By far the most widely pursued corporate directional strategies are those designed to achieve
growth in sales, assets, profits, or some combination. Companies that do business in expanding
industries must grow to survive. Continuing growth means increasing sales and a chance
to take advantage of the experience curve to reduce the per-unit cost of products sold, thereby
increasing profits. This cost reduction becomes extremely important if a corporation’s industry
is growing quickly or consolidating and if competitors are engaging in price wars in attempts
to increase their shares of the market. Firms that have not reached “critical mass” (that
is, gained the necessary economy of large-scale production) face large losses unless they can
find and fill a small, but profitable, niche where higher prices can be offset by special product
or service features. That is why Oracle acquired PeopleSoft, a rival software firm, in 2005. Although
still growing, the software industry was maturing around a handful of large firms. According
to CEO Larry Ellison, Oracle needed to double or even triple in size by buying smaller
and weaker rivals if it was to compete with SAP and Microsoft.7 Growth is a popular strategy
because larger businesses tend to survive longer than smaller companies due to the greater
availability of financial resources, organizational routines, and external ties.