Growth Strategy in Dispute at Traffic Clothing PLC

1. Use the case study to explain the difference between 'internal' and 'external' growth.

The main difference between internal and external growth is that internal growth is done within a business or a company while external growth is described as marging of two or more different companies. Therefore, it's done outside of a particular business. Using the case study, an example of internal growth would be the opening of low-cost factories in developing countries. On the contrary, taking over another clothing producer or material supplier would be an example of external growth. To be more specific, an example of the external growth would be a merger of the company with a prestige clothing retailer.

2. Explain how the business increased sales revenue, yet gained no increase in profits for the last three years.

Opening low-cost factories in developing countries helped to increase sale reveneu. However, there was no increase in profits for the last 3 years, This was due to several factors. For example: new competitors entered the industry and drove down prices. Another reason for no increase in profit was the rapid increase in prices of raw materials. Lastly, there was an increase in ther bargaining power that was done by the number of mergers between retailers.

Questions number 3 and 4 are higher level questions!

Ansoff's Matrix

Market Penetration:
Market Penetration is one of the objectives used in Ansoff's matrix. The potential gain of using this strategy is achieving higher market shares, possible increase in sales as well as improvements in  marketing. This can be done by selling existing product in an existing market, which obviously lowers the risk. However, even though market penetration is the least risky of the four strategies, companies using this strategy should still be careful. Since low prices are a method used to penetrate a market, it could eventually lead to a damaging price war that reduces overall profit of all firms in the particular industry.

Product Development:
This strategy is a bit more risky than market penetration. In order to develop and sell new products or new developments of already existing products in existing  markets, innovation of the product often must take place. This can be done by altering existing products to create something new and unique. Another possibility is to create completely new products. However, innovation of the product might lead to a distinctive identity of a business, which might be both positive and negative.

Market Development:
Market Development can be explained as a strategy used for selling existing products in new markets. This can be done by using geographic or demographic changes as well as by re-packaging for different market. To be more specific, this might include exporting goods to overseas markets. Even though that market development might be often a very successful strategy, it definitely contains a certain amount of risk too. Selling products in new markets might not always be appealing to a new range of customers. Therefore, it is recommended to do some research about a new market and its customers first.

Diversification:
Diversification is the process of selling different, unrelated goods or services in new markets by either looking for new markets for these new products or by diversifying into different products or services. This strategy is the most risky of the four strategies because it involves new challenges. A firm might later find out that it does not have enough competencies to survive in the particular industry. However, this strategy has several advantages too such as the possible reduction of overall business portfolio risk or the potential gain in an expanding industry.

The Analysis of the Starbucks' Article

"Starbucks Aims To Move Beyond Beans"

 Starbucks has been using several methods for growth of the company. They mostly have been using the internal or organic growth. One of the methods that Starbucks has been performing is expansion. By opening new stores in different parts of the world, Starbucks has become even more popular among the customers and they have increased their availability. They are also ready to open a string of stores that will be dedicated to the brand. Another method is diversification. Even though their main product making the most profit is still coffee, Starbucks has acquired three new business: Evolution Fresh Juices, La Boulange Cafe and Bakery, and lastly Teavana. The huge investment that Starbucks had to make will lead to an expansion of  the range of products Starbucks offers as well as it will give Starbucks an opportunity to compete in a different field of products. However, there are several obstacles that Starbucks should overcome in order to remain a successful company. One of the problems is that Starbucks stores were built to sell and offer coffee and not food and therefore, they are much smaller. Starbucks might start to thing about expanding their stores which would also cost them a lot of money. It doesn't have to be that much of an obstacle anymore, since lately they found how to squeeze freezers into all the Starbucks stores. On the contrary, Starbucks' primary business concentrating on coffee is most successful in the morning and by offering other new products such as healthy snacks, fresh juices and candies Starbucks might attract new customers and increase profit, which would balance their loss from the investment. In order to overcome obstacles, Starbucks started to pay lots of attention to detail. For example: Starbucks has been criticized by many consumers that the food they offer is not a good quality. Therefore, Starbucks had made sure  that one employee in each store is responsible for serving well baked and warm goods such as a chocolate croissant. The three related businesses, Evolution Fresh Juices, La Boulange Cafe and Bakery, and lastly Teavana, should make sure and be careful about not getting into a shadow by Starbucks dominant brand. They need to make sure they are being viewed as a brand instead of being viewed as an additional product line. Starbucks has had to invest lots of money into their expansion and diversification, and therefore they should keep being careful about what they are doing. The new range of products that they started to sell might affect (not necessarily in a positive way) their popular brand and a good image. 

  

Internal Growth (Articles)

1. How dukawallah family built top supermarket brand 
(http://www.businessdailyafrica.com/How-dukawallah-family-built-top-supermarket-brand/-/1248928/2031994/-/fqmaqwz/-/index.html)

Chandarana Food Plus supermaket has shown a clear example of the internal growth. In 1964, the founder of the supermaket, Shantilal Mulji Thakkar, opened his first grocery store. Shantilal was known as a seller who offered his costumers mainly spices, powders and brown paper packets of grains which later created a synonymom "Indian food and Spices" for his company. After Shantilal's death, his sons (Anil, Sanjay and Dipin) took the family business under control. By expanding the grocery that originally targeted only Asian community changed into a "Kenya's most affluent and niche supermarket brand." In the last 50 years, Chandarana Food Plus supermarket has grown from one branch to eight. Even the number of employees rapidly increased. From 12 employees to 500. Fifty years ago, Chandarana had been selling approximately 500 products. Now, they have been offering customers more than 20,000. Chandarana even managed to change their logo "Chandarana Supermarkets" to "Chandarana Food Plus". Internal growth that has been this family brand performing built one of the top supermarket brands!

2. Growing business by developing products and markets -  A Beiersdorf case study
(http://businesscasestudies.co.uk/beiersdorf/growing-a-business-by-developing-products-and-markets/growth.html#axzz2hotAZZ2m)

Beiersdorf is a skincare company behind many famous brands such as NIVEA, ELASTOPLAX, ATRIXO and EUCERIN. The company was first found in 1911 by German phermacist, Paul Beiersdorf. The first product they developed was NIVEA cream. This was the beginning of NIVEA, which is now considered to be one of the world's largest skincare brands. Their huge success is probably a result of a very good marketing strategy. For example: They have been regularly expanding their portfolio in line with changing consumer demand. To be more specific, in 1980s the company started to offer new products such as sun protection, soaps or bath and shower products. Another example of the company's internal growth is introduction of the first mass market male skincare brand called NIVEA FOR MEN. As NIVEA FOR MEN entered the market back in 1998, the company became even more successful among the costumers. It started to target not only women who like to pamper themselves but men too. Therefore, their target population increased and so did the sales. Beiersdorf has also expanded into many European economies which made the company and its products more available.

Franchising

There are several conditions such as recession that are either favorable or unfavorable for some franchise sectors. The most successful sectors are the following:

1. Fitness Centers: Nowadays, fitness is seen more like a necessity than a luxury. It has become more popular among the customers and therefore, also more available. Fitness Centers benefit mainly from membership-based model that provides consistent cash flow.

2. Healthcare: Healthcare franchise tend to grow during both good and bad times. Overpopulation is fueling them and makes them very successful

3. Fast-Food Restaurants & Convenience Stores: These franchises often offer discounts and specials that cause them to be very popular among consumers. The most successful are hamburger, pizza and doughnut restaurants.

Other franchises such as tax services and educational programs are also doing pretty good.

Sectors that are less successful are the following:

1. Financial Services: These franchises were hit by finance crisis and even though they started to recover since 2010, the recover is still very slow, especially for banks.

2. Real Estate Services, Property Inspection, Hardware Stores: The main reason of them being still in decline is that the real estate market is still struggling.

3. Automotive: Decreased traffic volume and high gas prices causes auto-related franchises to lose units.

Other less unsuccessful franchises are for example: video rental or general printing services

Home-based franchise - Jan-Pro Franshing Int'l. Inc:

They offer commercial cleaning services to businesses such as gyms, banks, schools, churches. They use cleaning products that contain less chemicals. The advantage of home-based franchise is that it can be run from home. Another advantage is that the number of  employees needed to run one unit is only one.

Low-cost franchise - Novus Glass Franchise:

This franchise began franchising in 1985. They came up with an idea that instead of replacing windshields that could start repairing them. Therefore, this franchise offers windshield repair system.The advantage of this franchise is that they are seeking for new franchises units in many countries such Mexico, Canada, Western Europe or New Zealand.Also 20% of all franchisees own one unit and this franchise can be also run from home.

The franchise ranked in the top 100 overall - McDonald's:

They are a fast-food restaurant that offers quick-service hamburgers, fries, milkshakes, chicken, salads and breakfast items. There are several factors that make this franchise successful. First, McDonald's is an internationally-recognized brand thanks to their availability. They have franchises all around the world and by serving food quickly they became very popular among the customers. By offering children's menu called "Happy Meal"containing a little toy they gained children's attention too. Interestingly enough, franchiser is still seeking new franchises units worldwide. 80% of all franchises own more than one unit.