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Analysis of business growth strategies and their contribution to business

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 International Journal of Economics, Commerce and Management
United Kingdom Vol. I, Issue 1, 2013
http://ijecm.co.uk/ ISSN 2348 0386

ANALYSIS OF BUSINESS GROWTH STRATEGIES AND THEIR CONTRIBUTION TO

BUSINESS GROWTH: A TANZANIA CASE STUDY

Absanto, Gerald
Institute of Continuing Cooperative Development and Education, Moshi University College of
Cooperative and Business Studies, Tanzania
geraldsumari @yahoo.com

Nnko, Elisifa
Moshi University College of Cooperative and Business Studies, Tanzania

Abstract
Growth is the most frequently used corporate strategy. It 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. Business growth can be realized through several
different indicators. The indicators can be grouped under four categories namely; business
outcomes, business outputs, capacity and qualitative indicators. In most recent years it has
been argued that most of Tanzanian companies have been experienced a slanted growth the
situation which is reflected in few companies being listed in the country’s stock exchange
company, the Dar es Salaam stock exchange (DSE). Among the reason sought for few
companies listed on DSE are most of the companies failing to grow in terms of profit for three
consecutive years which is one of the conditions for a company to be listed and inability of most
of company managers to execute growth strategies effectively.
Limited studies have been done to explore the application of growth strategies for Tanzania
companies. This paper analyses the application and implementation of different business
growth strategies in Tanzania context. It highlights how different businesses have benefited
from these growth strategies.
Keywords: Growth, Strategies, Tanzania

INTRODUCTION
Background
“The term growth means increase in size, or an improvement in quality as a result of a process
of development in which an interacting series of internal changes leads to increases in size
accompanied by changes in the characteristics in the growing object” (Penrose 1959). Growth is

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the most frequently used corporate strategy. It 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 increase profits. The cost reduction is very crucial if a firm’s industry is growing
quickly and competitors are engaged in price wards in attempts to increase their market shares.
Those firms which do not gain the necessary economy of large scale productions normally face
large loses unless they can find and fill a small but profitable niche where higher prices can be
offset by special product or service features.
Not every growth strategy is appropriate for every business. The key to finding the right growth
strategy is properly matching it to your company and its specific marketplace. Since the wrong
strategy can devastate your business, it's important to determine whether you are selling new or
emerging products in a new or existing market.

Indicators of business growth

Before we discuss different growth strategies which can be formulated by the business
strategists, it’s important to elaborate the indicators through which one can realize whether the
business is growing or not. This is important because it is through these indicators the
managers can assess the effectiveness and efficiency of their growth strategies. The indicators
can be grouped under four categories namely; business outcomes, business outputs, capacity
and qualitative indicators.
Outcome indicators: profit, the difference between revenues and costs is a common target
Of all private businesses and has to be achieved in order for any other objective to be
sustainably realized. The amount of profit that a business makes is a function of revenues
generated as well as the level of efficiency in the business. Increase in profit thus signifies an
increase in sales and increase in efficiency. So generally one can observe his/her business
growth through the increment of these aspects.
Output indicators: the main outputs of the business are the products and or sales. Production
level can be a reasonable indicator of the business size because it’s likely to reflect both the
capacity of the business and its potentiality for profit. The value of goods produced is not readily
available to the outsiders, so sales value is most widely used growth indicator. When amount of
products produced by the business increases it implies that the business is growing (Olomi
2004).
Capacity indicators: these reflect the potentials of the business to produce outputs and
outcomes. They include value of assets, capital invested, production capacity and workforce
size. The managers can realize their business growth by observing an increase in assets and
production capacity without forgetting the capital invested and the increase in number of
employees.

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Qualitative indicators: these include business structure, management practices, degree of

formalization. When the structure of the business is expanded to allow decentralization and
when management practices increase and become more complicated and the degree of
formalization increases, then the business is growing (Olomi, 2004).

Generally these are some important indicators which can be used to assess the business
growth. It is important for the strategists to understand whether the business is growing or not
and at what rate is it growing. Under this knowledge the strategists will be in a position to
choose the best growth strategy for their business at a particular time.

THE ROLE OF GROWTH STRATEGIES TO THE BUSINESS SUCCESS

While the need for firms to develop generic strategies is still unresolved debate, strategists
agree about the critical role of the growth strategies. Growth strategies are often called the
master business strategies; they provide the basic direction for strategic actions. They are the
basis of the coordinated and sustained efforts directed towards achieving long term business
objectives.(Mital, Robinson Jr, Pearce II, 2008).
The growth strategies have been playing the central role in the expansion, development,
stability and finally success of the business. These grand strategies have enabled organizations
to increase their market shares, develop new markets, and develop new products and services.
There are several different growth strategies to be applied by the business strategists but there
are four of them which are the result of product or market or both product and market changes.
These strategies have been elaborated into the figure below:
Figure 1: Product/Market Expansion
Existing Product New Product
Existing Market Market Penetration Product Development

Market Development Diversification

New Market

Source: Kotler, (1999)

However there are other growth strategies apart from the four on the figure above, joint
venture, concentric diversification, conglomerate diversification, horizontal and vertical
integrations and mergers and acquisitions. Generally the role of each of the growth strategies
has been discussed below with vivid examples.

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Market Penetration (Existing Products/Existing Markets)

Businesses that find themselves in a situation that involves neither new markets nor new
products are forced to grow through a market penetration strategy, a strategy that is designed to
give the business a greater percentage of market shares. This type of strategy usually seeks to
gain a competitive edge through pricing, marketing, or other initiatives. Additionally, market
penetration can be achieved by increasing customer usage through loyalty programs and
incentives targeting your existing customer base. Market penetration occurs when a company
enters/penetrates a market with current products. The best way to achieve this is by gaining
competitors' customers (part of their market share). Other ways include attracting non-users of
your product or convincing current clients to use more of your product (by advertising etc).

Tigo Telecommunication Company market penetration strategy

To understand more about this strategy lets take Tigo Telecommunication Company. The
company evolved from Mobitel through Buzz to Tigo, when it was Mobitel and Buzz there was
no any significant performance noted and actually had not seriously applied the growth
strategies. Then Buzz was changed to Tigo and the Tigo management decided to use market
penetration as their growth strategy. They targeted on providing the same service in an existing
market. At this time Tigo had about 4% market share. Then they acutely lowered the price and
subjected their service to high promotion, this strategy enabled Tigo to penetrate the market by
raising their market share to 25% which is equivalent to 19.6 million mobile subscribers in
Tanzania currently. Through this strategy the company has managed to attract people who were
non users of the mobile communication to join Tigo and also has attracted some customers who
were customers of competitor companies to join Tigo. Nowadays Tigo Telecommunication
Company is the Tanzania’s fastest-growing mobile network operator.

Market Development (Existing Products/New Market)

A more common strategy is one in which a business attempts to develop a new market for their
existing products and services. The new market can be geographical (e.g. foreign export) or an
untapped segment of a domestic market. It's even possible to develop a new market for existing
products by adjusting the product's packaging or expanding the product's distribution channels.
In any event, a market development growth strategy requires a working knowledge of existing
markets and the ability to identify gaps in the marketplace that can be exploited to the business’
advantage. If the marketing skills are not up to the task, the business will need the assistance of
a skilled marketing professional to achieve growth in the new market.

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Mzumbe University market development strategy

To understand thoroughly this strategy, Mzumbe University should be taken into account.
Mzumbe University provides both undergraduate and postgraduate studies. Previously Mzumbe
provided only full time Masters Programs, its market was only the graduates who wanted to
study Masters full time without other binding activities such as jobs, business etc. but then
Mzumbe University decided to add new market for its existing product (Masters courses), they
established MBA Executive program which targeted a new market of people who wanted to
study Masters while at the same time doing other non academic activities.

Product Development (New Products/Existing Market)

A growth strategy based on product development is the mirror image of a market development
strategy. Instead of pioneering a new market with existing products, the business attempt to roll
out a new product in a market with which the firm is already familiar. Many business owners are
more comfortable working in this kind of scenario because they already possess an awareness
of prevailing market conditions. However, a product development strategy can be just as
challenging as a market development strategy because it often requires the business to develop
new abilities and continuously adapt the products until they achieve marketplace success
(Kotler, 1999).

Pepsi Cola Company Product development strategy

Take an example of Pepsi Cola Company which is one of the largest beverage producers in the
world. The company has employed different growth strategies since its existence, however one
of the strategy the company has put into application recently is product development. Pepsi has
changed its product strategy by creating new products to follow the industry movement away
from mass branding. This new movement was designed to attract a younger, hipper customer
segment. Pepsi’s new products include a version of Mountain Dew, called Code Red and new
Pepsi brands called Pepsi Twist and Pepsi blue. (Louis, Yazijian and Harvey 1980).

Diversification (New Products/New Market)

Companies diversify for a host of reasons. In some cases, it’s a survival strategy. For instance,
if the company makes the bulk of its sales at a particular time of year, it makes sense to
consider diversification. By extending the company portfolio of products or services you can
ensure a regular revenue stream from January through to December. However, there are plenty
of other good reasons for diversification, not least by extending the company’s range of goods
or services it can either sell more products to its existing customers or reach out to new

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markets. This can supercharge company’s growth prospects. And perhaps the biggest reason
for doing it is to extend a brand reputation into other markets, making the business bigger than
one ever imagined. Take an example of General Electric Company.

General Electric Company Diversification strategy

General Electric the fourth most innovative company in the world (Bloomberg business week;
The World's 50 Most Innovative Companies Special Report, 2007) is one of the vibrant strong
companies in the world which primarily was a manufacturer of electric parts. Then in order to
expand and grow their business the company moved into financing and financial services, which
in 2005 accounted for about 45% of the company's net earnings. General Electric also owns a
majority share of NBC Universal, which owns the NBC television network and several cable
networks (Mital, Robinson Jr, Pearce II, 2008). It’s not advisable to consider diversification until
the core business is stable and profitable. If the business is still struggling to win orders and
build a sales time for the core product, there is a real danger that diversification will take its eye
of the ball. The catalyst to diversify business is often the realization that growth in the core
business is either slowing or set to slow, often because the market for a particular product is
becoming saturated. Diversification can put a company on the fast track to growth but if the
strategy fails it can also burn up money. Diversification strategy can be categorized into two
types: concentric diversification where there is addition of new but related products to the
business and conglomerate diversification where there is addition of new but unrelated products
to the business.

Concentric diversification
It is the addition to a corporation of related products or divisions. The corporation’s lines of
business still poses some common thread that serves to relate them in some manner. The
common thread may be similar technology, customer usage, distribution, managerial skills or
product similarity. This type of diversification is appropriate for companies wishing to take
advantage of their competitive position strategies..

Vodacom Tanzania and concentric diversification strategy.

Vodacom Tanzania has been repositioning itself to become a total communications solutions
provider, offering customers quality and meaningful services and products. Vodacom maintains
its stature of being “Tanzanians Leading Cellular Network” by introducing new products and
services that target each and every Vodacom customer. The company has employed the
concentric diversification strategy to maintain and improve its performance. In this strategy
Vodacom Tanzania has introduced new products for the new market but these products are

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highly related. The company has introduced the M-Pesa services and internet services, these
services are highly related to the primary product the voice communication. M-PESA is an
innovative money transfer solution that enables customers to send money to any mobile
customer in Tanzania and also pay various bills via a simple phone transaction.

Conglomerate diversification
A conglomerate is a combination of two or more corporations engaged in entirely different
businesses together into one corporate structure, usually involving a parent company and
several subsidiaries. Often, a conglomerate is a multi-industry company. Conglomerates are
often large and multinational. In other cases, conglomerates are formed for genuine interests of
diversification rather than manipulation of paper ROI. Companies with this orientation would
only make acquisitions or start new branches in other sectors when they believe this will
increase profitability or stability. A good example here is Bakhresa group of companies

Bakhresa Group of Companies: Successful Conglomerate

Bakhresa Group of companies is one of the leading Industrial Houses in Tanzania and East
Africa. Started in a humble manner with a small restaurant in Dar Es Salaam in mid seventies, it
has now emerged as a respected business group in the Region. The Group has its operations
spread in Tanzania, Zanzibar, Uganda, Kenya, Malawi, Zambia and most recently in
Mozambique. The group now boasts of a turnover of more than Three Hundred Million United
Sates Dollars and is a proud employer of more than two thousand employees associated
directly. Bakhresa Group had primarily been specialized in food processing and it was a single
company called Bakhresa Food Products Ltd, and then the conglomerate strategy was put into
application by introducing the other subsidiaries in different industries like Grain Milling &
Storage, Bakery Division, sports, Distribution, Specialty Packing, PET Recycling Project,
Logistics & Transport, Telecommunications and Real Estate. In these industries Bakhresa has
established subsidiary companies like Said Salim Bakhresa & Co Ltd, Azam Bakeries Company
Ltd, Azam Football Club, Bakhresa Food Products (Z) Limited, Omar Packaging Industries Ltd,
Azam Marine Company Ltd, Satafrik Tanzania Ltd and Reliable Property Developers Ltd
(www.bakhresa.com).

Mergers
A merger happens when two firms agree to go forward as a single new company rather than
remain separately owned and operated. This kind of action is more precisely referred to as a
merger of equals. The firms are often of about the same size. Both companies' stocks are

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surrendered and new company stock is issued in its place. In practice, however, actual mergers
of equals don't happen very often. Usually, one company will buy another and, as part of the
deal's terms, simply allow the acquired firm to proclaim that the action is a merger of equals,
even if it is technically an acquisition. Being bought out often carries negative connotations,
therefore, by describing the deal euphemistically as a merger, deal makers and top managers
try to make the takeover more palatable. A purchase deal will also be called a merger when
both CEOs agree that joining together is in the best interest of both of their companies. But
when the deal is unfriendly i.e. when the target company does not want to be purchased, it is
always regarded as an acquisition.

Vodafone Airtouch Plc and Verizon Wireless: good examples of mergers.

Vodafone Group plc is a global telecommunications company headquartered in Newbury,
United Kingdom. It is the world's largest mobile telecommunications company measured by
revenues and the world's second-largest measured by subscribers behind China Mobile, with
around 332 million proportionate subscribers as of 30 September 2010. It operates networks in
over 30 countries and has partner networks in over 40 additional countries. It owns 45% of
Verizon Wireless, the largest mobile telecommunications company in the United States
measured by subscribers. In 1999, Vodafone group plc merged with AirTouch Communications,
Inc. and changed its name to Vodafone Airtouch plc. Trading of the new company commenced
on 30 June 1999. Vodafone group plc had also merged with Bell Atlantic Corp to form Verizon
Wireless. However Vodafone Airtouch plc merger did not last very long it broke in the year 2000
and the name Vodafone group plc was revived. The Verizon wireless merger is successful and
Vodafone group plc owns 45% of its shares (www.electronista.com).

Acquisition
An acquisition is the purchase of one company by another company. An acquisition may be
private or public, depending on whether the acquiree is or isn't listed in public markets. An
acquisition may be friendly or hostile. Whether a purchase is perceived as a friendly or hostile
depends on how it is communicated to and received by the target company's board of directors,
employees and shareholders. It is quite normal for acquisition deal communications to take
place under confidentiality situation whereby information flows are restricted due to
confidentiality agreements (Harwood, 2005).
In the case of a friendly transaction, the companies cooperate in negotiations while in the case
of a hostile deal, the takeover target is unwilling to be bought or the target's board has no prior
knowledge of the offer. Acquisition usually refers to a purchase of a smaller firm by a larger one.
Sometimes, however, a smaller firm will acquire management control of a larger or longer

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established company and keep its name for the combined entity. This is known as a reverse
takeover.

The Bhart Airtel International acquisition of Zain Africa

Among the most recent acquisitions done in telecommunication industry is that of Bhart Airtel
International purchasing Zain Africa. The transaction of Bhart Airtel International purchasing
Zain Africa was approved on 27th April 2010. The transaction included the sales and purchase
of shares. The Bhart Airtel International completed the acquisition of Zain Africa by paying Zain
Kuwait the total of 10.7 billion USD, making the indian company the fifth largest telecom phone
company in the world. This acquisition strategy has undeniably expanded the Bhart Airtel
International which now has increased its number of its subscribers to 180 million subscribers
(www.ibtimes.com). Below is the list of acquisitions from the year 2006 to 2010 as listed and
approved by the fair competition commission.

Table 1: List of Approved Acquisitions for the period 2006-2010

Application Acquiring Firm Target Firm Approved
date date
28/06/2006 Business Connexion Group Limited(BCX) BCT and JEDI 23/01/2007
16/07/2007 Modern Africa One, Milken Africa Limited, Afsat Communications Ltd 11/09/2007
Milas Limited, Stelsat Limited and
Multichoice Africa Limited (MAL)
03/08/2007 Highland Tea Company Limited Kibena Tea Limited 06/08/2007
09/08/2007 Trans Century Limited Asea Brown Boveri Limited
25/09/2007 Marc Group Limited and Heritage Insurance Strategis Insurance 28/09/2007
Company Tanzania Limited Tanzania
06/11/2007 ATMT(Holdings) Limited Simbanet (T) Limited 18/01/2008
25/02/2008 Shelly’s Pharmaceutical International Shelly’s Pharmaceutical 25/03/2008
Limited Limited
27/03/2008 Barry Calleabut Sourcing AG Biolands International Ltd 01/04/2008
12/06/2008 Synovate (Holdings) Limited Steadman Group (T) Limited 25/06/2008
17/06/2008 Crystal Limited Chai Bora Limited/ Tanzania 20/06/2008
Tea Packers Limited
30/06/2008 Simba Plastics Limited Simba Plastics CompanyLtd 15/08/2008
14/08/2008 Vodacom Group Pty Gateway 22/10/2008
Telecommunications PLC
13/11/2008 Vodafone Group PLC Telkom SA Ltd 21/11/2008
05/12/2008 Eagle Africa Insurance Brokers (Kenya) Eagle Africa Insurance 23/12/2008
Limited Brokers (T) Limited
13/01/2009 Telkom International Limited M-Web Africa Limited 24/02/2009
24/02/2009 Mountainside Investment Limited Mountainside Farms 20/03/2009
Company
05/03/2009 NIC Bank Limited S avings and Finance 24/03/2009
Commercial Bank Limited
11/06/2009 I&M Bank Limited and The Kibo Fund LLC CF UNION 16/11/2009
18/08/2009 Aspen Pharmacare Limited (Aspen) GlaxoSmithKlie Export 02/03/2010
Source: Fair competition Commission Tanzania (2011)

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The Joint-Venture
A Joint Venture on a continuing basis is the normal business undertaking. The term Joint
venture refers to the purpose of the entity and not to a type of entity. Therefore, a joint venture
may be a corporation, a limited liability enterprise, a partnership or other legal structure,
depending on a number of considerations such as tax and tort liability. Joint Ventures are
normally formed both inside one's own country and between firms belonging to different
countries. Joint Ventures are usually formed in order to combine strengths or to bypass legal
restrictions within a country. Some Joint Ventures are also formed because the law of a country
allows dispute settlement, should it occur, in a third country. They are also formed to minimize
business, tax and political risks. The Joint Venture is an alternative to the parent-subsidiary
business partnership in emerging countries, discouraged, on account of ignoring national
objectives, slow-growth, parental control of funds and disallowing competition. Joint Ventures
can be in the manufacture of goods, services, travel space, banking, insurance, web-hosting
business, etc. Today, the term 'Joint Venture' applies to more occasions than the choice of Joint
Venture partners; for example, an individual normally cannot legally carry out business without
finding a national partner to form a Joint Venture as in many Arab countries. Also, the Joint
Venture may be an easier first-step to franchising, as McDonald's and other fast foods found out
in China in the early difficult stage of development. Other reasons for forming a Joint Venture
are: reducing entry risks by using the local partner's assets, inadequate knowledge of local
institutional or legal environment, access to local borrowing powers, perception that the goodwill
of the local partner is carried forward. In strategic sectors, the county's laws may not permit
foreign nationals to operate alone, access to local resources through participation of national
partner and influence of local partners on government officials (Mital, Robinson Jr, Pearce II,
2008).

Resolute Ltd, Ashanti Goldfields in joint venture with AngloGold, Barrick Gold Corp
The vivid examples of joint venture in Tanzania are those in mining industry: The Resolute Ltd;
Ashanti Goldfields in joint venture with AngloGold; Barrick Gold Corp; and the other joint venture
is between Placer Dome Inc; Meremeta Ltd; and Pangea Goldfields Inc in joint venture with
Miniere du Nord. The joint venture AngloGold Ashanti owns 50% of the Geita mine in Tanzania.
The mine which started production in August 2000 produced a record 661,045 oz at a cash
operating cost of US$170/oz in 2003, compared with 579,043 oz at US$163/oz in 2002. the joint
venture has increased sales and profits to the parts in the joint venture. Without joint venture
neither part could be in a position to secure the mining project alone. (www.tanzaniagold.com)

Concentration

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Concentration is the growth strategy which emphasizes a single product or product line, single
market or single technology. It allows a firm to put more time, energy and resources into the
development of attractive industry. Regarding a product line, market or technology a business
can opt to grow by either acquiring or merging with the competitor in the market or acquiring the
supplier, distributor or both of them. There are two concentration strategies; horizontal and
vertical growth.

Horizontal integration
The term horizontal integration is a strategy used by a business or corporation that seeks to sell
a type of product in numerous markets. Horizontal integration in marketing is much more
common than vertical integration is in production. Horizontal integration occurs when a firm is
being taken over by, or merged with, another firm which is in the same industry and in the same
stage of production as the merged firm, e.g. a car manufacturer merging with another car
manufacturer. In this case both the companies are in the same stage of production and also in
the same industry. This process is also known as a buy out or take-over (David and Henry,
2003). A term that is closely related with horizontal integration is horizontal expansion. This is
the expansion of a firm within an industry in which it is already active for the purpose of
increasing its share of the market for a particular product or service. The strategy is appropriate
for a firm with average competitive position wishing to increase its presence in an attractive
industry. The firm spreads into other segments of its current market or into other geographic
areas. The aim is to increase the sales and profits of the firm’s current business, through larger
economies of scale in production and marketing, and at the same time reduce current or
potential competition for customers and supplies. A firm can grow horizontal through internal or
external means. External horizontal growth is called horizontal integration and is the acquisition
by one corporation of another corporation or business unit in the same industry.

Deutsche Telekom horizontal integration strategy

A good example in this strategy is Deutsche Telekom. The company is based in Germany and it
is a wireless service provider. Deutsche Telekom was a dominant player in the European
wireless services market, but however it was not present in the fast growing US market by the
year 2000. Now to correct this limitation, Deutsche Telekom horizontally integrated by
purchasing the American firm Voice – Stream Wireless, a company that was growing faster than
most domestic rivals and that owned spectrum licenses providing access to 220 million potential
customers (Mital, Robinson Jr, Pearce II, 2008).

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Vertical integration
Vertical growth strategy: it is commonly called vertical integration. It happens when a
corporation enters one or more businesses that provide goods or services necessary to the
manufacture and distribution of its own products but which were previously purchased from
other companies. These can range from obtaining of raw materials to the merchandising of the
product (Folsom, Burton, 2007). In other ways Vertical integration is the degree to which a firm
owns its upstream suppliers and its downstream buyers. Vertical integration is typified by one
firm engaged in different parts of production e.g. growing raw materials, manufacturing,
transporting, marketing, and/or retailing. There are three varieties: backward (upstream) vertical
integration, forward (downstream) vertical integration, and balanced (both upstream and
downstream) vertical integration. A company exhibits backward vertical integration when it
controls subsidiaries that produce some of the inputs used in the production of its products. For
example, an automobile company may own a tire company, a glass company, and a metal
company. Control of these three subsidiaries is intended to create a stable supply of inputs and
ensure a consistent quality in their final product.

Suzlon Energy Limited, the backward vertically integrating company

The best example of the growth through backward vertical integration strategy is the Suzlon
Energy Limited. This company was primarily a textile company and it was incurring huge costs
due to dependence on the unpredictable power supply. To solve this problem the company
decided to undergo backward vertical integration strategy by purchasing two windmills for power
production. This strategy showed up undeniable improved performance by increasing company
sales, profit and assets. Having encouraged with the performance the company decided to
vertically integrate more in backward way. In the year 1995 it purchased the technology for
manufacturing Wind Turbine Generators from the Germany Company called Sudwind GmbH
Windkrafttanlagen. After purchasing this technology the Suzlon Energy Limited started
manufacturing and selling windmills. By the end of the year 2006, Suzlon Energy Limited
become India’s leading manufacturer of Wind Turbine Generators and the fastest growing
company in Asia (Mital, Robinson Jr, Pearce II, 2008).

A company tends to exhibit forward vertical integration when it controls distribution centers
and retailers. This is very common when the business wants to expand in the market where
there are strong distributors. See how Mohamed Enterprises Ltd applied this strategy in their
domain.

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Mohamed Enterprises Ltd integrating vertically forward wise

Mohamed Enterprises Tanzania Ltd (METL) was founded as a trading business which continues
to be a crucial core sector for the Group. Specifically, METL primarily was dealing with import
business, and even exportation. The trading business had not performed with flying colors until
when METL embarked on vertical integration strategy. After employing the vertical integration
strategy, the METL’s trading business has grown exponentially. METL has undergone forward
vertical integration by introducing distribution services. To make sure the company perform
better in distribution business, it introduced 15 Relationship Sales Executives (RSEs) catering to
the needs of wholesalers in Dar es Salaam and preferred customers in upcountry locations. On
the other hand it has a convoy of 30 vehicles that carry out sales rounds in Dar es Salaam every
day of the month. Currently METL is one of the very few companies in Tanzania to have a
comprehensive vehicle fleet as large as 450 vehicles. Such forward vertical integration has
expanded the business and improved the competitiveness of the trading business along with
good performance in distribution business leading to to rapid growth of the METL group of
companies in terms of sales, assets, profits and number of customers. (www.metl.net)

Balanced vertical integration means a firm controls all of these components, from raw
materials to final delivery. So METL can still stand as the best example of this strategy. METL
has employed both backward and forward vertical integration. While the above explanation
shows how the company integrated vertically forward wise, still METL Group embarked
backward vertical integration strategy as well. It entered the manufacturing field in late 1990’s
with a view to process locally available raw materials like cotton, maize, rice, edible oils, sisal
etc and to strengthen the manufacturing of processed products within the country together with
agriculture. The strategic vertical integration programme was designed to complement METL’s
core trading business and wide range of products from beverages to bicycles. The company’s
culture within the sector is to produce quality products that are affordable and meet the needs of
about 40 million Tanzanians. Major projects in the pipeline include development of a complete
supply chain for textiles, including cotton farming, ginning and expansion of capacities in the
spinning, weaving and processing sections (www.metl.net).

CONCLUDING REMARKS
Not every growth strategy is appropriate for every business, so the challenge to find which right
growth strategy is properly matching to the company and its specific marketplace can only be
overcame by innovative strategists in the business. Since the wrong strategy can devastate the
business, it's important to determine whether the business is selling new or emerging products

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 © Gerald & Elisifa

in a new or existing market. On the other hand not all the time business needs growth
strategies, sometimes the business might require other strategies to survive. It might be in need
of stability, retrenchment and any other strategies, to decide which strategy is better for the
business at the particular time requires innovative people.

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