Business has "Birth, Aging, Illness, and Death"—What Strategies Should You Use at Each Stage? /By Longtunman
In a human life, we go from birth through childhood, adolescence, and adulthood, all the way to old age. Each stage naturally has its own unique path and way of living.
For a business, even though it isn't "alive," it can be categorized into life cycles just like a human. Each stage of a business requires different approaches to operations and management.
So, what are the appropriate growth strategies for each stage of a business?
Longtunman will explain.
It must be said that while different industries may categorize their stages differently, they are generally divided into four main periods:
1. Startup Stage: Comparable to the infancy and childhood of a business.
2. Growth Stage: Comparable to the childhood and adolescence of a business.
3. Maturity Stage: Comparable to the adulthood of a business.
4. Decline Stage: Comparable to the old age of a business.
What does a business encounter in each stage, and which strategies should be picked up and used?
Let’s start with the Startup Stage.
In this phase, the business does not yet have a large customer base, and the products are not yet well-known in the market.
The most critical thing a business must focus on during this stage is the Business Model. For example:
- Who is the true target audience or customer of the business?
- How will our product provide value or solve problems for the customer?
- Why should customers choose our product instead of a competitor's?
- Which channels will we use to communicate with customers and deliver products?
- Who are our partners? (e.g., suppliers, shareholders, consulting firms, retailers)
- What will generate revenue? Will it be one-time sales, revenue sharing, leasing, subscriptions, advertising, etc.?
- What are the costs involved? What is the cost structure?
Having a clear business model is vital because it determines the growth direction of the business.
Once the business model is clear, the focus in this initial stage shifts to Building Awareness of the company’s products among the target audience.
This might include launching campaigns to attract customers, building a user base, establishing credibility, and collecting customer feedback to improve the product.
In this stage, even if revenue grows, the business is often still operating at a loss and requires significant capital. Therefore, liquidity is something the business must handle with extreme care.
Great companies like Apple, Amazon, Nvidia, and Meta have all passed through this stage.
The Second Stage: Growth.
Once a customer base is established and the business is relatively stable, the focus shifts to Scaling, which can happen through:
- Expanding to New Customer Segments: For example, the street fashion brand Supreme initially targeted skateboarders but later expanded its base to young people interested in street-style fashion.
- Launching New Products: Take the Thai skincare brand MizuMi. Their first successful product was sunscreen. Due to the positive response, they expanded their line to include new sunscreen formulas and other products like cleansers, serums, face masks, and supplements.
- Product Development: A business might add new features to existing products to better serve customers. This increases revenue without the risk of starting from scratch, such as water brands releasing special edition labels for customers to collect.
- Market Expansion: Moving into new territories. A business can take a successful product or model and apply it to a new area to capture market share. For example, Suki Teenoi began expanding to other provinces once they had covered Bangkok.
In this stage, the business might start turning a profit, but it will also require more investment and aggressive marketing to drive growth.
Additionally, a growing business may need more external capital to circulate, whether through bank loans, issuing corporate bonds, or raising funds through common stock—which, if taken to the stock market, is known as an IPO.
However, if a business can scale without requiring massive capital and has a high proportion of Fixed Costs relative to variable costs, every bit of additional revenue will often flow straight into profit.
Typical examples are platform businesses that can scale nationwide or globally very quickly with low unit costs, such as TikTok, Facebook, and YouTube.
The Third Stage: Maturity.
In this stage, the business begins to saturate. You can observe this by revenue becoming relatively stable or growing very slowly.
The business has products or brands that have been in the market for a while, a loyal customer base, and the market size may have hit its limit.
Growth in this stage requires looking "sideways" off the current runway. One interesting method is Mergers and Acquisitions (M&A) to create growth.
This could involve acquiring a competitor to increase market share and reduce competition, or even acquiring a non-competitor that offers Synergy with the current business—such as buying a business partner.
This includes "Upstream" acquisitions (like suppliers) or "Downstream" acquisitions (like retailers) to control the entire supply chain.
Furthermore, the focus shifts to Cost Reduction and Efficiency without sacrificing quality. Technology like Automation or AI might be introduced to assist here.
Crucially, in the Maturity stage, a business must strive to maintain its market share by focusing on customer relationships, such as membership services or loyalty programs.
The Fourth Stage: Decline.
Just as humans age, businesses do too. The difference is that a business has the chance to be "reborn."
In the decline stage, the stable revenue from the previous phase begins to drop. This could be due to a decrease in product popularity, increased competition from new players, or changing consumer behavior as the industry is disrupted by something better.
In this stage, owners or executives should control costs and consider cutting out unprofitable business units.
They must also look for ways to Pivot or "Turn Around" the business. This might come from investing in new innovations or partnering with other businesses to create a unique standout product.
If successful, the business life cycle can return to the Growth stage once again.
A real-world example is Apple, which once faced a crisis so severe it nearly went bankrupt. They invited Steve Jobs back to manage the company, and Apple returned to growth by launching revolutionary innovations like the iPod, iPhone, and iPad.
However, in the decline stage, if a business cannot be revived and revenue or market share continues to fall, it’s important not to force it. Considering a Reasonable Sale of the business can also be a wise choice.
By this point, you can see that every stage of a business life cycle has its own unique growth strategy.
It is no different from human life: childhood is for learning, adolescence is for seeking experience and finding oneself, and adulthood is for building wealth.
It must be said that it is normal for some businesses to be unable to adapt and eventually fade away. We can view this phenomenon as "Creative Destruction."
When old businesses disappear, they are usually replaced by new ones that are more efficient and innovative. Ultimately, this drives progress for the country, the world, and human civilization as a whole.