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Introduction

The relevance and significance of the topic “Specific features of growth and competitive strategies of international fast food companies in India on the example of Domino`s and Pizza Hut” are expressed in high rates of economic development of India. The liberalization of the Indian economy provides opportunities for many multinational companies to invest in this country. From the beginning of 1990`s many world famous multinational companies rapidly started entering India seeking for new markets, labor force, resources, and other opportunities. Foreign direct investments being a core non-debt financial source for the economic development of India flowed almost in all industries primary in banking, research and development, tourism, construction and healthcare. Foodservice industry requires special attention as it became one of the most rapidly developing and profitable industries of India. Being a country with an exceptional attitude to food culture, India represents an attractive destination for foreign direct investments for world-famous food producers, restaurant chains and international fast food companies. Taking into account distinctive consumption pattern of Indian consumers, based on relatively low incomes, the large share of young population and the large share of working woman population, fast food becomes very attractive for many categories of consumers for the main reason that it usually represents good quality quick prepared meal for the low price. Our previous work “Entry strategies of fast food companies to the Indian market by the example of Burger King restaurant chain” showed the main entry modes used by world famous fast food chains that intended to enter Indian fast food market as well as main obstacles and core conditions for successful penetration and capturing positions in the highly competitive market. The primary purpose of this work is to determine the features of competitive and growth strategies applied by international fast food companies to survive, expand and successfully compete against rivals within Indian high competitive fast food segment after successful entrance.

Throughout the research, several tasks were completed:

Ø Form the theoretical base for the research collecting the theories on competitive and growth strategies;

Ø Identify competitive and growth strategies used by fast food companies worldwide through analyzing previous researches;

Ø Determine the specific competitive and growth strategies relevant for implementation in Indian fast food segment by analyzing previous researches and case studies;

Ø Based on the research conducted, detect the competitive and growth strategies used by the market leaders. The results of the task are represented in table 3.

The research is based on qualitative methods through scrutinizing case studies, companies` profiles, scientific articles and existing theory on the topic stipulated. The object of the work is competitive and growth strategies of international companies. The subject represents competitive and growth strategies of international fast food companies in India. The hypotheses are the following:

H1: In conditions of high growth rate of the Indian fast food segment, hybrid growth strategy through franchising supported by market penetration and product development organic growth strategies represents the preferable combination of growth strategies.

H2: Present specifics of Indian fast food segment make international fast food companies balance between “operational excellence” and “product leadership” competitive disciplines.

The structure of the work consists of the introduction, three chapters and the conclusion. The first chapter “Theoretical background of competitive and growth strategies in the fast food segment” represents the theoretical base for the research. In the first paragraph of the chapter, the general theories on competitive and growth strategies are provided while the second paragraph is devoted to the typical for fast food segment competitive and growth strategies. The last paragraph of the first chapter contains studies on the experience of several leading fast food companies operating in Indian fast food segment of the foodservice industry regarding the implementation of competitive and growth strategies. The second chapter “Competitive and growth strategies of fast food companies in India on the example of Domino`s and Pizza Hut” provides the overview of the Indian economy and particularly fast food segment in the first paragraph. The second and the third paragraphs of the second chapter are devoted to the case studies of Domino`s pizza and Pizza Hut correspondingly with providing the history of the companies and their entrance to the Indian fast food market as well as the description of the strategies implemented in India. The last chapter, “Results and Practical outcome of the case studies” is divided as well into three paragraphs. The first paragraph of the last chapter contains a comparative analysis of Domino`s and Pizza Hut competitive and growth strategies as well as several conclusions and confirmation of the hypotheses. The second paragraph represents the recommendations for new entrants in terms of competitive and growth strategies based on the case studies and theoretical base of the research. The last paragraph of the final chapter contains the recommendations for future researches including the indication of limitations of the research and areas for future researches. The results of the work are summarized in the conclusion.

1. Theoretical background of competitive and growth strategies in fast food segment

1.1 Theories on competitive and growth strategies

Many researchers define strategy in different ways. Porter defines a strategy as “the creation of a unique and valuable position, involving a different set of activities” (Porter, 1996, p.61). Another definition indicates that “strategy is the determination of the basic long-term goals and objectives of an enterprise and the adoption of courses of action and the allocation of resources for carrying out these goals” (Chandler, Alfred Jr., 1962). “Strategy is perspective, that is, vision and direction” (Mintzberg, 1994). In our work, we adhere to the view of M. Porter as far as the definition given by him reflects the purpose of the present research, namely determination of the specific features of competitive and growth strategies used by fast food companies operating in India. Moreover, the theoretical ground on competitive strategies in this research is partially based on the Porter`s theoretical approach.

Competitive and growth strategies are the aspects of strategic management of a company elaborated to compete against main rivals and extend markets. It is worth indicating that “strategic management represents a process that deals with the entrepreneurial work of the organization, with organizational renewal and growth, and more particularly, with developing and utilizing strategy, which is a guide to the organization's operations” (Jofre, 2011). The strategy includes three main elements: the goal, the resources and the instruments. It is vital to stress out that “resources include all assets, capabilities, organizational processes, firm's attributes, information, knowledge, etc. controlled by a firm that enables the firm to conceive and implement strategies to improve its efficiency and effectiveness” (Barney, 1991). Another researcher indicated that “one of the most prevalent questions within strategic management is how firms are able to attain profits that allow them to gain superior competitive performance compared to their competitors” (Mwangi, 2010).

Companies implement strategies on three levels: corporate, business and international (Gregory G., Anil G., Jean-Francois H., Charles W.L.,1995). In our work, the strategies of business level are described and analyzed as far as the research is directed to the competitive and growth strategies used by international companies in the specific industry of the particular region.

Below, competitive and growth strategies will be examined separately with regard to the main purpose and features of each strategy.

Competitive strategies.

Before considering competitive strategies, it is essential to start with the concept of market rivalry or competition. “Competition, in a large sense, means a struggle of conflicting interests” (Ely, 1901, p. 56). Rivalry among companies selling similar products or providing related services is considered to be the engine for innovation, growth and development. There is strong empirical evidence that intense rivalry facilitates economic growth as the companies strive to survive through applying new technologies, innovative methods of production, reaching for economies of scale trying to beat the rivals. Such conditions pull out of the market the weakest players when the most influential companies remain active and set the pace of competition. For the management of each company acting in a highly competitive market, it is crucial to elaborate and apply so-called competitive strategies to overcome the rivals. The goal of the competitive strategy is to reach a competitive advantage that could be expressed in lower than average costs of production, the uniqueness of products and services and others. It is vital to stress out that “competitive advantage is achieved through the strategic management of resources, capabilities, and core competencies, as well as the firm's responsiveness to opportunities and threats in the external environment” (McGee & Sammut-Bonnici, 2014). Competitive strategies play a significant role when an industry is very competitive and consumers are provided with almost similar products.

Competitive strategies are elaborated by management with regard to a company`s market share, its position, strengths and weaknesses, financial resources, level of rivalry in the market and other crucial factors. Applying competitive strategy implies the creation of competitive advantage that differs a company from its rivals attracting more customers through the creation of customer value.

The classification of theories on competitive strategies in this work includes such approaches as “Porter`s Generic strategies” by Michael E. Porter and “The Discipline of market leaders” theory by Michael Treacy and Fred Wiersema. The most widely used theory of competitive strategies is Porter`s Generic strategies theory. Michael Porter, American economist, professor of Harvard business school, stresses out that when it comes to rivalry in business, it is crucial to start exploring it from the scale of an industry by considering so-called five forces model that could characterize the whole industry (Porter, 2008, p.80). The rivalry in any market of products or services is always accompanied by core factors that shouldn`t be disregarded. Thus, before considering generic strategies, it is essential to analyze Porter`s five forces model.

Porter`s five forces model

Porter`s Five forces analysis was elaborated by Michael Porter in 1979 for analyzing a company`s competitive position in a particular industry. The main idea is that the competitive environment and the attractiveness of the industry are determined by five core factors, namely the threat of new entrants, bargaining power of suppliers, bargaining power of buyers, threats of substitutes and rivalry among existing companies acting in the industry.

The work “The Five Competitive Forces That Shape Strategy” by Michael Porter published in Harvard Business Review in 2008 provides the following illustration (Figure 1) of the Five forces of competitive position analysis with further explanation.

Figure 1. Porter`s five competitive forces. Reprinted from: The five competitive forces that shape strategy, by M.E. Porter (2008), Harvard Business Review 86, (p.80)

franchising strategy activity

Supplier power. This factor shows in what extent suppliers are willing to raise the prices or the level of independence the suppliers obtain in the concrete industry. “Powerful suppliers capture more of the value for themselves by charging higher prices, limiting quality or services, or shifting costs to industry participants” (Porter, 2008, p.82). According to the author, supplier power depends on the followings factors: the number of suppliers in the industry, the uniqueness of the products suppliers provide, switching cost of buyers when they prefer one supplier to another and the market share of a supplier company. For example, when there are a lot of suppliers in the market that have their own competition for low prices and sound quality of the products provided, the switching costs between suppliers are absent, the supplier power could be described as weak. The example of the industry where supplier power is low could be a restaurant sector. But when the industry is specific and few suppliers represent large organizations providing particular materials such as spare parts for the air construction industry, supplier power will be high in that case.

Buyer power. Shows in what extent buyers facilitate the decrease in prices in the concrete industry. Buyers are influential if they are price sensitive and there are no switching costs in the industry. The core factors, determining the dominance of buyers demanding lower price are the following: number of buyers in the particular market, price sensitivity of buyers and buyer`s switching costs of transition from one supplier to another (Porter, 2008, p.83). Another researcher indicates that “when customers have the multiple choices of suppliers, they may easily switch to another if they experience dissatisfaction with the products and services of a particular supplier. This would, in turn, affect the supplier firm's profitability. But if customers do not have a choice (i.e. when there are few suppliers and hence the competition is lower), the satisfaction - performance relationship then does not matter” (A. Agnihotri, 2014, p.251). Thus, if a significant number of price-sensitive customers are purchasing standardized goods or services in the market where there are many suppliers as well and switching costs are low, like in fast food segment, the buyer power is considered high. In another case, if the market is specific and counts few buyers with high switching costs, for example, a buyer should pay penalty cost for breaking the contract with the previous supplier, the dominance of buyers could be described as low.

Rivalry among existing companies. One of the main forces in Porter`s model is the level of rivalry in the market. “Rivalry among existing competitors takes many familiar forms, including price discounts, new product introductions, advertising campaigns, and service improvements. High rivalry limits the profitability of an industry” (Porter, 2008, p.85). According to the author, the core factors that characterize competition in the industry include the number of companies in the market, the existence of entry barriers, a pace of industry growth, customer loyalty and size of companies. When the market has low entry barriers, there is a considerable number of small companies of similar size producing differentiated products that could be substituted by each other and the growth of the industry is low, the rivalry in that market is considered high and firms have to compete aggressively that makes the profits lower and industry unattractive. The example of a highly competitive market could be computer or smartphone industry. The industries of mining or operating systems for computers are considered low competitive.

Threat of substitution. The general meaning of the substitute is that
“a substitute performs the same or a similar function as an industry's product by a different means” (Porter, 2008, p.84). If there is a strong likelihood of introduction to the market of the product that could replace the existing one with low switching costs for buyers, it means that existing product or service is under the threat of substitution. The most illustrative example could be the market of tea that could be substituted by coffee. Another example is the market of gasoline that could be substituted by cheaper option namely diesel. Almost all products or services could be substituted by others, but it is crucial to pinpoint that the more specific features a product has, the more difficult for other products to substitute it.

Threat of new entrants. When the industry is considered attractive and profitable, new companies will probably fight for entering this market. In turn, the companies that manage to overcome entry barriers and penetrate the market will erode the profitability of the industry sharing the market with already existing companies (Porter, 2008, p.80). The threat of new entrants is high when entry barriers to the market are low and every company that eagers to enter the market could easily implement it. However, when the entrance to the industry requires substantial initial capital, patents or economies of scale that provide companies the opportunity to set low prices, the industry is usually considered profitable and the entry barriers are high. As a rule, the more profitable a particular industry is, the higher entry barriers it has. However, in some cases, if there are low barriers in the industry, it doesn`t always mean that it is not profitable. Low barriers lead to the high competition that in turn push companies to elaborate new strategies and introduce innovation to poses a competitive advantage. This process drops weakest companies that cannot withstand intense competition out of the market while the most influential and most innovative players remain in the market enriched with profits.

Along with the forces mentioned above, regulation, taxation and trade policies could be referred to the sixth force that is represented by the government. In some industries governmental participation is critical and many tariffs or taxation set by the government should not be underestimated in the process of analyzing the industry.

After analyzing Porter`s five forces model, the generic strategies could be observed and studied.

Porter`s Generic Strategies.

Porter describes competitive strategies through the matrix consisting of three main strategies that are widely used by companies for achieving competitive advantage.

The author of the theory (Porter, 1980) claims: “Competitive advantage grows out of value a firm is able to create for its buyers that exceeds the firm's cost of creating it. Value is what buyers are willing to pay, and superior value stems from offering lower prices than competitors for equivalent benefits or providing unique benefits that more than offset a higher price. There are two basic types of competitive advantage: cost leadership and differentiation” (as cited in Tanwar, 2013, p.11). The purpose of the generic strategies is to assist companies to cope with five forces affecting the industry possessing competitive advantage to cement their position in the market. The Porter`s generic strategies matrix is illustrated in figure 2.

Figure 2. Porter`s generic strategies. Adapted from: “Porter's Generic Competitive Strategies” by Tanwar R. (2013), IOSR Journal of Business and Management, Volume 15, Issue 1, (p. 12)

Each strategy from the matrix should be described for a complete understanding of the theory.

Cost leadership strategy. According to Porter (1980), companies that apply this strategy reach efficiency through low costs. The competitive advantage possessed by using a cost leadership strategy usually implies reaching for economies of scale and conducting cost reduction in all spheres of business. Cost leadership strategy is generally used when a company serves a broad customer base with standardized products and has preferential access to such resources as labor, raw materials and others. After establishing a low-cost structure of the business, the company acquires an opportunity to sell products or services at the lowest prices in a specific market, thereby having the edge over its competitors.

Economists and researchers highlight the significance of competitive strategies. It is worth indicating that firms do not have to sacrifice revenue to be the cost leader as far as substantial revenue could be achieved through capturing large market share (Porter, 1979, 1987, 1996; Hooley et al., 2004; Bauer and Colgan, 2001; Hackett, 1996; Reid et al., 1993). Lower prices increase the demand that, in turn, results in a larger market share (Helms et al., 1997). Being a low-cost leader, a company can introduce entry barriers against new entrants who would need larger capital outlay to enter the market (Hyatt, 2001). It is essential that cost leadership strategies are preferred in developing countries like Indonesia or India where the labor costs are lower and ,as a result, the production cost are lower as well (Aulakh et al. 2000). The example of a company that successfully applies cost leadership strategy could be McDonald`s that is well known for keeping low costs primarily through establishing local supply chains, economies of scale and labor division. Another example is Ford that historically has earned a reputation of affordable cars manufacturer.

Differentiation strategy. According to Porter (1980), this strategy is used by companies to serve a broad market and implies the creation of a product or service with unique features. Applying differentiation strategy means that providing a customer with an exceptional product different from others a company creates a brand charging a premium for the product due to its uniqueness. As far as the strategy is aimed at creation of the unique feature, “this specialty can be associated with design, brand image, technology, features, dealers, network, or customer`s service. Differentiation is a viable strategy for earning above-average returns in a specific business because the resulting brand loyalty lowers customers' sensitivity to price. Increased costs can usually be passed on to the buyers”. (Tanwar, 2013). It is vital that “a differentiation strategy is to create value to customers by providing superior quality, innovative products, brand image, and good services. This will differentiate the product, which means the product will be more competitive than others” (Hutchinson et al. 2007; Frambach et al. 2003; Porter, 1980). Another researchers state as well that “differentiation can be based upon design or brand image, distribution, and so forth” (Frambach et al. 2003). “The companies that use differentiation strategy aim to create a superior fulfillment of customer needs in one or several product attributes in order to develop customer satisfaction and loyalty”(Morshett et al., 2006). Buyers` preference and loyalty could also be a kind of entry barrier for new companies entering a particular market as they will have to endow their products or goods with special features as well to compete with existing brands and achieve customers` loyalty.

The best examples of companies using the differentiation strategy by the brand are Mercedes-Benz, Lamborghini. Differentiation could also be implemented by design (“Vertu” mobile phones), by positioning (Domino`s delivery “30 minutes delivery”), technology (Apple) and innovation (Google) (Baroto, Mas et al., 2012).

Focus strategy. According to Porter (1980), the focus strategy is used by companies providing their products or services for a narrow market or so-called niche markets. The strategy implies that focusing on a narrow market a company could meet the needs of a customer in a better way. Usually, target markets are less competitive and vulnerable to substitutes in comparison with broad markets of differentiated standardized products with a considerable amount of competing producers. For that reason, companies targeting a narrow market with a low level of competition and low probability of introduction of substitutes have opportunities to earn an above-average return on investment (Tanwar, 2013). The focus strategy could be used in two ways.

Cost focus strategy. The strategy requires a company providing products or services for a narrow market to be a cost leader, using cost reduction in all business aspects or reaching for economies of scale. The central principle of the lowest cost in the industry that allows setting the lowest prices remains the same as in case of cost leadership strategy. However, the main difference is the scope of the market and customers` willingness to pay a premium, buyers` switching costs, the presence of substitutes and level of competition (Porter, 1980). The example of a narrow market, where focus strategy could be used is the market of motorcycles. A company that intends to apply the cost focus strategy in this market should provide the market with the cheapest bikes affordable for a large share of the population. The example could be Honda motorcycles that are famous for being affordable almost in all countries.

Differentiation focus strategy. The author indicates that a company acting on a narrow market producing goods or services for buyers with special needs is likely to use differentiation focus strategy. If we continue considering the market of motorcycles, where Honda company is considered to use the cost focus strategy selling the cheapest bikes, Harley Davidson or BMW should be considered as premium class motorcycles. The last ones reflect the application of differentiation focus strategy, when companies serve a narrow market, producing premium goods and having loyal customers with low price sensitivity that are ready to pay a substantial premium for luxury and brand.

The main disadvantage of focus strategies is that the markets where the companies use those strategies usually experience slow growth or even shrink.

Implementation of generic strategies allows companies resisting the main forces that affect the industry and outperform the rivals. “By producing high volumes of standardized products, a firm hopes to take advantage of economies of scale and experience curve effects” (Tanwar, 2013). The critical aspect of cost leadership strategy is that: “Maintaining a cost leadership strategy requires a continuous search for cost reductions in all aspects of the business. A low-cost strategy is likely to generate increases in market share” (Tanwar, 2013). In turn, the principle of the differentiation strategy is that: “Differentiation is a viable strategy for earning above-average returns in a specific business because the resulting brand loyalty lowers customers' sensitivity to price. Differentiation strategy is more likely to generate higher profits than a low-cost strategy because differentiation creates a better entry barrier”. (Tanwar, 2013).

Generally, according to the work: “Competitive Strategy: Techniques for Analyzing Industries and Competitors” (M. Porter,1980), companies should concentrate their efforts on only one of the mentioned above strategies to obtain long-term competitive advantage, otherwise a firm risks to “stuck in the middle” failing to reach either strategy. However, it should be stressed out that "this proposition has been challenged by many world-class manufacturing firms as they simultaneously maintain many competitive dimensions” (Kotha, S., Orne, D.,1989). Indeed, “some firms make an effort to pursue more than one strategy at a time by bringing out a differentiated product at low price” (Tanwar, 2013). “Combinations like cost leadership with product differentiation are hard (but not impossible) to implement due to the potential for conflict between cost minimization and the additional cost of value-added differentiation” (Tanwar, 2013).

The work “Hybrid Strategy: A New Strategy for Competitive Advantage” by Baroto et al. (2012) provides reliable evidence of wide spread implementation of the integrated or, so-called, hybrid generic strategy that represents the combination of cost leadership and differentiation strategies. Low cost and differentiation strategies may be effective combination to cope with competitive forces (Allen & Helms, 2006; Miller, 1992; Spanos et al., 2004). Integrated or hybrid strategy has proven broad implementation (Kim et al., 2004; Miller & Dess, 1993; Wright et al., 1991). According to Ireland (2011), modern customers have high expectations and tend to demand low priced products with features that highly differentiate this product. Ireland also states that the integrated strategy has become more applicable worldwide than single generic strategies as global competition increases.

In comparison with companies relying on single strategies, the companies using integrated strategy adapt more quickly to environmental changes and learn new technologies (Baroto et al.2012). The vital conclusion is that implementation of integrated strategy provides a company with superior incremental performance over the implementation of single competitive strategies. The main feature of the integrated strategy is a multiple source of competitive advantage that could be expressed in economies of scale and customer loyalty (Acquaah, M., 2006).

A significant number of companies implement the integrated strategy. For example, IKEA provides differentiation in design and low price products while Toyota provides affordable cars of admirable quality (Baroto et al., 2012).

The Discipline of market leaders.

The next theory that deals with competitive strategies is the work “The Discipline of market leaders” by Michael Treacy and Fred Wiersema (1995), where they describe the three main competitive disciplines used by market leaders. "The Discipline of market leaders" is the theory that implies reaching competitive position by international companies in a market through pursuing one of the three core competitive disciplines: operational excellence, product leadership and customer intimacy.

The first discipline described in the work is operational excellence that requires companies to provide a market with low-cost, standardized products or services. Companies that adhere to the operational excellence discipline “are not service or product innovators nor they cultivate one-to-one relationships with customers. Their proposition to customers is guaranteed low price and hassle-free services” (M. Treacy, F. Wiersema, 1995). The main principles of that discipline are regular training of employees, organizing lean standardized production, management of transactions that accelerates processes between suppliers and a company, concentration on a limited number of products or services as according to Treacy and Wiersema “Variety kills efficiency.” Operational excellence is expressed in “providing customers with reliable products or services at competitive prices, delivered with minimal difficulty or inconvenience” (M. Treacy, F. Wiersema, 1995). Such companies as McDonald`s or Walmart could be illustrative examples of companies, using operational excellence for reaching competitive advantage.

The next discipline is product leadership that is aimed at providing a market with a product or service characterized by maximum benefits and the highest value for customers. According to Wiersema and Treacy (1995), the main principles of the discipline are constant investment in research and development, product development and innovation, education programs for employees, emphasis on talented people and teamwork, as well as elaboration of new products, the encouragement of innovation through small working groups, compensation systems that reward success and risk-oriented management style (risks connected with new ventures). The products or services of the companies that apply product leadership strategy are not usually cheap, as for high quality and innovation, customers are loyal and ready to pay the extra price. The best example of the companies known for successful product leadership implementation are Apple, Lamborgini, Chanel.

The last discipline mentioned by Treacy and Wiersema (1995) is “Customer intimacy” which involves the selection of one or a few high-value customer niches, followed by an obsessive effort at getting to know these customers in detail. The companies following “Customer intimacy” discipline “don't deliver what the market wants, but what a specific customer wants” (M. Treacy, F. Wiersema, 1995). “This requires anticipating the target customer's needs as well as they themselves do” (TCI Management Consultants, 2014). The TCI Management Consultants website as well stresses out essential features of the third discipline such as “availability of a full range of services for serving customers upon demand, corporate philosophy and resulting business practices that encourage deep customer insight and breakthrough thinking about how to satisfy customer needs in a better way”. Usually, the companies that apply this strategy act in a service sector and set higher than average prices having constant client base consisted of loyal customers. As the central principle is that all efforts are emphasized around clients' needs, the examples of such approach could be companies that organize individual packaged trips or provide turnkey services. Illustrative examples could be Virgin Atlantic or Club Med.

It is essential to highlight that according to Treacy and Wiersema (1995), on the way of becoming a market leader a company should concentrate only on one of the three disciplines. As a rule, companies that attempt to succeed in each discipline simultaneously are far away from being market leaders. In conditions of increased competition and globalization, it is imperative for a company to achieve an absolute competitive advantage to outperform rivals and take leading positions. However, according to Treacy and Wiersema (1995), if a company concentrate on a particular discipline, it doesn`t mean that others should be absolutely neglected.

Growth strategies

All the theories above describe competitive strategies applied by international companies intended to outperform main rivals. Another aspect of that work that should be considered represents growth strategies.

It is worth indicating that “in the 21st century, developments all around the world spread very fast thanks to the globalization movements and information technologies. Businesses need to develop new products and services, find new market places and consequently grow.” (Durmaz & Ilhan, 2015).

The work “Growth Strategies in Business and a Theoretical approach” by Y. Durmaz and A. Ilhan, (2015) stresses out that business growth implies both quantitative and qualitative improvement. Quantitative growth includes an increase in output, sales revenue, number of outlets, the extent of resources and investments. “Qualitative growth is about developing the quality of business elements” (Durmaz & Ilhan, 2015). The main goal of the growth strategy is that it provides business with advantages against rivals that are usually expressed in a larger market share, volume of output and capital, a number of employees and a scale of business operations, increase in productivity and maintaining a company`s status.

The theoretical ground for growth strategies in this work is based on the research works “Corporate reputation based theory of choice between organic, hybrid and inorganic growth strategies” by A. Agnihotri (2014) and “Strategic alliances and models of collaboration” by E. Todeva and D. Knoke, (2005). It is vital to indicate that “firms implement their growth strategies mainly via three routes. Organic route: which implies that firms develop and utilize their own indigenously developed resources and capabilities; hybrid route: in which firms share their resources or borrows required resources from the market and inorganic route: in which firms buy out another firm to gain access to the required resources” (A. Agnihotri, 2014, p.249).

Inorganic growth strategies

Inorganic growth strategies implies growth by takeovers, mergers and acquisitions. Inorganic growth provides rapid expansion as it allows immediate utilization of acquired assets, but such growth is connected with high risk. (Bruner, 2004). Acquisitions provide immediate growth, however, the problems of cultural integration between companies represent the most restrictive factor, which is absent in the organic expansion (Slangen, 2006). “Acquisitions can take a variety of forms. They can be either mergers or consolidation or acquisition of assets or equity” (Damodaran, 2002). The work “Inorganic growth strategies: An empirical analysis of who benefits from them?” (Latha, 2019) gives the following explanation of inorganic growth strategies.

A merger represents the absorption of one firm by another, where the acquiring firm remains independent and acquires the assets and liabilities of the target firm. The acquired company ceases to exist as an independent separate company. However, in a consolidation, a new business entity is created and both companies cease their legal existence forming separate independent company where all liabilities and assets become the property of the new business entity. In that case, the difference between the acquirer and the acquiring company is not crucial. Acquisition of stock occurs when one company purchases another company`s voting stock for cash or shares. Acquisition of stock usually starts as a private offer. Other case is a tender offer, that is usually unfriendly and represents a public offer to buy shares of a target firm directly from its shareholders. Tender offers are generally used to circumvent the target firm`s management, which usually takes defensive steps resisting the acquisition process. Acquisition of assets is the way of acquiring the firm by purchasing all the target company`s assets. This method helps to avoid the so-called problem of having resisting minority shareholders that takes place in the acquisition of stock. It is vital to pinpoint that inorganic growth strategies bring undisputable advantages for companies
(Latha, 2019, p.4). Mergers and acquisitions are referred to the means for companies to significantly increase their capital base and grow (Andrade & Stafford, 2004). Another researcher states that “M&A allow rapid expansion by overcoming the bottleneck created by the difficulty of establishing and developing adequate retail locations, which can take years from the site selection to finally opening a store” (Tanase, 2011). The researches show that economies of scale, new distribution channels and opportunities for differentiation are the core benefits the mergers and acquisitions could provide a company with.

Hybrid growth strategies

According to A. Agnihotri (2014, p. 252), hybrid growth strategies imply strategic alliances and joint ventures. Many other researchers as well consider alliances as hybrid organizational forms or arrangements between companies that share market elements (Auster, 1994; Olk, 1999). The work “Alliances and Joint Ventures” concludes: “Alliances are cooperation agreements where firms decide to share resources (technological, production, marketing and others) while remaining independent” (Prange & Mayrhofer, 2015). The authors also stress out that the term strategic alliance usually describes different types of cooperative arrangements that usually imply contractual and equity arrangements that require companies to contribute or exchange the capital. There are arrangements implying the creation of a new entity and others which require equity swaps. The authors also conclude: “Alliance is an agreement between two or more firms to cooperate in any value-chain activity from R&D to sales which may or may not imply equity investments. Thus, every joint venture is an alliance, but not every alliance is a joint venture” (Prange, Christiane & Mayrhofer, Ulrike, 2015). Another researcher indicate that “the formation of strategic alliances is a mean for establishing the flow of resources that a company needs and for reducing the risk and uncertainty confronted by the company” (Preffer & Salancik, 1978). “Joint ventures and strategic alliances are formed for a variety of reasons, which include entering new markets, reducing manufacturing costs, and developing and diffusing new technologies rapidly. Alliances are also used to accelerate product introduction and overcome legal and trade barriers expeditiously” (Walters et al., 1994). “To a some extent, alliances combine the assets and capabilities with the uncertainties and liabilities of all partners” (E. Todeva, D. Knoke, 2005, p.127). It is vital that, according to A. Agnihotri (2014, p. 248), the probability of forming a strategic alliance or joint venture in significant extent depends on the firm`s reputation. The firms with a poor reputation may not find desired joint venture partner and as a result adhere to organic growth strategies (Dollinger et al., 1997)”

Concerning the structure and classification of interfirm relationships, “Given the hundreds of articles that have studied these issues over two decades, it is not feasible to examine every aspect in detail” (P.Kale, H.Singh, 2009). Indeed, there is no general concept of strategic alliance in academic literature as researchers classify this form of interfirm relationship in different ways. Some authors separate strategic alliances and joint ventures, while others (Kale & Singh, 2009; E. Todeva & D. Knoke, 2005; Culpan 2002 ) attribute many forms of interfirm relationships to the types of strategic alliances dividing them on whether they are capital intensive or not. For example, “popular forms of strategic alliances include joint ventures, direct equity investments, research and development (R&D) agreements, research consortia, joint-marketing agreements, buyer-supplier relationships, and so on” (Das & Bing-Sheng Teng, 2000). According to E.Todeva and D. Knoke (2005), theoretical and research literature counts 13 basic concepts of strategic alliances including cartels, R&D consortia, joint ventures, franchising, cooperatives and others. Thus, in the present work we adhere to the classification given by E.Todeva and D. Knoke (2005) taking into consideration the forms of strategic alliances relevant for our research, namely franchising, joint ventures and cooperatives.

Thus, a joint venture (JV) is defined as “any form of a cooperative arrangement between two or more independent companies which leads to the establishment of a third entity organizationally separate from the parent companies” (Harrigan, 1986). A joint venture is usually formed between several companies in order to reduce risks and share expenditures, for example, while entering a new market.

Cooperative is a short-term non-equity strategic alliance that is formed between several firms aimed at the “pooling of separate functions, activities or business units, which are directed at a specific objective that do not affect the primary mission and the ownership and control of the participating firms” (Gerybadze, 1995).

Franchising represents a contractual vertical marketing system where the members (franchisor and franchisees) form contractual cooperation and operate as a unified system, rather than as independent channel members (Kotler & Armstrong, 1989). Franchising allows companies penetrating into mature markets through acquiring an existing location and provides foreign franchisors opportunities to penetrate saturated markets, eliminate rivals, and take advantage of their established business connections (Preble & Hoffman, 2006). “Franchising permits businesses to grow more rapidly than any other method” (Sidhpuria, 2009). According to Hisrich (2002) and Barringer (2010), franchising allows a business expanding quickly over a short period of time with minimum capital outlay. With the help of franchisees a company enters new markets quickly, however, the parent company in some way sacrifices the control under branches or outlets opened by franchisees.

Nevertheless, franchisees usually are more familiar with the local markets that facilitates better exploitation of those markets (Hisrich et al. 2002; Barringer et al. 2010). When franchising program is launched, the franchisee bears the cost of opening each store or outlet. It is worth indicating (UNIDROIT, 2002) that there are two core agreements included in a master franchise arrangement: the first agreement is the master franchise agreement (between the franchisor and the sub-franchisor). The second is the sub-franchise agreement (between the sub-franchisor and sub-franchisees). A master franchise agreement is a popular entry mode, however, it is also widely used within a domestic or existing market for market penetration.

However, the previous researches also show that despite extensive use of inorganic and hybrid strategies, namely alliances, mergers, and acquisitions, most of them lead to failure. “The failure rate of strategic alliances strategy is projected to be as high as 70 percent. The reasons include a breakdown in trust, a change in strategy, the value did not materialize, the cultures did not mesh, and the systems were not integrated” (Kalmbach and Roussel, 1999). The research conducted by KPMG (1999) revealed that 75% to 83% of mergers and acquisitions fail. Another researcher indicates: “when failure rates were analyzed in more detail, the overwhelming majority of senior personnel highlighted culture and communication to be the two areas that prove to be the most challenging”( Koi-Akrofi, 2016). Concerning the joint ventures, as an alliance, it also has a high rate of failure. International joint ventures are characterized by a high degree of instability and poor performance (Parkhe, 1993). Hennart et al. (1998) claim that the core reasons for the instability of joint ventures are tensions in shared management explained by conflicts of interests.

Thus, as the researches show, the main challenging factors in the stated above inorganic and hybrid methods of growth are discrepancies in companies` corporate cultures, lack of trust and difficulties in the integration process.

Organic growth strategies

“Organic growth, also being called as internal growth, expresses economical, physical, social and organizational growth which takes place in a company without external interaction” (Öncer, A. Z., 2012). Organic growth allows increasing the amount of capital stock, feedstock and the number of employees as well as the growth of the business structure. Moreover, the increase in goodwill and reputation is perceived as organic growth as well (Öncer, A. Z., 2012).

In many resources such as “Growth Strategies in Busýnesses and a Theoretical Approach” by Y. Durmaz and A. Ilhan (2015), organic growth is described through so-called Ansoff Matrix that reflects the nature of organic growth. In the present work, organic growth approach is based on the Ansoff Matrix as well. The Ansoff matrix was introduced by Igor Ansoff in 1957 in his work “Strategies for Diversification”. The matrix includes four main strategies for expansion, namely market penetration, market development, product development and diversification (Hall and Lobina, 2007). The Ansoff matrix is illustrated in figure 3.

Figure 3. The Ansoff matrix. Reprinted from “Strategies for Diversification” by H. I. Ansoff, (1957). Harvard Business Review. 35 (p.114)

Market penetration.

The most widely used strategy for a firm to grow. “The company seeks to improve business performance either by increasing the volume of sales to its present customers or by finding new customers for present products” (Ansoff, 1957). Market penetration is considered as the less riskiest market growth strategy “which aims to get a bigger share in the market with products in stock” (Timothy, et al., 2005, p. 8). According to Ansoff (1957), the main principle of this strategy is that a company penetrates the existing market through increasing sales volume and its market share. The core instruments in this strategy are increasing the number of outlets, shops or selling points, enhance promotion by spending on marketing, enhance distribution efforts through finding new distribution channels as well as decrease prices to attract more clients. Increasing market share is essential for that strategy, therefore to increase the number of outlets in existing markets firms expand through establishing company-owned entities. Increasing market share through establishing company-owned outlets implies a higher level of control and limited risk as expansion is gradual. However, “The opening of company-operated outlets or branches requires substantial capital investment, which is a major constraint to growth. In many markets, such growth is slow due to zoning restrictions, planning permission, the search for sites, including the acquisition and development of the premises and other factors” (George Cosmin Tanase, 2011). Tanase (2011) also claims that such factors “entail the risk that the critical mass is not reached fast enough and other retailers with similar concepts, but not similar constraints, expand faster”.

The example of successful implementation of market penetration strategy could be Subway and McDonald's that are well known for expanding quickly in existing markets through active promotional efforts and increasing the number of outlets.

Product development.

According to Ansoff (1957, p. 114), in this strategy, a company develops a new product to launch it to the existing market. Usually, this strategy requires substantial spending on research and development and market research operations. New products, developed for existing customers provide growth for the company where there is a decline in growth in existing markets with existing products. (Ansoff, 1957). The risk is that in some cases new products fail to bring an expected financial return. Apple Inc. is one of the most illustrative examples of successful implementation of product development. Apple continuously develops new models of mobile phones, watches and other gadgets, which are popular all around the globe.