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Business diversification - Strategic development: About

Business IA2


About Maturity Stage

Typically a business evolves through four major stages of development. The four stages are establishment, growth, maturity and post-maturity. Each phase, or stage of development, is characterised by a number of features that seem to be common to most businesses and need to be carefully managed.

Maturity In the maturity stage the growth in sales levels off. The business is selling the same value of products year after year. The reason for this is simply that the market for the product is saturated. After a time, for example, everyone who wants a plasma television set has one. The only sales will be made to people who are replacing sets that are worn out. Businesses that rely on products in the maturity stage must develop new ways to grow the value of their business. An example of a business in the maturity stage is Sanitarium, which relies on the product Weetbix.
The maturity stage is the time to employ professional managers. This is because professional managers have the skills to grow the value of the business by making the business more competitive. A more competitive business will attract customers from other businesses because it is offering cheaper products or providing customers with additional benefits. The result is increased share of the market and this grows the value of the business. Where managers are successful in this, as, for example, Roger Corbett with Woolworths, the business’s share price increases. The increased share price reflects the growth in the value of the business.
One of the most effective ways to increase the competitive position of a business in the maturity stage is to cut costs. Professional managers will carefully examine every aspect of the value chain, seeking to cut costs. The value chain is a central idea in business that every single activity in a business should add value to the final good or service that the business produces. Woolworths achieved most of their cost cutting in the warehouse and distribution aspects of their business. It made them very competitive compared to Coles and Coles’ customers started to shop at Woolworths.
Other businesses have successfully grown the value of the business while in the maturity phase by diversifying. Diversifying means to develop new products. Fosters, for example, moved into wine when the beer market matured. Again, this strategy needs professional managers, because there are risks associated with the markets in which these new products will be sold. This is mainly because the managers are not experienced in these markets. The markets for beer and wine, for example, are very different, and Fosters was forced to separate the beer and wine units in 2010. 

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