Chapter II

Review of Related Literature

Business Growth

Growing is one of the main motivation of businesses. Some methods that are being used as a

result of growth strategies are new sales strategies, new product development trials, trying to

create new investment areas, and merges. Growth strategies have some impact on businesses

whatever method is used. Grow and to make profit is the main goal of a business. As a result of

increased competition with globalization, surviving of companies and getting sustainable

competitive advantage depends on growth and development strategies.

According to Gale & Brown (2013) if a business sustains through the start-up stage, as a

young business the growth rate is the highest at any period of the business. Young and small

businesses grow faster than any other group of small businesses and create new jobs through

innovation. When compared to businesses that are older, young businesses have a higher growth

rate.

Furthermore, Decker et al. O2014) stated that the consideration of age as a factor of business

growth is important long after 5 years old.Conclusively, researchers have found small business

growth slows as they age resulting in reduced or negative job creation; it is important to consider

age when assessing growth. Additionally, Fort et al. (2013) found that small businesses initially

have high growth during the start-up and young stage, but have a decline in growth when the
growth analysis controls for business age. Consideration of business age when calculating growth

has become an important aspect of understanding growth issues among older, small businesses.

Moreover, small businesses have higher growth rates than larger businesses, but the

comparison balances with age (Haltiwanger et al. ,2013). Decker et al. (2014) and Gale and

Brown (2013) agreed that mature small businesses have slow growth, resulting in many net job

losses.

Hieronymi (2013) ; Karniouchina et al. (2013) claimed that when exploring the

development and use of growth strategies, it is essential to consider the age of the business. The

age of a business may influence the resourcesavailable, the vulnerability of industry or economic

cycles, the strength of its customer base, and adaptability to new production demands.

According to Eren (1987) aiming growth of business mandates managers to adapt business

to the development and changes in future by knowing environment better instead of executing

todays condition. Several researches has witnessed that nowadays small enterprises are also

continuously adopting innovative marketing strategies to mark their presence in this competitive

world. Much of this successful marketing is driven by innovation, however, to date, the

prevalence of Innovative Marketing Research has focused on firm-specific characteristics of

innovation, and/or the effect of external environment (Wolfe, 1994).

Furthermore, Satyajit Majumdar (2008) claim that growth is understood variously be

entrepreneurs, and their attitudes influence the goals and ambitions concerning growth. Their
actions in this regard depend on the contextual conditions. There are three model of growth

strategy in small entrepreneurial organizations that reflects strategic and entrepreneurial

dimension of growth. First, is the attitudes and vision of the entrepreneurs drive growth of small

organizations, second is entrepreneurs of small organizations conduct early search for strategic fit

in the market and the environment, and lastly entrepreneurs of small organizations persist in their

search for better fit in the market.

Jay Y Trivedi (2013), tried to find out the various marketing practices applicable to SMEs and

to evaluate the benefits of E-marketing, internet marketing and CRM. They collected their data

by different 5 managers of SMEs in Gujarat through personal interview and concluded that in

SME scan easily bring in the innovative marketing practices as they don’t have layers between

the decision makers and the people who implement these decisions. SMEs’ innovative marketing

strategy can work, if it is based on clearly formulated marketing program to reach the potential

and existing customers.

In addition, Gerald Sumari (2013) imply that growth means increasing sales, assets, net

profits and a chance to take advantage of the experience curve to reduce the per unit cost of

products sold and thereby increasing profits. It is the most frequently used corporate strategy.

Bhatnagar & Jyotsna (2008) claim that to face the competition at international level SMEs need

to look for formal cluster approach. This innovative marketing approach will help the SMEs to

build on cohesive market strategies to beat competition. Whether the companies is large or small,

the ultimate aim is profit maximization and to beat the competitors the companies need to market

their products to generate the sales (Carson, 1993). The marketing function in SMEs is hindere by
constraints such as poor cash flow, lack of marketing expertise, business size and strategic

customer-related problems (Doole et al., 2006).

According to Vasanth Kiran et. al (2012) in their study tried to find out the gap between the

small and large enterprise in terms of the importance and problems in innovative marketing in

SME. They came up with model which says that in a situation where consumers are flooded with

the informations of various products in a single second the SMEs should have an integrated

business strategy which combines Business and Market insights, Brand Positioning, Processes

and Management and Operational Marketing. Raju and Gopal (2006) stated that the key to

success in industrial marketing is Customer Relationship Management and in need to be

practiced by the organization immaterial of the size of their operation. The CRM practices need

to be as innovative as the customer satisfaction factor to play an important role in today’ market.

With the change of philosophy and the trends in the market, the need of the CRM activities came

into the existence.

To grow a business, entrepreneurs need a business development strategy. Here are some of

the growth strategies to grow a small business. According to Amanda Cameron (2017), Marketing

to existing customers is a best business growth plan for gaining more sales without acquisition

expenses. An entrepreneur can reach out to existing customers to announce discounts, events, and

news happening on a business. An entrepreneur could market to new customer bases to increase

sale. They make a market analysis on local consumers to come up with a marketing strategy.

Some growth strategies for small business include offering special perks to firsttime customers

and current customers who refer people. An entrepreneur can also grow a business by adding new

products or services. They find out issues that need to be solved in a market and what an
entrepreneur could provide to fix them. Expanding a market can also help an entrepreneur to grow

their business.

Market Penetration Strategy, entrepreneurs look at the current product, the current market,

and how they can increase their market share. To increase their market share is by

lowering their selling price, the second option is to offer promotions, and entrepreneurs can offer

trade and sales discounts. This will not only attract current customers but it may encourage new

customers to try the product or services (NSBC, 2018). Market Penetration Strategy is a measure

of how much a product or service is being used by customers compared to the total estimated

market for that product or service. Market penetration can also be used in developing strategies

employed to increase the market share of a particular product or service.

(Martin 2017)

Market Development Strategy, it was uses by looking at the different uses of a product or

service they could find that there are other markets which they should target (NSBC, 2018).

Furthermore, Market Development Strategy is a product-market strategy whereby an organization

introduces its offerings to markets other than those it is currently serving. They follow this

strategy for a current brand when it expands the potential market through new users or new uses.

New users can be found in a new geographic segments, new demographic segments, new

institutional segments or new psychographic segments. Another way is to expand sales through

new uses for the product.(Martin, 2017)

In Product Development Strategy a new product is developed to sell to an existing

marketing. For a small business entrepreneurs could use product expansion by innovating and

adding a new product to their product line, or they could add a new feature to an existing product
(NSBC, 2018). Additionally, Product Expansion Strategy was also known as Ansoff's Matrix. It

is used for planning by a company is looking to increase the sale of its products either by

expanding product range or entering new markets. Martin 2017.

Growth strategy allows companies to expand business. Diversification Strategy is used

by small business to enter a new market with a new product. There are two ways of

diversification, an entrepreneur can start a whole new product which is completely unrelated to

what a customer is currently doing or look at a product which is different to what a consumer

does but still services the same market which they are involved in (NSBC, 2018). Sujan Patel

(2019) suggest that adding new locations, investing in customer acquisition, or expanding a

product line practices can achieved growth. A company's industry and target market influences

which growth strategies it will choose. In Diversification Strategy entrepreneurs will sell new

products to new markets (Martin,2017).

Market Segmentation Strategy is the process of dividing and subdividing a large

homogeneous market into clearly identifiable segments having similar needs, wants, or demand

characteristics (Martin,2017). In Market Segmentation Strategy it is use when entrepreneurs

need to divide the market into smaller segments and focus on a specific market. (NSBC, 2018)

Furthermore, Acquisition Strategy is primarily considered as a big-business growth

strategy. It deals when the company purchases most or all of another company's shares to gain

control of that company (Martin,2017). Koçoğlu (2012)argue that business can grow by acquiring

competitors or merging with competitors based on abilities. Strategies such as differentiating

operating areas, finding new markets can be followed for growth. In addition, entrepreneurs can

also acquire other businesses, acquiring other business is a very quick way to grow their own

business. They must take a look within their industry and even outside of it to find potential for

potential opportunities (Adams, 2017).

John Spacey (2017) stated that some of the growth strategy are promotion, branding,

innovation, improving the quality, pricing, and distribution. Promotion was done through

promoting products and services in order to gain market share. Branding or brand strategies seek

to create a valuable identity in a crowded market that customers recognize in order to gain market

share. Innovation aims to completely change an industry as opposed to directly competing with

what exists today. Improving the quality of the products and services may improve the market

share. Pricing was done by offering a low price of products and services. Distribution was done by

expanding the distribution of a products and services into new markets. It was done by finding a

distribution to sell a product. Akula

Ravi (2008) stated that co-branding can strengthen the performance of the existing

products. This strategy can be considered as innovative marketing idea to captivate consumers’

attention. Furthermore, with the shift in the technology, consumers are more tech say and internet

blogs, e stores etc. are the innovative marketing practices adopted by SME the conclusion drawn

by Agarwal, Vaishali(2009)

Moreover, Alternative Channel Strategy uses internet to sell products like online shopping

or using a shopping application. This strategy has been greatly beneficial for small businesses and

entrepreneurs, since they were provided a platform where they can have a chance of competing

against more established brands (Martin, 2017).

 Adams (2017) stated that on growing a small business, entrepreneurs must create a loyalty

program. Loyalty programs are great ways to increase sales. It costs up to three times more money

to acquire new customers than it does to sell something to an existing customer. Building a

customer loyalty program will help entrepreneurs to retain customers. It might also help them to

attract new ones as well.

Entrepreneurs must also identify new opportunities. Analyze new opportunities in a

business by understanding their demographic better. Understand everything from distribution

channels to their direct competitors, and even an analysis of foreign markets and other potential

industries ( Adams, 2017). Barringer & Greening (1998) stated that a strategy utilized by small

firms to achieve their growth objectives is Geographic Expansion. It involves expanding a firm's

business from its original location to one or more additional geographic sites, this strategy also

suited for business that cannot expand in their present location but their products or services may

be appealing to consumers in other markets. This is simply franchising so that others can

experience the products or services, and business.

Adams (2017) stated that entrepreneurs must also form strategic partnerships.

Strategic partnerships with the right market can truly make a world of difference. It could allow

them to reach a wide swath of customers quickly. Identifying those partnerships might be easier

said than done. In Leveraging Partnerships Strategy it is making partnerships to those who has

what you don't have. These partnership may aldo help entrepreneurs cut down on costs, increase

efficiencies, and help the business grow (Martin, 2017).

Amanda Cameron (2017), suggested that some of the growth strategy on growing a small

business was to define ideal customer. Entrepreneurs must find out everything about their ideal

customer, entrepreneurs must find out how are the customers willing to spend, on what are the
interests of the customers, and how are customers willing to extend. This information can be use

to market to target customers.To define business's value, entrepreneurs need to convince

consumers to buy from the business in order to grow. It is by making survey asking customers

about the business or simply allow customers to make a review about the products in the

website. To review customer engagement strategies, customer engagement encourages

consumers to be interested in and buy from the business. Show customers by using friendly

processes and listening to them. To cut costs, cutting necessary expenses will give more capital.

Learn how to do things more efficiently. To create objectives, one of the most essential parts of

small business growth strategy is a set of goals to work for. Create key objectives to work

towards. This will inspire entrepreneurs to work hard.