Business expansion may seem like an uphill task for small-scale business enterprises. But expansion is essential for a business; not just for growth but also for survival. No business has ever become a great business without growth and expansion, even if such growth is gradual but consistent. And for growth, every enterprise needs a solid business expansion plan.
1. Nature of expansion sought, Selection of expansion strategy
The nature of business expansion can be of two types – organic and inorganic. In organic strategy, a business enterprise strives for growth and expansion with self-sustained efforts. Organic strategies include market penetration, product development, market development, diversification and franchise development. In inorganic expansion strategy, a business enterprise makes use of external agents in the form of mergers, acquisitions, alliances or joint ventures.
Selection of growth and expansion strategy depends on several internal and external factors. These factors include reasons for seeking expansion, financial capabilities, accessibility to markets, USP, operational feasibilities, profitability, distribution and logistical support, competition and so on.
2. Functional analysis
At the beginning of devising an expansion plan, a business enterprise needs to conduct a functional analysis to assess its own standing, readiness for expansion and selection of expansion strategy. This analysis is crucial because an entrepreneur or a business owner must make a realistic assessment of its stronghold with the existing products and existing markets and its operational and organizational abilities. The information output from a functional analysis is important because it lets a business enterprise assess its own strengths and weaknesses and make necessary improvements and improvisations in a business expansion project.
Marketing analysis should help a business clearly understand who are its customers, which market segments it is catering to, what needs its products and services are fulfilling, what features makes its products stand out in the market (USP), capitalized market share and market potential and how the marketing processes are executed. Additionally, marketing analysis also brings to the fore the people and agencies involved in a marketing process – customers, employees, distributors, suppliers etc. Marketing analysis will help a business enterprise assess its success and operational efficiency with the existing products in the existing markets. Marketing analysis could reveal whether a business requires an expansion or improvisations in its marketing processes.
Another important functional analysis is the assessment of the financial health of business. Clearly, availability of financial resources is a crucial consideration in planning for a business expansion. But there are other important financial considerations pertaining to business expansion like capital requirement and funding, the cost of capital, profitability and return on investment and break-even analysis. Financial analysis will help a business enterprise determine the financial feasibility of undertaking an expansion project.
3. Business expansion plan
The next stage is the preparation of the blueprint for business expansion. Business expansion plan involves preparing detailed functional plans. Some of the key functional strategies and their essential elements are highlighted below.
Marketing strategy
- What products and services will be offered?
- Which is the target market? Who are the potential customers and where are they located?
- What is the total size of the market? What is the targeted market share? Is it profitable?
- What is the level of competition in the new product category or in the new market?
- What are the pricing methods to be adopted?
- How will the brand name, products, and services be promoted? What will be the channels of promotions?
- What are the marketing processes involved?
- What will be the channels of distribution?
- Who are the suppliers and distributors?
- Is there a suitable and accessible logistical support and infrastructure?
- Marketing SOPs and process management
Marketing strategy
- What products and services will be offered?
- Which is the target market? Who are the potential customers and where are they located?
- What is the total size of the market? What is the targeted market share? Is it profitable?
- What is the level of competition in the new product category or in the new market?
- What are the pricing methods to be adopted?
Manpower Planning
- Manpower assessment (Qualitative and Quantitative)
- Manpower requirement (Qualitative and Quantitative)
- Recruitment strategy
- Training and development programs for new products and services and new markets
- HR SOPs and process management
Financial Strategy
- Capital requirement, cost of capital, sources of funding
- Return on investment and break-even analysis
- Working capital management
- Cost analysis
- Inventory turnover
- Anticipated profit and loss statement and balance sheet
- Finance SOPs and process management
Small scale business entrepreneurs can easily embark upon its growth ambitions by professionally planning and executing its business expansion. But this growth and expansion usually do not happen overnight. The dynamic business environment only makes it further complicated. However, with the right functional strategies, process orientation, and disciplined performance, business growth and expansion is not such a distant dream.
To know more about “Business Expansion” get in touch with our Retail Experts on [email protected]
Author Bio
Rupal Agarwal
Chief Strategy Officer
