Any company in today’s global economy must eventually face the issue that if it is not
growing, it will be expiring.  Essentially, companies can grow revenues in three
fundamental ways, and all companies must choose (and must continue to choose over
time) among these options.

Option 1: Expand Internally

This option requires a company to capitalize growth based upon its superior technologies
and/or expanding markets.   Most firms select this growth strategy because they can
control it most effectively and because, if successful, it can yield the greatest rewards.
However, this option has some considerable limitations.  It is contingent on strong markets
(domestic and foreign), good profit margins, and the ability to staff the expansion with the
right people.  It also requires sufficient cash to fund the internal growth strategy both short
and long term.  Finally, by going it alone, the company may be blind to important changes
in the competitive marketplace.

Option 2: Mergers and Acquisitions

This approach is quite risky and requires large sums of cash and/or stock and excellent
profits. Many companies have employed this option, whether to acquire new technology or
to access new markets or as a part of a diversification strategy.  Regardless of the reason
for the merger or acquisition, failure rates, on an industry-by-industry basis, have always
exceeded the success rates by a significant margin.  

A merger or acquisition might make sense when two companies combined can have a
much more dominant market share thereby taking advantage of economies of scale by
joining together.  Moreover, this option may be an effective tool if the strategic and
operational “fit” is correct, and if the acquiring company has the ability to control the
“aftershock.”  Acquisitions may also be a preferable alternative when one company needs
better locations for distributing its products or service, larger facilities for production,
additional resources or sources of supply, greater opportunities for expansion, and
immediate political approval in foreign countries and so on.   Generally, mergers make the
most sense when in your core business, whereas Option 3: Alliances are better suited when
entering new technologies or fields outside of the core business.

Option 3: Alliances

Alliances are a fast and flexible way to access complementary resources and skills that
reside in other companies and have become an important tool for achieving sustainable
competitive advantage. Alliances require leveraging valuable internal resources and current
competitive advantages in new and innovative ways.  Alliance formation requires a
minimum amount of cash and can be formed with a number of alliance partners
horizontally or vertically in numerous markets.  However, as alliance formation is a fairly
new growth option for most companies, they tend to bring some increased risk to the
inexperienced.  Regardless, growth through alliance formation has seen an almost
explosive energy in the past fifteen years as a vital secret and silent competitive weapon
by many companies.  Most alliances formed between companies are not made public,
either because the companies choose not to publicize the collaboration, they want to keep
the deal confidential for competitive reasons, or because business journalists do not see
them as “sexy” as mergers and acquisitions.  

Finally, many companies have learned that an alliance strategy is a good preliminary step
prior to an acquisition.  If an alliance will not work, it’s more likely an acquisition would not
have worked as well.  But the lesson costs are far less with an alliance – typically 25% -
35% of the cost of a doomed acquisition.

Your growth strategy for the 21st Century will likely involve all three options.  Your success
will depend upon your management team’s ability to quickly understand the market
opportunities, the right option to deploy and the amount of risk your company is willing to
take.  Are you ready to compete in the 21st Century?  Is your management team capable
and available to position your company for growth in today's global economy?  
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