategies (Turnaround, Disinvestment or Liquidation). However, a business a may need to be scale up and sometimes turnaround and reduce different lines of business and focuses the capital on research and development of one section could only be the option.
IV. Combination Growth Strategy
There are few other strategies which can be applied to grow the organization. This strategy is designed to mix growth, retrenchment and stability strategy and apply them across different business units of the organisation. Few great examples are of Reliance industries which were into textile business but expanded it to new areas such as information technology/telecom sector.
Now basis the above strategies, we can comprehend that there are four major strategies which can be used to scale up or expand the business and further conclude that subtraction can be a part of growth strategy. The most common strategies that any small company, start-ups or big organisations may adapt for expansion or growth are:
1. Market Penetration– Same market and product but you try to penetrate in the market through other means to expand your business by reaching out to your customers. For instance, the distribution channels like Swiggy, Zomato are a great example of using market penetration as the growth strategy
2. Market Development– New market but same product. This means following a franchise mode the franchises like subway and Mc Donald’s. Presence at multiple places
3. Product Development– Same market but a change in product for profit-making. Phone companies usually have this strategy to get more revenue from their existing customers. For instance, you are an Apple fan and maintain brand image and a loyal customer and would buy the latest technology whenever you get the updated version in the market.
4. Diversification – (types – vertical, horizontal, concentric and conglomerate) –This means you have a new market and a new product as a part of your growth strategy. This strategy is not usually done by small business owners due to market saturation.
An organization shall follow a business and growth strategy depending on their need and stage of the business they are at. Also, as every organization has a unique environment and characteristics so the strategy must change accordingly for expansion.
Retrenchment and Redundancy
You may have heard the terms as part of strategies across different businesses. Sometimes, in a business, a situation arises where a Job role is no longer required. It may be due to shutting down of the location, maybe due to technology disruption or role has been made redundant as it is slowing down the process and it is not the focus area while the business is scaling up or merger of two businesses and thus instead of two people, only one person is required to perform that role. This is the concept of redundancy and retrenchment.
Retrenchment is making the job role/position redundant as it is no longer in the scope of the growth or expansion strategy of the organisation. One has to be tactful in handling the subtraction of roles either due to redundancy or retrenchment strategy. It is very important to note that the position is being made redundant and not the people. Employee’s role is redundant and deployment of the employee or movement of employee internally within the organisation isn’t possible. Incase, a proper redundancy process shall be followed while exiting employees from the organisation.
∙ A formal meeting should be held between the employee and the employer.
∙ Proper notice period and pay-out compensation are required.
Causes of Retrenchment or Redundancy
Bad workforce planning may lead to redundancy. This means your business or growth strategy adopted at the beginning is not supporting the business and thus, needs a change. Workforce planning means how many people you need in a current scenario to run the business, how many would be required in 3 months and how many in the next 6 months down the line and so on. If we are not good at workforce planning, we may end up having challenges like over hiring people and you may have to remove someone. Redundancy process involves letting go someone from the organisation as there is no such business need now. The role has been made redundant and an employee loses the job without him/her being at fault. So redeployment is the law in some company and company must find a role for the employee. It is very different from “firing” or performance managing an employee.
You need to remember that someone is redundant because of the job role which no longer exists or is no longer required for thriving the business. In case an employee is performance manage, the company would need and find a replacement unlike in the case of redundancy. Redundancy could be compulsory or non-compulsory voluntary. You give an option to employee/employees if they would like to volunteer and this may sound like an attractive option. Redundancy is common during recession, economic downturn as the business has to scale back. Developing a strategy to manage staff. Forward workforce planning can help to reduce such redundancies. It could be emotionally very stressful for an employee. An employee may think “why me” especially, when there are selective redundancies which mean only a few are being removed. One needs to ensure that you do not take it personally. It is a difficult thing for companies to do. It requires a huge round of selection criteria when the company chooses people to let go.
In a start-up with no experience of redundancy, you need to get this right. You need to ensure that you are doing the right thing for the company and for the people you are making redundant. In case you fail to follow the right process; you may be vulnerable to legal action which means you may end up paying high penalties or paying a large amount of compensation for.