When your business has grown to a certain level of financial and operational success, you may start thinking of ways to reach out to new markets. After all, as an entrepreneur, it's only natural for you to pursue the goal of opening other branches and diversifying your products. Moreover, here are other reasons you should consider expanding your business:
Importance Of Business Expansion
- Attract New Customers: Expanding your business may help grow your customer base, especially when you introduce new products and services or open new branches in other areas.
- Enjoy Economies Of Scale: When you increase your production strategically, you’ll have a better chance of gaining more profits. You may also get more discounts from your suppliers because of purchasing in large quantities.
- Multiple Income Streams: When you introduce a new product or service, you increase your income sources. This may cushion you in situations where one of your products isn't performing well. Thus, the revenue from other products can sustain the operations of your business.
- Brand growth: Selling your products in new areas or exploring new markets will provide you with more opportunities to achieve greater brand recognition. It’ll be easier for your target audience to attach your business qualities, characteristics, and ideas to your products and service.
Business expansion is a crucial phase in the lifecycle of any venture. While various methods can be adopted to scale operations, successful growth often requires a focus on enhancing customer experiences and managing increased service demands. However, managing a growing customer base can be challenging, especially when venturing into new markets. To tackle this, many expanding businesses turn to external resources. Partnering with a customer service outsourcing company can be a strategic move. These companies have expertise in managing diverse customer needs across various platforms, which allows businesses to maintain high-quality customer interactions while freeing up internal resources to focus on core expansion activities.
Methods Of Business Expansion
There are several strategies that you may use to expand your business. Some of these methods include the following:
1. Expansion Through Cooperation
With this method, your organisation agrees with another enterprise to jointly carry out the business operation to grow your market potential. Business expansion through cooperation can be done through the following strategies:
- Merger: This is a strategy involving two or more businesses where one of the firms commits to an asset purchase agreement to transfer assets between the parties involved in exchange for shares or cash. Both firms may get dissolved, thus forming a new organisation.
- Takeover: This is a method of expansion wherein one business acquires another and takes over the operations of the acquired firm. The two firms can mutually agree to have the bigger firm takeover the smaller one—a step that’s usually deemed beneficial to both firms.
- Joint Venture: This is a setup where two firms agree to carry business operations together. The aim is usually to leverage each other’s strengths. However, this strategy is usually temporary, especially when the organisations wish to accomplish a certain objective.
2. Expansion Through Diversification
This strategy is aimed at changing the definition of your business. You can achieve this by introducing a new product or reaching out to new markets. In most cases, a firm that chooses to carry out product and service diversification hopes to overcome economic downtimes. The profits gained from one product may help clear the losses sustained in another product category during turbulent market seasons.
Read more: Why You Need To Diversify Your Business To Accelerate Growth
3. Integration Expansion
This is a business expansion strategy where you combine two or more business operations without changing the customer category. You can achieve this through the value chain, right from procurement to the selling of the finished products. However, make sure you closely examine the needs of your customers to broaden the scope of your business. With integration expansion, your goal is to move closer to your target customers to increase the sales of your products.
4. Internationalisation Expansion
Expansion through internationalisation targets markets beyond your national boundaries. This is often applicable to businesses that have already taken advantage of their local market and are now in a position to explore the global market. When considering expanding your business internationally, you have to keep in mind that the international market might be tougher as you may have to deal with strict quality measures, pricing, and delivery services.
5. Expansion Through Concentration
This kind of expansion strategy requires you to invest more of your resources into your production line to cater to your customers’ growing needs, technology alternatives, and functions. With concentration, you strive for market penetration by focusing your efforts on the market your existing products belong in. Moreover, you can perform market development concentration where you pull new clients for the same products. You can also choose product development concentration by introducing new products and services in an existing market.
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Preparing For Business Expansion
☆ Invest In Marketing
If you’re targeting to grow your customer base, investing in the right digital marketing strategies is one of your best options. Do proper research on the type of customers you’d like to reach online, create a persona, and identify where they’re likely to be found online. There are several channels you can use to market your business online, including social media, your website created by using a one-page website builder or other tools, email marketing, and Google ads.
Read more: Infographic: Video Marketing Statistics
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☆ Establish Scalable Processes
You need to put measures in place that will allow you to scale your business at any time. If your processes can only work for certain business sizes, you need to review them to accommodate your anticipated growth. For instance, if you own a startup, you need to implement scalable practices from the inception of your business.
☆ Be A Planner
If you don’t have a clear vision or direction of where you want to take your business, you’re likely to face significant obstacles in your efforts for expansion. Some causes for failure include lack of competency in strategic management, lack of good financial control, and failure to plan where the cash will go. So, always start with a clear goal in mind and communicate your vision with your team.
☆ Hire Top Talent
If your goal is to achieve sustainable growth, you have to focus on quality instead of quantity. It’s better to hire a few staff members who are highly skilled than to invest in a large pool of workers who might be lacking in competence. Recruit experts and remunerate them well to motivate them and ensure loyalty. This way, they’ll serve your customers with excellence, identify new streams of revenue, and be willing to accept new responsibilities.
☆ Have A Good Credit Score
A good credit score is important, especially if you’ll need to secure finances to fund your business expansion. Financial institutions will inspectyour credit score before they’ll approve your loan. Remember that a good credit score isn’t only good for you but also for your business, whichis a separate entity. To maintain a good credit score, always pay your loans on time and settle your debts with suppliers and vendors.
Business expansion is an attainable venture when you factor it in as you start your business. You need to put in place modalities that cater to the scalability of your business. Your business may need to cover new geographical areas nationally or internationally. However, you need to continue preparing your firm for expansion in the future. In the early stages of your business, implement strategic marketing strategies, maintain a good credit score, and employ competent employees.
About Author: Jonna Tims is a business consultant and a marketing expert. She has been practicing for over 10 years. She likes sharing her expertise and knowledge through guest blogging. During her free time, she likes watching movies, playing chess, and skating.