We have all come across inspiring and motivating business expansion journeys of TATA, Amazon, Paytm, Jio, etc. But have you ever thought about how these businesses could achieve so much more and grow their business beyond the domestic boundaries? Well, they all had a clear vision and a good business expansion strategy in place.
This blog entails shedding light on business expansion strategies by discussing their types, advantages, benefits, effective strategies, and risks in detail for your benefit. Let's start from the ground up and understand the definition of business expansion.
Business expansion is a stage of growth where a business or company attempts to grow more by generating more profit. In economic terms, business expansion reflects the steady growth of gross domestic product (GDP) for two or more consecutive quarters. Business expansion indicates economic recovery leading to an increase in employment, income, and GDP.
Having a consistent business expansion cycle is every business owner or company's dream, enabling the business to expand and reach and grab new opportunities for development and profit-making. Let's understand the significance of business expansion and the benefit it carries:
Business expansion leads to profit generation enabling businesses to try new ventures and concentrate on new projects or products. Focusing on new product development could ensure business growth.
The business expansion also enhances the customer base with business growth. Tapping into new products or services tapping into different population demography increases the business's reach and customer base.
The business expansion also allows diversifying in terms of products, projects, pr services. Introducing new and innovative products or services into the dynamic market could make you the trendsetter or pioneer. Trying your hand at new things furthers business growth.
Global expansion is a good business expansion strategy. If your business is doing good, the next big step is to generate global brand awareness and go international with your products or services. The deep-rooted globalization has resulted in an integrated virtual market supporting global business expansion.
Business expansion strategies could be categorized into internal and external growth based on the growth. The following table will elaborate on these types while listing their advantages and disadvantages:
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Expansion by Internal Growth |
Expansion by External Growth |
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Expansion by internal growth is attained by utilizing the internal resources within a business or company. The most common internal business expansion strategies include:
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Expansion by external growth occurs when external resources and capabilities are utilized for business growth instead of internal activities. Some of the business growth strategies used for external growth include:
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Advantages |
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Disadvantages |
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To check whether your business expansion strategies are working, one should know how to measure the business growth. There are certain indicators through which business growth and expansion strategies could be assessed, including:
When the amount of company assets increases, surpassing the liabilities, it's a sign that your business is doing well. The ability to accumulate more assets shows your company's growth.
Another indicator revealing your expansion strategies are working is when the number of employees increases.
Total output implies the sum value of goods and services produced by your business monthly or annually. If the total output or productivity is high, it implies business growth.
Increasing customers also denotes business growth. But if the customer retention is poor compared to customer acquisition, your growth plans for the business need repositioning.
A direct measure of your business growth is revenue. It shows how much money your business is generating. The scope of business expansion enhances with more revenue.
The amount of profit your company or business bags also measures your business growth. Profit is a sure-shot indicator of whether you need to modify or change your business expansion strategies or not.
Market capitalization refers to the company's total share issued to the general public. This indicator is usually applicable to public limited companies. As the stock prices are dynamic, this measure is as stable as others.
An expansion strategy is a plan devised for business expansion. If you are wondering about how to expand business or how to devise a growth plan for the business, or how to increase business growth, we have seven business expansion strategies for you to try.
One of the most common and effective types of expansion strategy is market penetration, i.e., increasing your company's market presence in the existing market. Market penetration could be attained in two ways- horizontal or vertical. In horizontal market penetration, business expansion occurs by increasing advertising, spreading the brand's name to other products, or introducing better products. Vertical market penetration focuses on business expansion through increased production, lowering prices or creating new products.
Devising a full-proof marketing strategy promoting your products and services also directs company growth. Market your products through the right channels and target audiences by analyzing their behavior and buying patterns. Google analytical tools could be handy if you wish to dab into digital marketing and promotion.
Expanding the market scope and entering a new market is another effective business expansion strategy. It gives a new and continuous opportunity for business growth. Ensure you conduct thorough research, understand the potential customer, analyze the need of your service or product for the target audience, generate brand awareness, find the right partners and build a strategic market development.
A global expansion strategy is another way to go for business expansion. Expanding business internationally could enhance your company's revenue, operations, and market share. You could also diversify your company's culture, expand the company's assets and find the required funding for business expansion by transitioning to a global scope.
Franchising is another proven business expansion strategy. Entering a new market becomes easy with franchising as the business owners have to pay relatively less. Its easier for business owners to gain access to market knowledge in different areas once they partner up via franchising.
A business partnership is another way of facilitating business expansion. Especially if you are a start-up or entrepreneur, entering a joint venture could ensure company growth for both parties. Merging is also a good option for business expansion, especially when your business acquires a smaller company or grows in size, resources, and human resources.
One of the most effective ways to drive up sales and business. By introducing and developing new products, you could attract new demography or customers and increase the consumer base. Diversifying your product lineup creates additional potential for revenue generation, sales, brand awareness, and market expansion.
When it comes to business expansion, you must research, plan, analyze, and implement your goals and business expansion strategies accordingly. You cannot hastily make a risky move to expect company growth.
Before you make any move in the direction of business expansion, here are some things to be mindful about:
Although it sounds easy, business expansion, even with a good business expansion strategy, involves risks. Otherwise, business growth will be in everybody's bucket.
Some of the risks involved in the business expansion are:
Monetary loss is one of the major risks you could face during business expansion. While introducing new products, entering a new market, increasing production, or utilizing new technology, your business may incur a financial loss. The new product may not click as much as you hoped, the new market was not responsive, or the new technology was expensive and brought down the productivity resulting in financial loss.
Business acquisitions, mergers or joint venture business expansions may face ineffective management. Merging with a new company or entering a partnership may cause conflict in management styles and company culture, impacting the employees' productivity and daily operations of your business.
The word constant is not something which is always associated with business expansion. The dynamic and unpredictable market situations, increasing competition, and new markets or terrain could prevent consistent business expansion. These variables could make the business expansion process unstable.
Employees or other staff may refuse to change and pose a hindrance to business expansion. Be it introducing new technology to enhance productivity, merger with another company, or forming a partnership, if employees don't react or respond to these changes, the business expansion may hinder or backfire.
Any business is impacted by the socio-political climate in a region or country. Economic aspects highly impact any business but so does the political and social conditions of regions. Any major political or social change could highly impact or hinder the business expansion. For instance, communal or civil riots could easily hinder your business growth and expansion strategies.
Amazon is one of the successful business expansion examples in India. In 2013 Amazon India went live in the Indian market land doing exceptionally well in the coming years and up until now to become one of India's biggest e-commerce platforms. Amazon slowly and strategically expanded the business by introducing Prime membership in July 2016 and by December 2016, introducing Amazon pay balance, Prime Video and Prime Music in March 2018. Amazon's business growth in India was ensured by introducing new parallels and features like Amazon Business, which concentrates exclusively on the needs of business owners, wholesalers, buyers, and sellers. The business expansion story of Amazon in India has been truly inspiring and motivating, given Jeff Bezos kept investing in growing business in the Indian market.
The journey of Paytm is another example of successful business expansion. Paytm was launched as a digital platform in 2010, but now it has completely transformed into one of the finest fintech companies. Paytm started as an online recharge platform and has incorporated parallels like offering micro-loans, e-wallets & UPI money transfers, shopping, booking train/ bus/ movie tickets etc. The innovative and bold risks taken by Paytm have led to its growth and business expansion.
Many factors and variables come into play while deciding on an expansion strategy to grow your business. Apart from the economic factors, socio-political circumstances also play a determining role in business expansion. But if you have a clear vision, effective expansion strategy, right resources, adequate funding, and decision-making ability, your business could grow beyond the local market. Join the Amazon Business community and learn how to expand business online. Check out our guide on how to start an online business in India and learn more about online business.
