What are Your Options for Growth?

By John Riley

 Building incremental sales has been one of the lesser options for rapid growth for many years. It’s just too slow. When a company begins to think about doing something to make their financial sheet look more robust, they begin to consider other options.

 While growth is often important, other issues often come into play as well. It depends entirely on the needs of the purchasing company.  Some examples:

 The target company may have a strong research department with promising new products in development.

 The target company may have some highly skilled engineers in their product design department.

 The target company may have a solid distribution in a key market the buyer wants to penetrate.

 The target company may have several core accounts the buyer wants to capture.

 Developing and introducing new products can reinvigorate a company’s sales and profit efforts. It also has the virtue of making life difficult for the competition. However, unless the company has a healthy research budget with a stream of new products in the pipeline, additional sales will be spotty.

 Entering a new market can open up new revenue possibilities, but it is a costly and time consuming process. Additionally, competition will be reacting in the form of cut prices or some other counteraction.

Distribution is likely to be contested by the new entry, but if the competition has strong distributor relationships, any new comer is likely to find it difficult to penetrate the market.

 Mergers are a viable option if the two parties can make the merging of two different cultures work. That’s is one of the most challenging issues.  Beyond that, such things as who holds controlling interest, executive appointments and restructuring of the organizations are not easy to reconcile.

 Partnerships share most of the same challenges of mergers.  In this case, the partner with the most money usually emerges as the ‘senior’ partner.

 Acquisitions have long been labeled as the fastest road to financial success or failure. Transactions are either in cash or stock or both. Culture differences can also intrude here when two companies become one. Many successful acquisitions have been accomplished over the years by companies of all sizes. Time Warner’s $124 billion purchase of AOL is a compelling example of how not to make a acquisition.

 Achieving solid growth year in and year out is hard enough, but achieving rapid and significant growth is not only difficult, but risky. So as you consider your options, do your due diligence carefully and your chances of success will be much greater.

Explore posts in the same categories: Management, Operations

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