Category Archives: Business

Growth with profitability: the great challenge for companies

The massive amount of information and more demanding consumers have driven companies to operate a more complex business, especially those that do not have the necessary tools. Sintec offers consulting focused on growth with profitability, through the design of a specific strategy.

Business people having a meeting in office with laptop

Many times companies make the mistake of thinking that the growth of their sales and gross contribution will translate into greater profitability, however in practice this may be different, so it is important to support customers to grow in a sustainable way This was stated by Fernando Espinosa, Frank Maes and Thomas Shimada, partners of Sintec, a Mexican business consultancy with 28 years of experience in Latin America.

 

The three partners of the Mexico City office shared with Forbes Mexico that over more than two decades, the firm has worked on more than 300 projects with leading companies in 17 countries, which has positioned Sintec as a leader in the region .

 

The Mexican firm has established itself in Monterrey, Mexico City, Bogotá and São Paulo offering a value proposition based on the profitable growth of its clients’ companies, through the design of a specific strategy.

 

“We seek to help our clients grow profitably. In the past we have observed that very few companies manage to grow profitably, because their operation becomes much more complex and what we do is help them manage that complexity that occurs when they grow ”, says Fernando Espinosa, partner Sintec.

 

Among the tangible benefits that Sintec has achieved in these years, is the impact on sales growth of between 20 and 50%, an increase of between 5 and 15% in operating profit, the increase in asset utilization of between 10 and 15%, the reduction of working capital of between 15 and 25% and the improvement in the level of service of between 5 and 15%.

 

The partners explain that the model that has been successful, both for the companies and for Sintec, has been to go from the design of a strategy to an implementation, that is, to indicate to the clients what to do and accompany them during the process, ensuring that the companies develop organizational capabilities.

 

“The most successful projects have been those in which there has been a diagnosis, a design and an implementation,” they detailed.

The crucial moment in decision making

 

Currently, companies are exposed to large amounts of information, which makes it difficult to operate a business, therefore, it is vitally important to have tools that provide companies with specific information when making decisions.

 

Sintec has implemented the Business Analytics and Optimization (BAO) tool, which specializes in predicting the different possible business scenarios and suggesting courses of action.

 

In this regard, Thomas Shimada, Sintec partner explains: “Although today there are highly trained people in companies, the reality is that many decisions are still made by intuition. What we are looking for is that our clients’ decisions are made based on hard data and with BAO we use technology for that data exploration ”.

Profitability or growth? That is the question

When managers, board members or even company owners are asked what they prefer between profitability or growth, almost automatically a large majority would say that both, however, the answer is not obvious.

It depends on multiple variables and elements to consider about what is best. Here are some reflections on the correlation between the two concepts and how it applies depending on the type of business.

1. Profitable growth

Profitable growth refers to the joint achievement of profitability and growth goals. This is the case of companies that achieve a balance between concentrated and diversified clients, with organic and inorganic growth models and exposure to high-margin, high-growth businesses. They are companies with business models in which the linearity between the new number of clients and the costs and expenses that are activated for their attention is broken. Very few companies manage to maintain sustained profitable growth.

2. Growth first, then profitability

For certain industries, high-growth companies are often more valuable than slower-growing companies, however, this situation is dangerous because growing at exotic rates can lead the company into a valley of death. Supergrowth with low or no profits induces organizations into danger zones due to lack of liquidity, high fixed costs and difficulties to operate on a day-to-day basis. Not focusing on profitability but on growth implies that enough capital will be required to finance growth operations, until the investment actually generates new returns.

While growth is one more variable, many associate it with vain metrics, as they try to impact and focus on growth, without paying attention to what is really “in the bank” after all the corporate effort. Income growth alone rarely creates the great success that entrepreneurs dream of, and worse still, it is sometimes achieved through dangerous borrowing, high risk, or even sacrificing profits.
Indiscriminate strategies of growing just to grow have generated serious strategic errors with dire financial consequences. When organizations become obsessed with growing by excluding other objectives such as profitability from the analysis, they end up competing in markets where they do not have the required capabilities to gain an advantage and in the long term the organization ends up losing important value.

3. First profitability then growth

When a company focuses on profitability by limiting expenses, it can lead to stagnation, a condition that cannot be maintained for long if it is to continue to maintain the value and importance of the company in the market. Unfortunately, many companies find over time that ensuring profitability can be much harder to hit than the numbers associated with growth.

Mature companies understand that making decisions to abandon customers, products or even markets can involve a painful process in the face of growth, but that it is necessary and is almost a healthy practice to safeguard profitability, especially when the ultimate objective of any organization is to create and To distribute value, companies must meet their ability to grow their profits and not simply their income.

4 key factors to achieve profitable growth

1. APPROACH THROUGH THE STRATEGY

The main advantage that a company must have over its competitors is focus, that is, dedicating itself to a market segment and serving it as no one else can. However, a common mistake in your intention to grow is when you go after new customers or launch products without having a clear focus. An executive must select segments in which he can really make a difference, that allow him to grow and create relevant, differentiated and executable value propositions.

You should always ask: What challenges, constraints and risks do we have to grow profitably in those segments? The answers must be transformed into the company’s strategy, its approach and actions

2. DIFFERENTIATION THROUGH KEY COMPETENCES

A competition is the ability of a company to be better than the rest. What the entrepreneur must understand is what his key business activities are and invest in that: practices, people, technology. It should be very clear to any executive that companies do not compete with their products or services but with the skills they have in relation to their competitors. That is the true source of competitiveness. Copying a product is relatively easy; replicate a competition, no.

3. EXECUTION THROUGH MANAGEMENT

Management refers to the basic administrative cycle of planning, deciding, verifying and acting, which if not done efficiently, will have serious consequences for the company. The task is to create management mechanisms that the organization can replicate. It is a fundamental and unremarkable task that requires perseverance and detail. Because it is so simple, many executives do not carry it out and leave gaps in the management of the company, through which profitability escapes. This results in excess or obsolescence of inventories, higher costs, late recovery of the portfolio, among others, which in the end result in profitability and / or flow problems.

4. DEVELOPMENT THROUGH TALENT

Talent is the most important and critical issue for the company to develop. Understand what is required for key positions, have competent people, not necessarily with a lot of preparation and experience, but with aspirations and skills for the tasks of the position. An executive cannot be the todologist; he becomes the restriction of the company and a prisoner of his own creation. There is no way to overcome this other than through the right people and, in many cases, better than the executive himself for the position that is assigned to him. The main asset of an entrepreneur is the people with the capacity to grow professionally together with the company, who receive a fair remuneration and the required training.

The main task of an executive is to create a company that has the capacity to do business; his attention should be on this. There is no hidden science; achieving this requires discipline around these four dimensions. The scarce resource is having executives who are willing to develop those disciplines and, in the process, discipline themselves.

The search for profitable growth

Entrepreneurs want their businesses to grow. More products, more markets, more customers, more sales. More investments, extensions, expansion, more equity. There are many ways to measure the growth of a company; But the only thing that really counts is earnings growth. Profitable growth is the goal that the entrepreneur must seek.

In his company, the businessman tries to get everyone involved in the process. Growth is everyone’s business, it is something every day, every decision that is made and every step that is taken. Every day something happens in companies, and those things that happen will lead the company to success, or failure.
Entrepreneurs want to be successful in their businesses. Success is profitable growth.

Expanding the operations of a company, a larger size of the organization, more products, more square meters, more machinery or more sales, is not always real growth. All these elements can dazzle both people and others; but they are not always accompanied by profits. Worse, they are sometimes achieved through dangerous borrowing, high risk, or even sacrificing profits.

What works in the real world?

For almost 10 years I worked as a financial and accounting consultant; then 10 more years I specialized in financial reengineering, supporting companies facing terrible financial crises. Then I decided to specialize in utilities, and I now dedicate my consulting almost entirely to that. Why? Because I determined that many companies grow impressively; but without profit. This growth with debt –or risking the profit margin–, causes businesses to end up bankrupt in a short time due to lack of liquidity, high fixed costs and difficulties to operate on a day-to-day basis.

True profitable growth is made up of several components. Entrepreneurs do not always have sufficient control that they should over each of these elements, nor over the connections that exist between them. It is in this lack of control that the problems of low profitability in business originate.

The whole thing starts with taking over where it really should be held.

Some of these components are:

• The ability to effectively understand what the customer wants, and even to know if the company is in its right market niche.

• The ability to innovate and develop new products or services.

• The ability to have a truly competent sales force.

• The ability to accurately know the costs of each product or service.

• The ability to control and modify the production costs of each product or each service.

• The ability to adapt the structure of the company to your needs and get the most out of fixed costs.

• The ability to modify or negotiate the leverage structure and cost of capital.

All these knowledge are capacities in which the entrepreneur must invest time and money. They are related to growth indicators that should appear on the radar screen of every entrepreneur, and that must be looked at every day.

5 strategies that will help you boost your business growth

Business growth is necessary to sustain itself over time

In 2019, for the fourth consecutive year, the number of companies created in Colombia increased. According to the statistics of the Colombian Confederation of Chambers of Commerce (Confecámaras), 309,463 productive units were constituted, with an increase of 2.1% compared to 2018, when 303,027 were born.

This creation figure is encouraging and according to the president of Confecámaras, Julián Domínguez Rivera, it reflects the good economic moment in the country and the growing interest in formalization.

However, not all new companies are guaranteed to stay in the market. According to a recent study by Confecámaras, after 5 years of operation only 34 of the 100 registered firms survive. And the death rate is highest among small businesses.

Consequently, the future of these businesses will depend on their strategies to be bigger. But what does it mean to grow up?

“A company grows when it is able to give back more and more to shareholders, generate more jobs, gain market share and increase sales.” President of the Private Competitiveness Council (CPC), Rosario Córdoba Garcés.

Business growth is not just about increasing sales
According to experts, a protifable growth is the ability of organizations to generate value, therefore, it goes beyond increasing sales and implies providing differentiated offers to customers, generating quality employment, profitability for shareholders and sustainability.

There is a group of companies that have very high growth rates in certain periods of their life. The Organization for Economic Development Cooperation (OECD), to which Colombia belongs, defines high-performance companies as those that achieve year-on-year growth in employment and sales greater than 20% for at least three consecutive years.

“In that definition is the subset of companies called ‘gazelle’ that, being young (five or less years), achieve the same high growth rates,” adds the head of the CPC.

We ask ourselves then, what does it mean to grow?

According to the book Emprendedores en Crecimiento, derived from research carried out in 2015 by the Universidad de los Andes for iNNpulsa and Confecámaras, for a company to grow it is essential:

Change of mind: the manager needs “open mind and ambition to look beyond its borders”. This first challenge involves overcoming fears, wanting and believing that you can grow.

Networking: it is also key to be linked to support networks, such as the programs designed by the Chambers of Commerce of various cities to boost growth. Valle E and Valle Impacta, from the Cali Chamber of Commerce, and Crecer es Posible, from the Medellín Chamber of Commerce for Antioquia, are an example of these initiatives to promote the growth of entrepreneurs and businessmen, but there are also calls for entities such as iNNpulsa or non-governmental organizations such as Endeavor.

Relevant and sustainable strategy: business growth implies having a clear, solid and long-term business strategy that includes options if any of the tactics used does not give the expected result on time. According to experts, to take a leap in business, companies must also be highly productive and efficient, have a viable financial strategy and hire highly skilled human capital.

Use of new technologies: according to Córdoba, they must also use frontier technologies – renewable energy, biodegradable plastics, artificial intelligence and electric vehicles, among others -, know customers deeply and adapt quickly to the reality of the market.

You may be interested in reading: How to increase sales? Data analysis is the key

5 strategies to boost business growth

1. Design a business model that is scalable

To grow, it is essential to have a business model that can be replicated in other cities or in other business segments, in such a way that once the effectiveness has been proven in a certain place or with a particular customer niche, another can be reached. geographic market without having to make major adjustments. Digital applications and franchises, for example, are a sample of this type of strategy. If your knowledge and presence are essential in the business model, it will not be so easy to grow when opportunities arise unless you dedicate yourself to transferring knowledge to the work team and create a system that allows the standardization of production processes and customer service .

2. Focus on solving the need for massive audiences

This refers to choosing a market that offers a significant size because if the focus is on micro-niches it will be difficult to scalar the business. In these cases, growth would be generated by a high price of the product or service with the risk that this entails.

3. Integrate into powerful supply chains

In this case, it is about becoming a supplier to companies with a presence in different countries or with a very powerful distribution network, such as the D1 or Justo & Bueno type ‘hard discount’ chains, which will drive growth based on their own growth. . In these models, the risk is not having enough funds to leverage this accelerated growth that can be generated in a short time.

4. Have a high-performance management team

Although you must have high-level employees, it is key to set up boards of directors with people who have experience in internationalization and can contribute their ideas and knowledge to the company’s expansion plan. If the board does not already have this experience, it is feasible to have at least one mentor with the ability to guide growth strategies.

5. Incorporate innovation into the DNA of the organization

In the 4.0 economy, innovation is the key to overcome challenges, expand borders and meet customer needs. From day zero of the company, it is essential that innovation is on the table and allows creating effective communication networks with customers to detect changes in their preferences that can provide new business opportunities. The best source of information to innovate is your customers, so it is with them that you must dialogue on a daily basis to establish the next challenge.

Business growth is necessary to sustain a business over time. This growth exceeds the fact of selling more and implies that you incorporate innovation in your company, that you integrate into wide-ranging supply chains or that you focus on solving the needs of mass audiences.

4 strategies to counteract declining growth

It is imperative that when economic times get tough, small businesses are flexible enough to adapt to shrinking markets and shifting consumer preferences.

Small businesses in retreating industries face a real challenge. In recent years, there has been a negative shift in sales growth for many traditional businesses – department stores, bookstores, and newspaper publishing, to name a few.

It’s tempting to blame e-commerce competition alone for the decline in popularity of traditional brick-and-mortar stores. While that is a factor, there are other issues affecting struggling industries that have also contributed to their decline.

Some of the reasons for this regression are:
Dependence on trends and consumer spending: For many companies that sell discretionary (non-essential) products, sales depend on consumer spending. If your products are not considered essential, consumers can abstain or buy less expensive alternatives during tough economic times. Trends and fashions are also behind the demand for discretionary items and can even give a business an old-fashioned appearance. This is a common challenge for department stores.

Inability to implement economies of scale: fixed merchandise prices make it difficult for retailers to maintain sufficient margins, as they do not have the necessary volume to develop economies of scale. For example, maximum prices are set by publishers (in the traditional model), so bookstores must rely on higher volume or lower discounts to maintain profitable growth. Fierce competition from Amazon, whose prices can be set through individual book sellers, has resulted in increasingly unstable growth.

Speed in technological innovation: Demand for certain products can also be driven by technological innovation. To survive in a highly competitive market, companies must constantly develop new items and functionalities. For example, the demand for print advertising dropped substantially with the advent of Facebook and Google Ads. Newspaper publishers have lost an important source of income and have struggled to make a dent in the online advertising space.
Rise of Automation: The usability improvements and cost savings that businesses can achieve by automating certain tasks has led to a decline in demand for many human-provided services. Businesses and individuals that provide these services, such as travel agencies, language translation, accounting, secretarial, employment agencies, customer service, postal services, and even agriculture feel the impact of this process as demand shifts towards a service. faster and more efficient.

In these difficult times, some brands have disappeared and others have emerged willing to meet the challenge. Those who survive pay close attention to the market, are flexible, and implement creative solutions to keep up with changing demand.

In times that demand more flexibility, being small has its advantages. Lower costs can help small companies fill the gaps left by larger competitors that have cut back or exited the market. Smaller companies tend to be more agile, able to adapt more quickly to market conditions and implement new ideas with less negative impact. Most importantly, you know your customers better than anyone. A small business owner is much more likely to be in personal, day-to-day contact with his clients than a large corporation owner.

That said, adapting to changing times, digitally or traditionally, requires creativity. By combining the opportunities explained below with the advantages of being small, you can increase your relevance and stand out in the market.

Offer a unique experience
While many large bookstore chains have faced big drops, small independent bookstores are making a comeback, growing year-over-year since 2015. Why? Because they can provide an experience that Amazon cannot. The smell of a new (or used) book, a unique selection of titles that you can explore and discover on your own, a coffee shop that offers never-before-tested own mixes.

Small businesses, especially retailers, can often provide a type of personal experience not found online or in a chain. Take advantage of what it does to you e unique and make it a key point to create a memorable experience for your customers.

Meet customers where they are
Despite the fact that Nordstrom is a great company, it started as a small family business and considers its customers part of that family. He was an early driver of the discount department store trade with his Rack department, while aggressively developing his online business from the start. Now, your customers can buy your merchandise while browsing Instagram or Pinterest. Barnes & Noble was able to compete with Amazon by offering to deliver its products the same day customers place the order. What do your customers value in a shopping experience? Find out how to sell in your small business and invest your resources accordingly.

Empower your employees
Small local newspapers have not recorded the drop in readership that some large national media have suffered. One reason could be that your employees often live in the same communities in which they work. In this way, your staff often access unique details and information on local, provincial or community issues that national newspapers do not have. Small newspapers also tend to have limited staff resources, so they tend to hire cautiously to avoid the costs of hiring someone new.

Hiring quality employees and training them to access customers without asking for permission is an added value for the consumer as it improves the service and offers personalized content.

Provide better customer service
Have you ever called a company for help, only to feel stuck on the phone for hours with an automated system that doesn’t understand you? It’s not fun. Good automation saves time and resources while facilitating the user experience, but automation that frustrates the customer is often counterproductive.

Providing excellent service can really strengthen customer loyalty and increase the chances of being referred. Prioritizing the customer experience is a great way to demonstrate the value of your company to your customers, differentiate your business from the competition, and attract new customers from companies that offer a less pleasant and less personal experience.

Of course, all of these strategies require proper marketing to truly be an asset to your business; many small businesses are pushed out of the market by larger companies with huge marketing budgets. However, if you take small steps and focus your efforts in the right place, you can go a long way with a relatively small investment.

As mentioned above, an advantage of being small is that it allows you to have a more personal relationship with customers. Talk to them about their consumer experience. Find out how they found out about your business and what they like. This can help determine whether marketing efforts should be directed towards social media or face-to-face contacts and what type of incentives (such as discounts or opportunities) might be attractive to our target audience.

Smart differentiation strategies can help a small business counter declining growth. As competition intensifies, creating strong differentiators and advertising them effectively can help you stay competitive. The above strategies can help not only retain existing customers, but also attract new customers who value atmosphere, service, experience, and personalized attention.

Every company is different, which means that there is an opportunity to highlight your distinctive qualities and catch the attention of consumers. Whether it’s the location, the employees, the type of customers or the service provided, it has its benefits to hone and emphasize your best qualities, personalize your customer experience and fight declining growth with authenticity.

Pricing and Profitability Management as vehicles for growth

Businesses can grow in several ways: maintaining sales and reducing costs (increased profitability and margins); maintaining costs and growing in income (increase in sales and nominal contribution margin) or with a mix of these factors, to increase the value of the companies and their results.

The retail and mass consumption industries have a lot to say in this regard. On the one hand they have the need to align themselves with the reality of consumers; and on the other they must continue to grow in value. The way forward should combine: Strategy, Government, Execution and Technology oriented to price management and profitability.

In the Retail industry and mass consumption in Chile, a certain immaturity can be seen in the teams and structures, and the need to deepen their capacities is evident. Although it is understood as a natural immaturity characteristic of our market, the way to grow and the competitive advantage will come from those companies that focus on the following aspects:

Have definitions of your pricing strategy to maximize revenue / profitability
Train and form a governance and management team of the pricing process to maximize income / profitability
Optimize prices via Software, to be able to adjust ad hoc to the demand by segments and products
Align regulatory and tax aspects to the model
Generate processes to define, execute, and evaluate prices and profitability day by day
Understand that Price and Profitability Management is the key to being able to grow and maximize value in times of slowdown
Invest in a better understanding of customers, in order to define a price that generates a deeper and fair relationship with them
Globally, all Retailers and mass consumption companies invest millions of dollars in improving their models, equipment, and technology around Price and Profitability Management. An increase in these capacities can impact up to 5% the EBIDTA of a company, with an investment that usually has returns within a year.

Generating Profitable Growth

The permanence of a company in the market is closely related to its ability to grow: small companies are more fragile to the changing Latin American environment and, therefore, more likely to disappear. However, growing profitably is not easy. Knowing the edge strategy model is very important, since it offers us alternatives to increase sales and profits.

Various statistics maintain that in Latin America the mortality rate of companies is around 70%: 7 out of 10 companies created do not exceed the first year of life and, most, close in less than five. The main explanation is the difficulty of adapting to the external environment, which presents innumerable challenges on the continent due to its volatility.

 

Normally, companies that overcome these external storms, among other aspects, have a common denominator: they have exceeded a certain minimum level of sales, generating a size that ‘protects’ them against certain ups and downs. Some have successfully explored unfamiliar markets, while others have efficiently squeezed their key assets.

 

Most often, however, companies fail in this quest building a  profitable growth strategy. Exploring unfamiliar markets is no easy task: sometimes the desire to leave a mature market forces the company to venture into businesses where they lack strategic assets or the ability to create them. Similarly, the more that is squeezed out of a current business model, the more assets specialize toward that way of making money. There we have the example of Walmart and its difficulty in facing the challenges that Amazon presents .

 

Fortunately, there is a middle way, less risky than exploring unknown markets and more profitable than seeking efficiency in today’s business. Edge strategy is a way of thinking that emphasizes taking advantage of what is at the edge of the company: discover benefits in nearby territories.

 

Edge strategy is a way of thinking that emphasizes taking advantage of what is at the edge of the company: discover benefits in nearby territories.

 

The edges of the business

The edges of the business are generated in the mismatch of our value proposition and the set of permission granted by the client. People have desires that they satisfy by buying a good or service; By choosing a particular company, you are granted “permission” to fulfill part of those wishes.

 

When our value proposition is not exactly the same as these wishes, a mismatch occurs. For example, a professional may seek a master’s degree program in business to open up career opportunities, but is not interested in the international component of the program as he wants to work in his own country.

 

This mismatch should not be seen as a problem, but precisely as an opportunity: given that our clients vary a lot between them, our value proposition will hardly meet the expectations of all of them 100%. The exercise of identifying these mismatches is known as the edge strategy.

 

The product edge strategy describes situations where our product or service is imperfectly calibrated to meet the needs of our customers: many of them will be willing to leave us more money if we seek to calibrate it better. This is what Apple does when it sells phone cases to its customers; whoever buys a telephone is not looking for the device itself: it seeks to be able to communicate and carry out other operations without damaging the telephone. A housing offers additional security, better meeting customer wishes.

 

The strategy of the edge path describes situations where our company can redefine its participation in the way that helps the client to complete their mission. Some young couples would be willing to go to the movies if they had an area where they could safely leave their baby. The Mexican Cinemex, by offering CineMá, an adequate room in volume and sound for these couples to enjoy the film in the company of their baby, is a clear example of growing through sales at the edges of the business after deciding to accompany one more step in the set permission of the client.

 

Finally, the enterprise edge strategy describes situations where the strategic assets of the business are exploited in a way that was not envisioned when they were created to sustain the traditional business. It is reflected in Amazon’s strategy when it rents or sells much of the technological infrastructure that sustains its businesses.

 

In short: it is necessary to grow profitably without putting at risk our current or future position in the business. Seeking opportunities at the edge of the business, in the product, in the definition of the customer path or in the company, can generate significant growth and support the strengthening of the company.

 

Have you ever thought about the growth opportunities that present themselves at the edge of your business?

How to ensure the growth and profitability of companies?

Too many companies fail to meet their revenue and profitability growth targets. However, the likelihood of achieving profitable growth is increased when the organization has a clear and clean growth strategy coupled with strong execution within its infrastructure. One without the other hurts the likelihood of success.

Why is growth so elusive? Based on research and experience, there may be two main reasons: An organizational infrastructure that cannot sustain successful execution and an inadequate consideration of opportunities within the core business activity, adjacent, or lack of customer knowledge.

Set clear growth goals (SMART):

S: Specific

M: Measurable

A: Achievable

R: Significant

T: Timely

Setting SMART goals  gives you structure and the ability to monitor your goals and objectives. Exchange your incomplete resolutions, setting SMART goals creates verifiable trajectories towards accurate objectives, with clear steps and an estimate of the ability to achieve your goals.

In corporate life, this type of goal planning is one of the most effective and least used to achieve goals. Clarify the way in which your objectives arose and the criteria that will shape their realization.

Identify the ideal customer

Generating sales is relative. If you are selling to clients whose business need is not sustainable, this represents a zero-sum game for you. If you don’t have the right mechanisms in the right place to prospect your ideal client , it will be difficult for you to maintain growth or even grow.

You have to adopt a business or entrepreneurial attitude that allows you to see beyond the obvious and locate the client that is compatible with your business model. This keeps acquisition costs low and ensures that customer relationships are mutually beneficial, and that objectives are aligned.

Create a dissemination and / or promotion strategy

What is the use of setting my goals and knowing who my ideal customer is if I cannot promote my products or services effectively? It is necessary to understand that a marketing campaign needs to be designed specifically for your ideal client and spread in the exact place where they are. General advertising no longer works, it is necessary to contact only potential prospects in order to start an effective process that takes them by the hand at the moment where they make the decision to purchase your products or services, becoming future clients and promoters. One of the most effective ways to achieve this is through an inbound marketing campaign  led by trained professionals who understand who your company is and your ideal client profile, and thus creating a more effective way to ensure the growth and profitability of your company.

Business Growth Strategies

If a company wants to remain competitive in the market, it must constantly consider the development of growth strategies, but not only to improve sales, market share, profit or the size of the organization, but also to survive attacks from the competition, thanks to the economies of scale and the experience effects it offers.

FROM THIS POINT OF VIEW, FOUR BASIC GROWTH AND EXPANSION STRATEGIES CAN BE DISTINGUISHED FOR A COMMERCIAL DISTRIBUTION COMPANY:

Market penetration strategy : exploitation of the same commercial format in the same market, using the same products or slightly altered products.

Internationalization strategy : opening to other geographic markets with the same commercial format.

Vertical integration strategy : extension of the company’s activities towards wholesale and production activities.

Diversification strategy : entry into other commercial formats and sectors that support commercial activity.

BASIC WAYS TO GROW

Growth strategies can be realized through internal or organic growth or external growth. The choice of one or the other option will depend on various factors, such as the life cycle phase of the commercial formula, market saturation, the level of competition, the need or not for rapid growth, the existence or not of possible external collaborators, the level of resources and capacities of the company, and so on.

 

INTERNAL OR ORGANIC GROWTH

The internal or organic growth is to carry out the strategy of growth through the creation of new facilities , new production plants, new representative offices of the same company, perfectly controlling the expansion and ensuring that the entire entity meets the objectives.

 

This strategy can also be developed by creating a new business formula through a subsidiary with the same or new brands. The internal growth strategy has been the normal one in most business development processes, which is why it is known as natural growth.

 

SOME OF THE ADVANTAGES OF THIS TYPE OF GROWTH ARE:

Facilitates the optimization of locations and commercial distribution

Resources grow gradually, so financing it is more comfortable and can optimize the management of the process

Enables the acquisition of the latest technology, especially when it comes to capital goods

Many companies decide to grow under this scheme, but more and more, given the processes of business concentration that we are experiencing, the trend is towards non-organic growth.

 

ORGANIC OR EXTERNAL GROWTH

It is the growth formula that we can most commonly observe day by day in the economic press. It is based on the processes of mergers, acquisitions or alliances , through which a market is accessed through a company that is acquired, with the peculiarity that it is in operation, which eliminates some hidden costs of internal growth.

 

When the sector in which the company is located is saturated or wants to enter new markets quickly, external growth may be the preferred option. Thus, external growth is fundamentally based on the purchase of other companies or on acquiring significant financial stakes in them. In this sense, in recent years there have been very important purchases and mergers in all sectors, one of the most recent in 2010 is the merger of British Airways and Iberia, a process that has taken several years to sign. of the definitive contract.

 

External growth occurs as a consequence of the control of one or more companies in operation, either through a simple association, such as an alliance, or through the acquisition of all or part of its assets through shares or other securities. that form its social capital. This type of growth is materialized, therefore, by acquiring existing capacities and resources, so from the macroeconomic point of view it does not represent an increase in real investment or a growth in aggregate supply , but a simple transfer of ownership. .

 

Advantages :

External growth saves time compared to the internal one, since it needs time to develop products, build new facilities, develop new distribution channels or be accepted in the market.

It may be the only way to overcome a barrier to entry due to the difficulty of internally developing the necessary capacities or resources to compete.

It involves less uncertainty, since both the investment required and the current results are known

As there is less uncertainty and less risk, the financing alternatives for the process are much greater.

Disadvantages :

An acquisition is generally expensive as a large part of the final value of the going concern is made up of what is known as goodwill. By buying it, a part of the future profitability will already be discounted in the value of the sale with the subjectivity that valuing it entails.

Sometimes unnecessary assets are bought that are tied to the company being bought, which limits the flexibility of the company to make decisions.

The problem of integration of two organizations and their cultures can be a major brake that deteriorates the expected results of a merger or acquisition.

Antitrust legislation, which, in the case of Europe, is governed by the Antitrust Court, may limit the possibilities for this type of growth.