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Abstract
The paper presents an empirical examination of the relationship of an organisation's growth strategy to performance. The study includes a sample of chief executive officers in the financial services sector, specifically credit unions. In particular, the relationship of product-market growth strategy to profitability is investigated while also controlling for firm size and the perceived environment. The authors find that product growth strategy has no impact on profits but that market growth strategy does significantly affect profitability. In particular, those firms that emphasise new markets in their growth strategies are the highest performers and are significantly more profitable than credit unions that emphasise growth through either emphasis of products, current markets, or both current and new markets.
Keywords Product-market growth, firm performance, credit unions, marketing strategy, financial services
INTRODUCTION
One of management's main concerns is with the outcomes of strategic decision making. In particular, how does a specific marketing strategy decision, such as the selection of a strategy for competitive posturing, affect the performance of firms within specific industries? This and related issues have previously been addressed by many studies in the literature, often with conflicting results.1-4
Improving an organisation's growth over time is a factor closely monitored by management due to the relevance and impact on many aspects of the firm. Thus, interest in this study focuses on the issue of product-market growth strategy, specifically as presented by Ansoff,5 and its subsequent influence on a firm's profitability. His typology suggests that growth within a product-market can be accomplished by focusing either on existing products or new products, or by emphasising current markets or new markets. Previous research into this strategic paradigm has emphasised growth through product development over growth through market development.6,7 Few researchers have focused on market development as the growth vehicle.8
The implementation of Ansoff's5 general idea is tested using data collected from chief executives in the financial services industry, specifically credit unions. Credit unions have shown a rapid growth in asset holdings in both Britain and the USA throughout the 1990s.9,10 In the USA during this time, an industry consolidation has led to larger institutions faced with stronger competition within the industry.9,11 Additionally, an easing of restrictions has led to cross-industry battles with other types of financial institution such...