Different Growth Strategies for Firms Aiming to Become Market Leaders

All firms aim to become market leaders and be the dominant player in their chosen niche and space. Towards this, they actualize some strategies aimed at seizing the market and grab market share.

However, not all firms succeed, and hence, the so-called “Holy Grail” (the quest for perfection and mastery) eludes most firms.

For instance, though firms such as Yahoo in the Internet space were dominant players once, they lost the race to become market leaders due to some factors such as not anticipating the changing market trends and the shifting consumer preferences.

Even Microsoft with its much vaunted innovative and inventive strategies missed the Smartphone and Mobile Computing revolution that resulted in it being relegated to secondary and tertiary places in this niche.

Vertical and Horizontal Integration: The Example of Reliance

So, what should firms do to capture market share and be the Alpha player in their chosen niche?

To start with, they can undertake consolidation and integration which means that they can choose to aim for scale and size and then bludgeon the competition with their sheer size and ability to have deep pockets meaning that they can outspend their rivals.

This is the strategy that the Indian Oil and Petrochemical conglomerate, Reliance, adopted with regards to its launch of mobile and telecommunications offering under the banner of Jio.

This happened recently wherein Reliance with its ability to outspend the competition due to it using some of the profits from its other ventures to plow them into Jio leaving the competition gasping for breath.

Indeed, Reliance is also an example of how Vertical and Horizontal Integration strategies work in the real world.

Before we discuss what vertical and horizontal integration are, it is important to note that firms who are in one business can consolidate by expanding into all the allied and ancillary businesses around the concentric circles of their core competencies.

Thus, vertical integration happens when firms such as Reliance who are into the oil and gas exploration market enter into upstream niches such as refining, processing, retailing, and allied sectors. Indeed, vertical integration means that firms expand and grow into all the secondary and tertiary sectors that are associated with their core business.

The Example of Amazon

Taking the discussion further, Amazon with its recent acquisition of Whole Foods is another example of how vertical and horizontal integration happens.

Consider a grocery shop and then imagine what would happen if the grocer expanded into growing foods, farming, distribution, and even doorstep delivery.

Now imagine if this grocer acquires or expands into clothing stores, toys, gadgets, and the like.

Thus, the former is an example of vertical integration and the latter is an example of horizontal integration. Both Reliance and Amazon are highly successful examples of how vertical and horizontal integration happen in the real world.

Failures of Diversification and Integration

Having said that, this does not mean that mere expansion and integration always pay off. For instance, the Murugappa Group in India diversified into allied and non-allied sectors over and above its core competency, and this eventually led to its downsizing and selling off some of its businesses as External Consultants such as McKinsey felt that it had moved far away from its core competency.

Indeed, the lesson here is that firms can integrate vertically and horizontally as long as there are complementarities between its core business and the businesses it is expanding into.

This can be seen in the way firms such as Unilever and Proctor and Gamble always make sure that they do not “stray” too much away from their core competency of FMCG or Fast Moving Consumer Goods.

Synergies and Efficiencies

In addition, firms can always consolidate their operations and become bigger to ensure that they outsmart the competition with sheer size.

This is the strategy employed by firms such as Apple and Infosys wherein because of their sheer size; they can “stay in the hunt” and “outlast” their peers as they have ample cash reserves and the scale and the size needed for longevity.

Indeed, the adage that “bigger is better” works in business though it might not work in terms of environmental and ecological concerns. Humor aside, the fact is that as long as firms know what they are doing, they can always be counted upon to deliver.

The clear insight that one gets is that synergies from the integration of different and discrete businesses and efficiencies of scale from size or the benefits of the returns from “economies of scale” should be ensured for firms to become dominant players.

Synergies or the term used to refer to the gains from integration and consolidation due to complementarities and supplementary benefits from integrating different businesses and the efficiencies from the economies of scale or the gains from scale and size should never be discounted.

Organic and Inorganic Growth

Firms can also grow organically and inorganically meaning that they can grow naturally through any of the strategies discussed until now or they can also acquire other firms and take over smaller firms or merge with bigger firms thus growing inorganically.

Each firm or business must adopt particular growth strategies depending on their specific business and market trends and circumstances.

There is no one right way to growth and the most successful of firms ensure market dominance by sensing and intuiting what works and what does not work in their case.

Conclusion

To conclude, everyone loves growth, and as we have discussed so far, there are many ways to grow and more often than not, it depends on the leaders and the visionaries who are in charge of the firms to use their acumen to decide on a particular strategy.