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Developing growth strategies to become a market leader
S T R AT E G Y
Introduction offering within a range of different markets including oil and gas,
nuclear power and the food and drink industry. IMI’s products help
A business will not become the market leader by chance. It takes its sector-leading customers to become more competitive whilst
careful planning to build an organisation that outperforms its enhancing responsible business practice in their specific markets,
competitors. In business, these plans are called strategies. for example, by improving efficiency, increasing output or reducing
A business strategy can take many forms. For IMI, a leading energy usage. IMI calls this Engineering Advantage.
engineering business, its strategies focus on growing the business
within the niche markets in which it operates. A niche market is a IMI’s growth strategies are set to help achieve its mission and
relatively small and often highly specialised segment of a market. goal. A company’s mission communicates the organisation’s core
purpose to its stakeholders. IMI’s mission is: ‘To become the most
IMI is a global engineering business focused on the precise control admired engineering solutions company of our size anywhere in
and movement of fluids in critical applications. IMI has five the world.’ A company’s goal outlines what it hopes to achieve in
platform businesses which use its expertise in valve and fluid the long-term. IMI’s goal is: ‘To become the world’s leading
engineering in different markets: engineering company in each of the global niche markets we
• Fluid Power – specialists in motion and fluid control serve and to be admired for our innovation, applications expertise
technologies, custom engineered for critical applications and global service.’ An organisation’s mission and goal provide a
requiring precision, speed and reliability. framework in which the strategies are created. This case study
• Severe Service – highly engineered valves and controls that shows how IMI uses a variety of strategies to grow each platform
enable vital industrial and energy production processes to of its business to work towards achieving its mission and goal.
operate safely, cleanly and more efficiently.
• Indoor Climate – experts in hydronic distribution systems and Growth as a business strategy
room temperature control which deliver energy efficient indoor
climate systems. The purpose of a business strategy is to create a competitive
• Beverage Dispense – specialists in innovative beverage cooling advantage in the market place. Strategies are the means by which
and dispense solutions that contribute to increased sales and an organisation can achieve its goals. IMI’s strategies are therefore
lower operating costs. focused on growing each of its five business platforms to become
• Merchandising – specialists in bespoke point of sale the world-leading engineering company in these niche markets.
merchandising solutions which improve retailer profitability by
driving up sales.
IMI is a member of the FTSE 100, a list of the 100 largest UK
organisations listed on the London Stock Exchange. The Group
manufactures products in over 20 countries and has over 15,000
employees worldwide. Its employees focus on creating unique
solutions to specific problems. In fact, around 70% of IMI’s
products are engineered to order. Its employees’ global
knowledge and skills are a key factor in its ability to differentiate its
Curriculum topics covered: • Business strategy • Organic growth
• Inorganic growth • Measuring growth
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Each business is different. Strategies are heavily influenced by the IMI’s growth strategy focuses on the markets where it is, or has the
business’ values. Values outline its behaviours, often referred to as potential to become, the market leader. It uses innovation and its
‘the way we do things around here.’ An organisation’s values expertise in the four growth drivers to enhance its position in these
underpin all decision making and play a vital role in setting markets. The benefit to IMI is that the business achieves higher
strategies and goals. IMI’s values are part of its unique selling margins (the amount of profit once costs have been subtracted),
proposition (USP). A USP is something the company offers that its greater product differentiation and improved customer intimacy. IMI’s
competitors do not. For IMI, this code of conduct is referred to as objective is to focus on these markets over the next 5 years. This
‘The IMI Way’. This states that an IMI employee: ‘Pursues objective drives all of IMI’s investment decisions and supports its
excellence and delivers results; innovates and provides value to goal to grow to become market leader in its niche markets.
our customers and acts with integrity.’ This is true for IMI
employees around the world and demonstrates their commitment Organic growth
to doing the right thing for the business and for its customers.
One method used to grow a business is organic growth,
Every business is affected by factors in its external environment. sometimes called internal growth. Organic growth occurs when a
Monitoring and assessing the likely impacts of these external business grows by selling more products or services. Ansoff’s
factors will highlight challenges and opportunities for the business. matrix outlines four ways this can be achieved:
IMI has identified four global long-term trends which are shaping • market penetration – selling more of its products to existing
the future direction of the business. These growth drivers are: customers
1. Climate change – providing green technology solutions to • market development – selling its products to a wider market,
improve energy efficiency and environmental impact. either at home or abroad
2. Resource scarcity – innovative products to manage energy, • product development – increasing the product portfolio by
water and waste more efficiently. selling new products or services to existing markets
3. Urbanisation – the increasing movement of populations to cities • diversification – selling new products or services to new markets.
adds pressure in areas such as improving the operation and
maintenance of older buildings, enhancing building design to PRODUCT
improve efficiency and providing better transport links. Existing New
Existing
4. Ageing population – delivering niche products to support Existing product New product
MARKET
healthy lifestyles. Existing market Existing market
New
Existing product New product
Growth is a common goal, also known as a business objective, for New market New market
many organisations. A business may pursue a growth strategy to
increase its market share, improve efficiencies through economies
of scale or to increase revenue. Organic growth is a long-term strategy. It is a lower risk growth
strategy than inorganic growth as it is building on the company’s
strengths to increase sales. For IMI, growth of each of its five
platform businesses is driven by:
• innovation
• new product development
• market development – seeking opportunities in a variety of
emerging markets.
IMI seeks to maximise organic growth opportunities by focusing its
innovative new products on the four growth drivers. IMI’s strategy
for growth has seen increased investment in new product
development, as well as sales, to increase exposure to the higher
growth emerging markets. For example, IMI’s Severe Service
division has experienced growth in emerging economies such as
Argentina where its market-leading control valve technology
gained new customers in the oil and gas industry.
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Although a much faster method of growth than organic methods,
inorganic growth carries greater risks. It is often very expensive to
buy a business, even if the business being acquired is in financial
trouble. Acquisitions must be carefully planned to ensure the
venture is viable. If acquiring a business that strays away from the
organisation’s core competencies it must ensure it has the skills
and knowledge required to run the business profitably. When
analysing an acquisition, it is essential to recognise that a business
is not just purchasing tangible items such as employees, stock
and buildings, but also non-tangible ones such as reputation,
intellectual property, liabilities and goodwill. Once an acquisition
has been finalised the process of integration must be carefully
managed so that a smooth transition takes place without a loss of
Using IMI’s technology, Pan American Energy eliminated high value in the acquired company.
vibration and poor fluid control in its water injection control valves
and pumps, avoiding expensive shutdowns and maintenance costs. Carefully planned acquisitions are key to IMI’s growth strategy. IMI
focuses its acquisitions on companies that are complementary to
In recent years climate change has been a key growth driver for its existing businesses and will help it achieve its mission and goal.
IMI’s Severe Service division in a variety of markets. For example, in This involves acquiring companies that are leaders in their
Spain IMI worked on ‘Andasol 1’, Europe’s first trough commercial respective fields to strengthen IMI’s market share. Two examples
power plant. The plant supplies environmentally-friendly solar are IMI’s Severe Services platform acquisition of German industrial
electricity for up to 200,000 people using steam powered turbines. valve maker Zimmermann & Jansen in 2010 and the leading Italian
IMI engineered valves to control the flow of steam, eliminate the engineering business Remosa in 2012. These enabled IMI to
emission of greenhouse gases and improve efficiency. become the leader in custom engineered valve and control
solutions for critical in-plant processes. Both companies operated
New product development also drives IMI’s organic growth in all in power generation and oil and gas, industries in which IMI
divisions. For example, IMI’s Beverage Dispense division already had a wealth of expertise. They also gave IMI a strong
engineered a premium juice dispensing unit for McDonalds. presence in emerging markets, including South America and Asia,
Focusing on the ageing population and climate change growth where Remosa, for example, was already highly active.
drivers, this new product has the capacity to double the existing
number of juice brands McDonalds can offer, giving customers
greater choice of healthy beverages. The unit helped McDonalds’
sustainability goals by using hydrocarbon to reduce negative
impact on the environment and LED lighting to reduce power
consumption.
IMI’s organic growth, in each of the five platform businesses, is a
result of carefully planned strategies and the expertise of its global
workforce to deliver innovative solutions to the challenges facing
its customers.
Inorganic growth
Inorganic, or external, growth is another method used to grow a
business. The main sources of inorganic growth come from
mergers and acquisitions with other businesses. A merger is when
two companies join together to create a new company. An
acquisition is where one company buys another company which it
then controls.
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www.imiplc.com
Alignment of these objectives is key for IMI to meet its target to
invest the percentage of revenue from new product development,
and to achieve a corresponding increase in investment in research
and development.
Conclusion
IMI’s growth strategy is driven by market and product
developments that focus on its long-term goals. Using the global
expertise of its workforce, IMI is able to develop innovative
solutions for the challenges faced by its customers. These
challenges are driven by IMI’s growth drivers; climate change,
resource scarcity, urbanisation and ageing population.
IMI has a 5 year map of its new product developments. This map
allows the company to identify opportunities to increase market
share as well as market development opportunities in sectors
where the company already has knowledge and expertise.
Alongside organic growth, IMI’s well targeted acquisitions strategy
aids the achievement of its goal to be the market leader in the
Another example of inorganic growth is IMI’s acquisition of InterAtiva in
niche markets in which it operates.
2012, a Brazilian isolation valve business serving various end markets
including oil and gas and water treatment. This acquisition also
supports IMI’s market development strategy. InterAtiva had strong
customer relationships in Brazil so IMI has been able to increase its
customer base and presence in this core emerging market.
Measuring growth
Organisations can measure growth in a variety of ways. For
example, growth can be measured against revenue, profit, market
share or the number of geographical markets in which a company
operates. Comparisons can then be made between this data and
data from previous years to determine if its aims and objectives
have been achieved. IMI measures growth against its key growth
strategies and its goal to be the global leader in each of its niche
markets. IMI monitors its global competitors to determine whether
it is the market leader.
IMI sets growth objectives at a Group level as well as for each of its
divisions. The annual results enable IMI to measure the percentage
of growth in each division, both organic and inorganic growth, to 1. Describe one method of organic growth pursued
Exam-style questions
ensure objectives have been achieved. For example, in 2012, IMI’s by IMI. (2 marks)
organic and reported revenues rose 3% to £2.19 billion. IMI’s 2. Explain the difference between organic and inorganic
Severe Service revenues, boosted by the Remosa and InterAtiva growth. (4 marks)
acquisitions, were up 20%. The results also demonstrated that IMI 3. Analyse the benefits and drawbacks of IMI’s recent
achieved strong growth in emerging markets with a 24% increase in acquisitions. (6 marks)
revenue in 2012 and organic growth up 14%. This information is 4. Evaluate the effectiveness of IMI’s growth strategy.
used by IMI senior managers to determine growth trends and to set (8 marks)
future growth strategies and objectives.
IMI | Developing growth strategies to become a market leader
