Internal growth strategy occurs when firms grow from within. They use their own resources or acquire them from outside to increase their size, scale of operations, resources (financial and non-financial) and market penetration. Firms also grow by expanding their scale of operations. It may be product expansion or market expansion. They concentrate on products and markets which have not yet reached their maturity stage.
Intensive growth or product/market expansion can be achieved in the following ways:
1. Increase sales of existing products in the same market through better promotional efforts or introduce new uses of existing products. The firm penetrates into the market to increase its market share. Sale of products like tea, coffee or bourn-vita is promoted in this manner. Selling tea in tea bags, cold tea, cold coffee represent sale of the same product to the same consumers by promoting their new uses.
This strategy is suitable for firms with small market shares. It is called the strategy of market penetration. It increases sale of existing products in the existing markets to present and new customers. Growth is achieved by expanding market base of the company.
2. Increase revenues by introducing new products in the existing markets. Adding similar products to the existing products promotes growth in the existing markets. Firms that sell soaps can also sell detergents to achieve higher growth targets. This is called the strategy of product development.
3. Increase sales of existing products to new customers in new markets. Transport companies can grow by increasing transport services in national and international markets. Firms reduce the price of products to approach the middle and lower-income groups in new markets. It means selling existing products in unexplored markets.
It is called the strategy of market development. It increases sales by entering into new markets with same products or products with minor modifications. Mobile companies have grown by selling mobile phones with affordable prices in rural areas. Cosmetics can be sold in different markets with different consumer preferences and price ranges.
4. Increase revenue by adding new products to the existing products, new markets to the existing markets, modifications in the existing products to cater to new market segments. Changes in colour, size, shape or similar features increase sales in existing and new markets. This is called the strategy of product and market development.