Understanding Business Expansion

Language Barrier

In today’s world, the language barrier always presents itself as an obstacle for business expansions. Hence, the world is moving towards localization solutions and Professional localization services

These agencies not only translate their text, but also localize their content to cater to the specific interests of the target audience. 

The Business Dream

The dream of every business is to burgeon its operations and enhance the size of its organization. This is the fundamental step necessary to expand your profits and market share. 

It is imperative to discuss how businesses can grow both externally and internally.

Internal Growth

New Production Sites

The first thing that organizations can do is that they can establish state-of-the-art production facilities.

These sites will expand their operations. And will enable them to increase their market share in their home territory

Targeting New Markets

Internal growth also comes by targeting new markets. These markets do not have to be from another region. 

They can be from the same territory but pertain to a different segment of society. For example, if you are selling female shampoo. Another market could be if you add men grooming products to your portfolio. 

Product Development

The most common example of Internal growth is if you develop new products. Or add new features to your existing product or service lines.

For instance, translation services increasing their language portfolio is an example of new product development. 

External Growth 

Acquisition

The most popular form of external growth is acquisition. An acquisition is a process of when a firm gets hold of another firm’s shares or completely owns another company. 

Merger

A merger is also one form of external growth. In this process, two companies make the conscious choice of combing their business.

And becoming a new legal entity. Mergers allow companies to ameliorate their market share, penetrate new market segments and increase customer reach.

Joint Venture 

A joint venture is somewhat similar to a merger. In this scenario, two or more companies attain joint ownership of a business. Hence, the profits and losses are equally shared. 

Significance of Business Expansion

The only way companies can earn more revenue is if they grow their business, and expand it. However, one may ask why it is necessary to expand your business?

There are multiple reasons. Let us discuss a few of them.

More Revenue

Every business aims to generate more revenue and earn more profit to satisfy its investors. Hence, business expansion fulfills this aspect and allows an organization to expand its customer reach, automatically selling more.

Competitive Advantage 

Another pro of business expansion is that it gives a competitive advantage to a company. This competitive edge enables firms to attain more resources, which allows them to cater to their audiences in a more effective way.

Market Share 

Business expansion often leads to a bigger piece of the pie vis-a-vis an increase in market share. Experts proclaim that at the end of the day, control of the market share is the end game.

Organizations that have a higher market share have the power to eradicate their competition via acquisitions and mergers. 

Bargaining Power

Once businesses are able to increase their market share, it automatically puts them in the position of power. 

Power of position in business terms means a higher bargaining power. This power can be utilized to put better deals with stakeholders.

The stakeholders mainly include;

  • Consumers
  • Distributors
  • Investors
  • Suppliers

Market Prices

Businesses that have been able to expand their operations often have the power to influence market prices.

The major benefit of market leadership is that companies become trend creators rather than followers.

Economy Of Scale 

Business expansion not only gives you control of the market prices, but also assists you to decrease your costs. How? It is simple; because of economies of sale. 

The wider your operations are and the more products you are making on a daily basis, your costs will spread across a higher output. Thereby, lowering your cost for one unit.

The ultimate factor is that business expansion not only ameliorates revenue but increases Shareholder value. 

The people who took the initiative to trust you earlier with investing in your business plan will finally get the reward vis-a-vis higher dividends. 

How To Evaluate Your Business Growth

Initially, we discussed the importance of business expansion. Now we will discuss how you can measure or evaluate whether a business is expanding or not.

So let us discuss some of the criteria:

  1. The first indicator is that a company expanding its operations will have an increased number of assets than it had when it started its business.
  2. Another indicator could be the fact that the company has hired more employees. So now the workforce has increased.
  3. An organization expanding its business will definitely prude a higher number of products. Or would be increasing its existing online product line.
  4. The consumer base would be greater, as the company will be able to reach more markets around the world.
  5. If the business is able to offer its product and services to more markets and consumers, the revenue, and sales would increase as well.
  6. With an increasing number of sales, the profits would ameliorate as well. Moreover, due to economies of scale, a higher profit would be accumulated.
  7. The overall net worth and company value would improve as well. You will find that the company stock would get higher.
  8. Another indicator of business expansion is that it might lead to companies opting for professional localization services.

 Since they are expanding into new regions and markets, the language barrier can only be fulfilled if they are translating and localizing their content. And this task is mainly done vis-a-vis localization solution.

Advantages And Disadvantages Of Business Expansion

Advantages:

  1. If the company is expanding its operations via merger or joint venture, it often works in favor of the organization. The reason behind that is mergers or acquisitions often reduce the risk of failure because now the capital is more. Meanwhile, the resources are greater. And the risk would be divided as well.
  2. Business expansion often diminishes the level of competition. If organizations are increasing their operations and acquiring more markets and conducting mergers, the local competition would eventually reduce.
  3. Another big advantage of business expansion is that it offers market capitalization to the firm. Leading to higher bargaining power.

Disadvantages:

Business expansion definitely has a lot of benefits for companies. However, there is another side of the picture that needs to be discussed. 

  1. If your strategy is not perfect, it can lead to severe consequences. Such as huge financial losses.
  2. Mergers and acquisitions come with their fair share of problems and obstacles. For instance, it can lead to ineffective management. The conflict between approaches and vision can often lead to stagnation.
  3. If the organization is not strengthened from the inside, it’s very hard to make it successful from the outside.
  4. employees and management can be reluctant to change if you are trying to penetrate a foreign market.
  5. There can be a lot of political and legal issues. One may never know what policies the foreign government can change. Hence, leading to unsuccessful expansion. So there is a lot of risks involved.

Conclusion

Business expansion is one of the most arduous tasks an organization can take. There are a lot of risks involved.

However, if one is successful in successfully penetrating a foreign market, it can lead to more revenue and profits than you can even imagine.

In this article, we discussed in detail the concept of business expansion. And further discussed what are the advantages and disadvantages.  read more