Business Expansion Flashcards
What are the types of business expansion?
Geographic expansion - opening new stores or branches in different regions, states or countries
Product expansion - adding new products or services to your offerings to reach new customers
M&A - horizontal merger: combination of two businesses in same industry; vertical merger: combining firms at different stages of production and distribution; conglomerate: unrelated businesses merge
Franchising - allows companies to expand without costs and risks associated with opening new locations
Strategic partnerships - two companies collaborate typically in marketing efforts
What four areas should you consider when expanding a business
Company, Costumers, Competitors/Market and Product.
What information about a COMPANY should you consider?
- Financial situation - are they highly leveraged, have they got strong working capital, is it enjoying healthy profits?
- What are its key strengths and weaknesses to identify any USPs. This helps with identifying whether it is well-positioned to penetrate a market.
What information about the PRODUCT should you consider?
- Are they superior to other products available in the market?
- What stage of the product life cycle are its products? If growing, then maybe a good idea to expand.
What information about CUSTOMERS should I consider?
- What are the key customer segments in the company’s market and how does this compare to the segments in the market?
- Are the company’s customers price-sensitive? If so, can the company offer competitive pricing (lower or equal) alongside its competitors?
What information about COMPETITORS/MARKET should you consider?
- Growth rates of product segments in the market the company is entering.
- Key players in the market and their market shares. If fragmented market and not particularly well-established, expansion seems attractive.
- Legal environment. Are there strong patent laws? If not, competitors could easily copy the company’s products.
