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Why companies have to expand

Because their competitors are growing. If the company remains stagnant and do the same
thing over and over without any effort to expand their business, their competitors can crowd
them out of the market. But if another company is increasing their market share, then that
means that another company is decreasing their market share (assuming same number of
competitors in the market). If the company starts experiencing a declining market share, then
it could affect their bottom line -- which could threaten the company's survival
Expand Markets and Increase Sales Expanded markets and increased sales mean more
profits. Profits mean success for a business. They also mean that a business can make
contributions to causes that they believe in. For example, MAC Cosmetics is a business that
increased sales and broadened their markets in order to become more successful. This
business started as a small idea and eventually expanded to a greater establishment by going
international.
Recruiting
Growing businesses can attract energetic employees who want to be at the centre of the
action, perhaps to share the rewards.
Obtaining financing
Lenders and financiers take growing businesses seriously, although they may temporarily
see them as riskier. Larger size enhances marketplace credibility and presents an image of
strength.
Brand recognition
Bigger businesses have more customers, giving them an advantage in marketplace
recognition.

Seven Ways to Expand


Increase your sales and products in existing markets. This is obviously
the easiest and most risk-free way to expand. This tactic may require a bigger location,
different pricing strategies, new/improved marketing techniques
Introduce a New Product. You have a successful product/service that you have
been offering for some time and have been collecting data, customer feedback and doing the
tinkering on your newest product.
Develop a New Market Segment or Move into New Geography. Both
of these areas require cost outlays and uncertainty. Moving your products into new categories
or demographic segments requires market research.
Start a Chain.
Before starting a chain you must be cognizant of what made the first location a success - was
it location, your staff or you?
Franchise or License. While it's a quick way to grow, You will need to be a good
teacher, be able to prepare the training manuals (preferably in more than one language), be
very organized and willing to travel.
Join Forces / Strategic Alliance. A merger or acquisition combines the best of two
companies, expands your customer base, increases intellectual capital and delivers
operational efficiencies. The trick is finding the right partner.
Go Global. You can decide to go global in a number of ways. Growing markets, rising
consumer spending, improved business climate--sometimes the only place to find these things
is overseas.

Things to consider before expansion


(Plan before you expand)
Unplanned costs, unanticipated legal liabilities, and unforeseen regulatory nightmares can
haunt you and your business for years. To avoid the headaches of entry, consider these
factors:
Consumer need. The first and most important question you must answer is whether
local consumers in the target market can afford to buy your products or services and if you
can you sell them at a competitive price. Analyze a market's consumers, demographics, and
competitive landscape.
Customization and localization. Consider tailoring your product to local
demands or tastes. McDonald's, a company that has experienced breathtaking international
success, is famous for customizing its menus to local demand. You will need to be flexible
and adaptable to seize the target market's business opportunities.
Barriers to entry: Research potential barriers to entry in the target market, including
"soft barriers" such as language and culture, and more business-centric ones such as
inadequate infrastructure (roads, ports, etc.) and expensive transport and logistics costs.
Exchange rate and country risk. An additional layer of complexity presents
itself in the form of exchange rate fluctuations with the local currency and monetary
restrictions imposed by foreign governments.
Legal/regulatory structures. Gain a granular understanding of the target market's
legal and regulatory structure, especially as it relates to your middle market company's
products or services.
Achieve economies of scale.
The age old concept in business is economies of scale. This means that bigger businesses
achieve lower costs per unit and stretch administration dollars over a larger product line:
marketing, professional fees, insurance and banking charges, to name a few. This economy of
scale contributes to having more money for R&D, sponsorships, employee training and
education, investment in new technology and creating more productivity out of employees.

Will expansion result in any cost advantages for your business?

Economies of scale: Customer base: Will expansion expose you to new customers? And
will your existing customers remain loyal while you work through any growing pains?
Yourself: Will expansion bring unavoidable stress into your life that could potentially deter
your ability to successfully operate the business under the new expansion?
Networking/versatility: This is one of the things to watch. It tells about the locations,
involvements and your activities around the globe. Without networking, a company's
expansion policy is never complete.

Keys for Expansion/Growth


1. Good Policy/Decision Making: An organization with a good policy /decision making
usually stands the taste of times due to the type of policy or decision embarked upon by its
owners in the day-to-day running of the business. If an organization embraces a wrong policy
or decision in their business activities, its collapse is imminent.
2. Good Planning: Any organization that does not plan well must collapse. This involves
actions to take, when to take and strategies to adopt in the course of reaching the set
objective. An organization with a bad planning method can never grow because it lacks the
technical no how to achieve the required goal.
3. Strong Financial Base: This is one of the most essential factors that enhances expansion
and growth in business organization. Business organizations should endeavour to make
money available in pursuance of its goals and objectives with regard to its expansion policy.
4. Research: Without research, no organization will stand. It involves an insight into the
world of possibilities and impossibilities as it affects organizational progress, growth rate,
obstacles, products, market demands, etc. It is a mirror in which the future of every
organization is seen based on the data available from the day-to-day running of the business.
5. Accountability: Any organization that does not embrace proper accountability in their daily
activities is doomed. Proper accountability reveals the financial status of any organization

Preparing your organization for growth


Most senior managers pay close attention to the strategic side of growththe wheres,
whens, and hows. Yet many underestimate the importance of organizational factors in
translating a growth strategy into reality.
Stifling structures
Well-defined organizational structures establish the roles and norms that enable large companies to
get things done. Therefore, when growth plans call for doing things that are entirely newsay,
expanding into new geographies or adding productsits well worth the leaderships time to
examine existing organizational structures to see if theyre flexible enough to support the new
initiatives. Sometimes they wont be.
Unprepared people
Growth naturally creates new interactions and processes, expected and unexpected, and often at a
fast pace. To manage them, the employees who face the greatest complexityfor example, those
in functions or businesses that will see increased activitymust have ambidextrous capabilities.
These enable people to take initiative beyond the confines of their jobs, to cooperate and build
linkages across the organization, and to complete many tasks in parallel.
Companies sometimes forget to think about these capabilities in the units immediately involved in
growth and very often dont do so beyond them.
Motivation: Every organization must motivate their entire workforce if it plans to embark on
expansion. Every true expansion/growth must start from the motivation of the entire
workforce as this brings out the best in them and make them work more efficiently. An
organization without motivation of its entire workforce cannot boast of expansion because
they are the brain behind any move to attain greater heights.
Hire people based on where you want to be, not where you are.

The team that can successfully run a $1 million company is not the same team that can run a
$100 million company. If your goal is growth, hire people who can perform in the size
company you want to be--they'll help you get there.

Put the right people in the right places.


The right people doing the right jobs is absolutely critical to sustain growth.
Take care of your people.
Your employees are what keep you successful. Recognize and reward that. Working in a
high-growth organization is stressful and challenging. Take note of your employees' work and
respond appropriately, or risk losing top talent. Create an environment where people are
willing to work through the growing pains.
Stay close to your customers.
No company can do without customers, and if you don't stay close to them, you'll lose them.
Know what they need, but more important, know what they want and do everything you can
to give that to them. Most important, communicate. Never let your customers wonder what's
going on. Tell them--whether it's good or bad.
Flatten Your Organization - Improve Communications
The Flat Organization. Traditional organizations, where divisions along the chain of
production are aided by support units.. As they grow organizations find they can benefit by
decentralizing into semi-autonomous units Providing your managers with autonomy to make
decisions within the parameters of the organization's mission, goals and strategy.
Communications are Key. Removing the barriers to communication are more likely
in a flatter organization. Information flows more easily across self-managed units with some
degree of cross -functional individual responsibility. In this way knowledge sharing,
flexibility and speed of response to change are maximized.
Delegate. Growth is not possible if you (the business owner or entrepreneur) are still doing
everything. One of the most necessary skills of management is delegation. Take your
delegating to the next level:

You are delegating mission-critical tasks that you once did yourself.

You delegate tasks that you once did better and faster yourself.

You set up reporting stages and mentorship reports for employees that have been
assigned complicated tasks that you once handled so that they can accomplish them
successfully.

You determine which tasks to delegate consciously while deciding how your time is
best spent, so that task is not just delegated simply because it remains undone.

You give your management teams autonomous decision-making and spending


authority, either individually or as a group.

A SWOT Analysis for Growth


If you do not have all the above going for you, determine how to get it by gathering your
management team and analyzing each area of your company for strengths and weaknesses:
marketing, sales, production, technology, human resources, customer service, etc.
Strengths (Internal to Organization)

What are we doing especially well?

What resources do we have that other businesses don't have?

What are our key competitive advantages?

Weaknesses (Internal to Organization)

What do we do poorly?

What activities detract from what we do best?

Where can we improve?

Opportunities (External Environment)

What opportunities exist for our business?

What trends face our industry?

What changes are occurring with our customers, i.e. age, spending habits, values,
residences?

What changes are coming to our industry's regulatory environment?

Threats (External Environment)

What obstacles do we face?

Are there new competitors entering the marketplace and what is their strategy?

Is there a threat from planned regulatory change?

Is there a threat from global competitors?

Do you have the following building blocks of growth in place, and can you manage
them?

Understanding your core competencies

Planning the growth

Controlling costs

Consolidating growth and working to fill in the down cycles

Keeping control of the debt

Building your team and creating an enviable corporate culture

Taking time for yourself to guard against burnout

Core Competencies - Now that you have a growing business you need to measure the
aspects of your business that drive your profits and those that increase your expenses,
Planning the Growth & Controlling Costs - The tools for planning your
growth and maintaining your costs are cash flow projections and multiple scenario budgets
planned on a shorter term than one year. While it may be pessimistic to plan for failure, do
the math and figure out what things might look like if more money is going out the door than
coming in.
Manage the Cash Beast - Cash flow is king in all businesses, but especially small
businesses. A poor business plan, operational budget and cash flow plan make you a financial

risk. Get in the habit of doing a mini-business plan for every project, complete with a cash
flow projection and best-middle-worst case scenario. Start some cash flow kick starts today:

Ask for fee deposits

Increase your fee

Shorten your fee deposit deadline

Stop work for customers that dont pay

Turning the Plan into Metrics:


In review, ask these questions as you ponder expansion strategies. The metrics of success can
be teased out of these questions.

Do employees have the necessary skills to support your growth strategy? Will you
need to hire new staff or provide additional training?

Can existing operations handle a sudden boost in demand?

How will you maintain service levels while reaching for new business? Are current
operations, including order management, customer service, record keeping and
inventory control, running smoothly and ready to take on more?

Where's the money coming from? Will cash flow from sales be enough to support
your expansion, or will you need lender or investor financing? What will you need the
money for? Study historical cash-flow statements as a guideline, then determine cashflow needs on a weekly, monthly and annual basis to plan your funding strategies.

Are you ready to delegate more tasks and give managers more control?

Does expansion rest on a reliable mix of intuition, solid competitive analysis and
customer research?

Do you have a time-defined exit strategy if expansion plans fail?

Motivation: Every organization must motivate their entire workforce if it plans to


embark on expansion. Every true expansion/growth must start from the motivation of
the entire workforce as this brings out the best in them and make them work more

efficiently. An organization without motivation of its entire workforce cannot boast of

expansion because they are the brain behind any move to attain greater heights.
ii. Product diversification: An organization with a lot of goods and services in high
demand credited with its name is without doubt expanding. This is very important, as

profits will be coming in different areas, which enhances its stability.


iii. Networking/versatility: This is one of the things to watch. It tells about the
locations, involvements and your activities around the globe. Without networking, a

company's expansion policy is never complete.


iv. Affiliations: An organization that has a strong expansion program usually affiliates
with another with such policy, so that they can share ideas, etc to attain greater

heights.
v. Annual Accounts: This shows a company's profits, losses, access etc. It is a
yardstick to ascertain the financial strength of an organization.