INTRODUCTION: When a firm aims at substantial growth, it adopts growth strategy. The growth strategy is also called as expansion strategy. To achieve higher targets and objectives than before, a firm may enter into new markets, introduce new product lines, serve additional market segments, substantial increase in market share and/or increase in sales targets. This strategy involves greater effort and risk as compared to stability strategy. DEFINITION OF GROWTH STRATEGY: According to William Glueck ―a growth strategy is one that an enterprise pursues when it increases its level of objectives upward in significant manner, much higher than its past achievement level. The most frequent increase indicating a growth strategy is to raise the market share and or sales objectives upward significantly‖. MEANING OF EXPANSION STRATEGY: A strategy used at the adapter level to identify whether objects should be loaded or not in the representation model. The expansion strategy defines how an object is going to behave when it is expanded. It also indicates whether load on demand is implemented. We further define an expand strategy as one in which we are growing significantly faster than the market or market segment is growing overall. MEANING OF GROWTH STRATEGY: Growth is a way of life. Almost all organizations plan to expand. This strategy is followed when an organization aims at higher growth by broadening its one or more of its business in terms of their respective customer groups, customer functions, and alternative technologies singly or jointly – in order to improve its overall performance. E.g.: A chocolate manufacturer expands its customer groups to include middle aged and old persons among its existing customers comprising of children and adolescents. Page 1 of 31 NEED AND IMPORTANCE OF GROWTH/ EXPANSION STRATEGY: 1. Survival: In the long run, growth is necessary for the survival. If a firm does not grow, new entrants may push it out of the market. Also, firms adopting growth strategy would be in a better position to withstand pressures during recession. Growing firms may be in a better position to face the challenges of business environment. 2. Innovation: Growth strategy enables innovation in the organization. Due to growth strategy, the organization gets higher performance. As a result, the employees get higher incentives. Therefore, the managers and employees come up with innovative ideas in respect of; new products, new methods, new schemes, etc. innovation gives competitive advantage in the market. 3. Motivation to Employees: The growth strategy generates higher performance. The higher performance enables the firm to motivate employees with incentives: monetary incentives and non- monetary incentives. Due to motivation the employees work with application and dedication, which it turn improves efficiency of the organization 4. Customer Satisfaction: Growth strategy may lead to customer satisfaction. The growth strategy enables the firm to enhance customer satisfaction by providing quality goods at right prices. Customer satisfaction takes place when product performance matches with customer expectation. When product performance is less than customer expectation; customer gets dissatisfied. When product performance is more than customer expectation; customers are delighted. 5. Corporate Image: Growth strategy helps to improve corporate image of the firm. Due to the growth strategy, the firm‘s performance improves. Therefore, the image of the firm improves in the mind of various stakeholders: customers, employees, shareholders, suppliers, Page 2 of 31 dealers, etc. The support of various stakeholders is required for the survival and success of the organization. For instance, if the performance of the firm improves, the shareholders may get higher dividends, employees may get higher wages and incentives, customers may get quality goods at right prices, dealers may get higher incentives, etc. Mergers generate goodwill in the market. For instance, the merger of ICICI and Prudential in the insurance sector has enhanced the image of ICICI-Prudential not only in the Indian markets, but also in the global markets. Also Takeover strategy gains goodwill in the market. Large takeovers such as Mittal Steel of Arcelor Steel, and Tata Steel of Corus gave them a wide publicity in the markets worldwide. At times, takeover increases the confidence in the shareholders of the company. Customers may also develop a good image of the company, especially when the takeover is of reputed firm. 6. Competitive Advantage: Growth image provides competitive advantage to the firm. Due to growth strategy, the firm makes every possible effort to face competition in the market. The firm comes up with proactive decision rather than being reactive. The proactive decisions give competitive advantage in the market. Takeover strategy also helps to face competition in the markets. For instance, in 1993, Coca Cola took over Parle Breweries brands of Thums Up, Limca, Mazza, etc., in order to consolidate in the Indian market, and to overcome the problem of competition from Parle Breweries. Also, Matsushita Electric of Japan took over 80% control of privately held anchor Electricals (from the Mumbai based Shah Family- now controls only 20%) in order to overcome the problem of competition from Anchor in India. At the time of taking control, Anchor was having 33% of the Indian domestic electrical market. 7. Economies of Scale: The growth strategy enables a firm to take proactive decisions. Therefore, there is increase in demand for the firm‘s products. Increase in demand results in large scale production and distribution, which in turn brings economies of scale: Economies of large scale production such as discounts on bulk purchase of materials, saving in labour costs due to installation of labour savings devices, etc. Page 3 of 31 Economies of large scale distribution such as freight concessions on bulk shipment or distribution, economies relating to sales force, etc. 8. Efficiency: The growth strategy generates higher efficiency in the organization. Efficiency is the ratio of returns to costs. Firms adopting growth strategy may undertake various activities such as: Technology up-gradation. Training and development. Research & development, etc. All the above activities result in higher efficiency to the organization, i.e., the firm gets higher returns at lower cost. 9. Expansion of Business: The growth strategy facilitates expansion of the business. Due to the growth strategy, the performance of the organization improves in terms of sales, market share and profits. Therefore, the firm would expand from local to regional level, from regional to national level, and from national to international level. 10. Optimum Use of Resources: Due to growth strategy, the company gets higher demand for the goods/services. Increase in demand results in large scale production and distribution. Therefore, a firm can make optimum use of resources such as: physical resources, capital resources, and manpower. 11. Tax Advantage: Merger can be used as effective source of tax planning, especially, when one of the merged entities was having accumulated losses. In such a case, it can result in several tax savings for the merged entity. At times, takeover helps a firm to gain substantial tax benefits. For instance, if a firm takes over a loss making domestic firm, then the firm can claim tax benefits. Also, a foreign firm acquiring a domestic loss making company, then it can claim tax benefits in certain countries. 12. Spreading of Risks: Business growth helps to spread business risks. For instance, a diversified firm can spread its business risks. If there are losses in one area of business, the losses may be covered up from profits of other areas or other types of businesses. Page 4 of 31 TYPES OF GROWTH STRATEGIES: The growth strategy can be further classified into: Internal Growth Strategies: which include diversification strategy and intensification strategy. External Growth Strategies: which include mergers, takeovers, strategic alliances and joint ventures. I. Internal Growth Strategies: 1 DIVERSIFICATION STRATEGY: Diversification is one type of internal growth strategy. It involves entry into new products and in new markets. Diversification can be defined as entry of a firm into new product or product lines, new services or new markets, involving substantially different skills, technology and knowledge. When an established firm introduces a new product which has a little or no affinity with its present product line and which may be meant for a new class of customers different from the firm‘s existing customer groups, the process is known as conglomerate diversification. Page 5 of 31 Types of Diversification Strategies: Diversification can take place in several forms: i. Vertical Diversification: It consists of extending the activities of a firm. It can be in two forms: a) Backward Integration: In backward integration, a company moves one step backwards from the current line of business. For instance, a firm may tie up with supplier of raw materials, or take over a firm that supplies raw materials, or may itself decide to manufacture raw materials and/or components required to manufacture its final product. For instance, Hero Cycles has set up a subsidiary to manufacture cycle wheels and tubes. b) Forward Integration: In this case, the company moves one step ahead of its current line of business activities. For instance, a cloth manufacturer may enter into readymade garments