BUSINESS EXPANSION STRATEGIES & OPTIONS
It is sometimes difficult for small or medium business to have survived the first few years of starting up the business and now the owner’s attention turns to growing and increasing what he has begun. The sole aim of top successful business managers and entrepreneurs is to target new market and better get more profit from their business. There are many ways to achieve this and they all present a new set of challenges and risks. You can do one or all depending on your business and the risks your willing to take. According to a recent survey conducted by a business group, about 26% of small and medium-sized businesses are engaging variation of strategies to spring themselves a competitive edge advantage in the market. To expanding a business is totaling the capital base of the business with an objective of cumulating revenue and profit.
As analysed by Forbes Business publication, it made out time to examine the theory call Ansoff Matrix, in Ansoff Matrix, there are four strategies to grow your company, each with a different level of risk. Market penetration is the safest course to take because you already know the products and the market that you will be targeting. Selling more products to an exciting customer, finding new customers within these markets or widening the range of exciting products requires little research and risk, but can it achieve your businesses growth objectives. Lowering prices to compete with competitors may not work for everyone like it has done for Walmart and Costco. Apple uses aggressive marketing campaigns for selling more iPhones and iPads to their current market. According to Panmore Institute, Market penetration is Apples second most intensive strategy for growth. A quick look at it too is Coca Cola which also use product development as used by Apple Technology as their foremost strategy for growth. In the case of Coca Cola, Coca-Cola launched Coke Light in 2013, a low calorie and low sugar alternative. A few years later it was taken off the shelves, Coca-Cola explained it was to simplify customer options as they already had Diet Coke and Coke Zero.
It is important to consider some factors which should be put into consideration prior to expanding a business which the owner want it be more viable and for it to serve the primary purpose which is to make a profit. It is not prudent to invest into business sightlessly. A good investor will make sure he or she examine and evaluate the health of the business and determine whether it is ready for evolution into a bigger one or not yet.
The Ansoff Matrix is a strategic planning tool that provides a framework to help executives, senior managers, and marketers devise strategies for future growth. It is named after Russian American Igor Ansoff, an applied mathematician and business manager, who created the concept.
Diagram showing the Ansoff Matrix
Ansoff, in his 1957 paper, provided a definition for product-market strategy as “a joint statement of a product line and the corresponding set of missions which the products are designed to fulfil”. He describes four growth alternatives for growing an organization in existing or new markets, with existing or new products
Market penetration strategy is the strategy used when a business attempts to grow using its existing offerings (products and services) in present markets. In other words, it attempts to upsurge its market share in current market situation. This comprises growing market share within current market segments. This can be attained by selling more products or services to the customers as a way to established customers relationship and making sure the customers have great experience and also finding new customers within existing markets. In this situation, the company pursues improved sales for its existing products in its extant markets using more aggressive strategy, promotion and distribution.
This can be accomplished by:
- Price decrease
- Increase in promotion and distribution support
- Acquisition of a rival in the same market
- Modest product refinements
- This is the least risky growth option.
- Easy access to products and services
- Providing after sales service to bring better customer experience.
The next to be discussed on the Ansoff matrix is market development strategy, when a firm determines to expand into virgin markets. Using the business existing product offerings and also with slight product/services expansion.
This can be accomplished by:
- Diverse customer segments
- Industrial buyers for a good that was previously sold only to the households;
- New areas or regions of the country
- Overseas markets.
This strategy is more likely to be successful where:
- The firm has a unique product technology it can leverage in the new market
- It benefits from economies of scale if it increases output
- The new market is not too diverse from the one the business has experienced
- The buyers in the market are essentially profitable.
The third on the list to talk about is product development strategy, the strategy is employed by companies trying to create new products and services targeted at its existing and even on the run get new customers who will be attracted to the new product when it gets to the markets as a way to achieve growth. This involves spreading the product range accessible to the business’s existing markets.
These products may be obtained by:
- Investment in research and development of additional products;
- Acquisition of rights to produce someone else’s product;
- Buying in the product and “badging” it as one’s own brand;
- Joint development with ownership of another company who need access to the firm’s distribution channels or brands.
Diversification is another important growth strategy companies or organization who attempts to grow its market share through announcing new offerings in new markets. It is the riskiest strategy for the reason that both product and market development are required to perfect the diversification strategy which will see it work proper.
Related Diversification: there is relationship and, therefore, potential synergy, between the firms in existing business and the new product/market space. Concentric diversification, and (b) Vertical integration.
Unrelated Diversification: This is otherwise termed conglomerate growth because the resulting corporation is a conglomerate, i.e. a collection of businesses without any relationship to one another. A strategy for company growth by starting up or acquiring businesses outside the company’s current products and markets.
SIGNS THAT YOU ARE MATURE FOR GROWTH/EXPANSION.
Expanding your business at the wrong time can be more dangerous than not expanding at all. To know when to expand a business, consider the following factors. If several are true of your business, it may be time to branch out.
You Have a Loyal Customer Base
A very powerful customer base which are very loyal with the business brand are one of the signs that the business is ready to expand especially when they are much.
Customers Are Asking You to Grow
In a situation where by the loyal customers are much and as well want to see the business grow to their respective location for more convivence, they request by confiding in the management of the company.
Your Business Has Been Profitable for 3+ Years
A persistent increase for at least 3 to 4 years is a sign that the business is doing fine and it will thrive years after. As a result, it may be wise that the organization think of growth which will further increase the success recorded by the business.
You Have a Strong Team of Employees
To handle growth, your staff needs to be ready for additional work, new demands, and new challenges. In other words, they need to have their act together. You’ll need employees who can step up and take charge of a second location, a new product line, or a big new account. If you’ve got these workers in place, your chances of successful business expansion improve.
Your Industry or Market Is Growing
Another sign that could be telling you are ready for growth is when the particular industry in which you are operating is booming and making great impact in the economy of the state. For example, the oil industry in Nigeria that suddenly received strength which resulted in many oil companies rescaling to be bigger.
You Have Steady, Positive Cash Flow
Constant positive cash flow is a reason why business may want to scale up their business both geographically and even sometimes product wise. After preparing your cash flow statement and it indicate that the business is liquid enough to offset bills and liabilities, then one can expand operation.
You Have More Business Than You Can Handle
In this situation, the business will sense that there has been little or no time for rest as all the time has been taken for engagement with the clients of the company. In this sense, the business transaction is more than what they can handle, then they will think of growing the business to satisfy the other customers perfectly.
Strategic ways to grow your business for more profit.
Get to know your customers
Having personal understanding of your customer is very important as it will enable you to know how best to meet their needs by producing products and services which will satisfy their wants and needs. One on one interaction with customer will bring about customer experience which will in return bring you more turnover.
Offer great customer service
Business management should ensure that customer service is excellent and they should even go that extra mile when they can. Such treatment and hospitality will be memorable with the customers as they will also be more likely to refer other people to you. Nurture existing customers and look for new opportunities
Use social media
Social media is a powerful interface to promote business to potential customers and gaining valuable insight by showing what he has to the social media community. The business can open page for the business on all social media depending on their niche and customers they want.
Give back to your community
Building brand awareness in your local community is a great way to attract new business. This is other wise called corporate social responsibility. Through cheerful donation, people using and people that reside will take time to talk about the brand.
Create a webinar.
Webinars are a boundless way to grow any product or service. It can also aid you grow any business moderately fast. Webinars deliver an automated selling tool for literally taking any product or service to market and reaching a wide audience quickly.
Acquire other businesses.
Sometimes, buying over other businesses is a very speedy way to grow your own business. If you can find competitors or businesses in other industries that would complement your own business or that is competing, one can buy it over and as a result there will be more outlets for your business.
Diversify your offer lineup.
A view into diversifying your offers will look like bringing complementary products or services which you can bring in your business for growth and improvement. In a way to grow, you need to think about expansion that will bring better view and status for your brand. Recognize new opportunities within your niche.
Form strategic partnerships.
Working with strategic partnerships who has the right companies can truly make a world of difference. The synergy could allow the business to reach a wide range of customers quickly. Recognizing those strategic partners might sometimes be very difficult that its implementation. But one has to look out for those companies that are complementary to your own business. One will approach and present to them the kind of profitable synergy you will like to bring up.
As one of the most effective ways to migrate into new markets is by being on the lookout for customer referrals from existing customers. Research has shown that 83% of consumers will trust the endorsements of family and friends over other forms of advertising being the fact that they know they got first-hand experience and will have no reason what so ever to deceive them. From referred customers, has proven to convert more often, they have a higher lifetime value and retention rate.
Launch an Ecommerce Website
Lunching of an E-Commerce website is the right decision to make in a way to grow the customer base and attract customers outside your geographical location as a way to extend your market reach. To do so, you’ll need to set up your website using an ecommerce platform, then focus your SEO and digital advertising. It will help show your products, price and specification where customers that love any of it can order them. Example is www.businesscardinal.com and likes of jumia, konga etc.
ABOUT THE AUTHOR
Razaq Adedamola AYENI is a creative, talented and innovative Accountant with consolidated expertise in Accounting, Strategy, digital marketing and business development. He has worked in different industries and this has added to his wealth of knowledge.
He is a highly motivated and positive minded person, a business development expert. He has demonstrated his competence in leadership and mentoring in Matog Consulting & Matthew Ogagavworia & Co. in Ikeja Lagos where he is a Consulting associate and an Audit junior.