Reasons for Expanding a Business
- Establishing New Markets. Expanding your business can allow you to establish new markets and reach an entirely new...
- Increased Volume. If your business started on a relatively small scale, you may need to expand to handle an increase in...
- Additional Services. Expanding your business allows you to provide additional services that are...
What are the reasons for business expansion?
Reasons for Expanding a Business. Ultimately, your main reason for expanding is probably to generate more revenue. However, there are more specific reasons that expansion is the right choice for your business. Expansion can involve increasing physical locations or offering more products or services.
Should I expand my small business?
Small businesses are known to be slow about expanding. It is more risk, it does require more investment and time away from your current product portfolio. However it can increase your marketshare with your current product porfolio.
What are the benefits of expanding your business into new markets?
Expanding into new markets can help your business establish a presence in locations where there is a particular need for your product or service. This can help to reduce the effect of saturation and tough competition in your existing market.
Why should you Expand your business overseas?
Expanding your business can allow you to establish new markets and reach an entirely new customer base. This often occurs when companies establish a base of operations in a new country where there is a great need for their products or services or when attempting to establish a more global presence.
Why would a business choose to expand?
However, expansion is crucial to increase profits and reach new customers. Expansion could involve increasing physical locations or offering more products or services. For example, you may want to diversify your revenue stream so that you aren't reliant on selling just one core product or service.
What are 4 reasons for business growth?
Business Growth – Analyzing 9 Reasons Why Businesses Want to GrowSurvival. ... Increase in sales. ... Increase in market share. ... Greater power to control the market. ... Increase in profits. ... Economies of scale. ... Protection from the risk of takeover. ... Increased status and recognition.More items...•
Explore new markets
Once your company has been successful in your home country, it’s time to look at markets overseas. For many businesses, global expansion offers a chance to conquer new territories and reach an entirely new customer base — meaning you’ll be able to generate more business and increase sales.
Gain a competitive edge
Expanding abroad allows you to get out of an oversaturated market — helping to reduce the effects of tight competition.
Opportunity to diversify
Keeping your business in the domestic market can limit profit potential and leave you exposed to market changes. Taking your business international allows you to diversify your assets, an action many businesses take to protect their bottom line and stabilise their revenue.
Access fresh talent
Another reason to expand overseas is the opportunity to access new talent pools. Hiring international employees can bring a whole host of advantages including advanced language skills, diverse educational backgrounds and new perspectives.
Reduce costs
Many companies have found it advantageous to move some of their operations to other markets due to varying statutory employer costs in different countries. Equally, it makes financial sense to have a base in the country where you’re supplying your products or services. Economies of scale also play a part here.
1. Survival
Start-up companies must grow by finding the first few customers and developing the first few products. As other new competitors are also likely to strive for growth, new businesses need to be better and more competitive in securing the first few orders to compete with their growing rivals.
2. Increase in sales
Businesses grow by selling more products, either by selling more to existing customers, or finding new customers. Company A grew in size after it has increased its value of annual sales by 30% between 2021 and 2021 from USD$10,000 to USD$13,000. However, the growth in the value of a business’s sales does not automatically increase its market share.
3. Increase in market share
An increase in market share results from business growth. With the increase in market share, the company will gain higher profile and more market power. First, this will allow the firm to charge higher prices, therefore will increase sales revenue and gain more profits at the same time as costs remain unchanged.
4. Greater power to control the market
Industry leaders have much greater power to control and influence market activities than smaller businesses. For example, this includes having greater control over setting prices.
5. Increase in profits
Expanding businesses and achieving higher sales is one of the ways of becoming more profitable.
6. Economies of scale
As a business grows in size, it usually benefits from reduced Average Cost (AC) of production as a result of economies of scale, e.g. lowering the cost of purchasing raw materials by buying in large quantities. By lowering the cost of producing its products, the company will increase its profits.
7. Protection from the risk of takeover
Public limited companies are often at risk of hostile takeovers – buying a majority stake in the business, because they have growth potential, have a widely recognized corporate name or due to a decrease in profits and subsequent fall in their share price.
Why do businesses expand their business?
Business expansion has the potential to expose your products and services to a broader audience. Increasing your customer base will help you convert more customers and improve your sales. This leads to higher profits. Just like your team members, customers are important to the success of your business.
What are 4 reasons for business growth?
There are a number of good reasons for you to consider expanding your business:
What are the disadvantages of business expansion?
A shortage of cash. You may need to borrow money to buy new premises or equipment to expand.
What are the risks of expanding a business?
Business risks: instability, ineffective management, financial loss. Business growth brings pressures to a system that may not have had the time / experience to get geared up for increased production or services. New timing of payables / receivables may create financial strain. Customers may feel underserved.
What are the advantages of being a small business?
Flexibility, generally lean staffing, and the ability to develop close relationships with customers are among the key benefits of small businesses. The digital communication revolution has significantly lowered the cost of reaching customers, and this has been a boon to small startups and big businesses alike.
Why do owners want to expand the business give 5 reasons?
Therefore it’s extremely important to fully understand your motivations.
What happens when a business does not grow?
If your company is not growing, then something is dying. The business owners lose profit, employees, their own equity or they lose a combination of all three. If you’re not growing, then you’re dying.
What happens if you don't expand your product line?
If you own a business and aren’t constantly working to expand your product line, you’re missing out on some amazing opportunities. In fact, you might even be dooming your company to failure in the long run. Even if your current product lineup is highly profitable and generates exceptional sales, people will start losing interest eventually.
Why is customer loyalty important?
Customer loyalty is a key ingredient to long-term business success, so your efforts will pay off in spades. Now that you’re aware of the best reasons to always expand your product portfolio, you shouldn’t need any more convincing. Get to work on it now, and your company is sure to enjoy new levels of success in the weeks, months and years to come.
Why do companies need international expansion?
This is why, most companies, even SMBs, include international expansion into their growth strategies. The opportunities it can open your business up to are many and include talent, customers, cost-saving imports and manufacturing. It allows you to overcome domestic dependency and address your overall market position.
Why do governments offer incentives?
This is because you can bring new business to their country, provide employment to their citizens and add to their tax collection. From a business standpoint, these incentives can come to your advantage if you use them strategically to make the best out of them.
What happens when your business grows?
When dealing with expanded markets, or a larger number of products or customers, it becomes more difficult to offer a personal service.
What does it mean to be a larger business?
Being a larger business means you can take advantage of economies of scale. Larger businesses can often get bulk discounts and better supplier credit terms, meaning costs are driven down and profits increased.
How does franchising help your business?
Franchising, licensing your products and services or expanding into carefully chosen new product areas allows you to spread your brand. As the number of locations and products increases, your brand identity develops, and your revenue grow s. 3. Increase stability. As businesses grow, they tend to become more stable.
Why do companies enter into joint ventures?
Entering into a Joint Venture offers a stable and mutually beneficial way to enter new markets, increase your customer base and and find an additional talent pool with local/product knowledge. Businesses entering into a joint venture usually have mutually complementary offerings which can help grow both enterpises.
What are the factors that affect the growth of a business?
2. Increased workload and stress. Growing a business is tough and requires sustained hard work and absolute commitment. When you grow your business, it tends to increase pressure on staff and resources, as well as finances and management teams.
Why do you buy another business?
Buying another business offers a faster, albeit more risky way to grow your business. The business you acquire could be one of your competitors, or a business that complements your offering. Acquiring a business with similar turnover to your own can be a quick way to double your revenue.
Why is it important to understand your motivations?
Therefore it’s extremely important to fully understand your motivations. 1. Respond to market demand. You’ve conducted in-depth market analysis and know that your product or service is well-suited to the needs of the current market.
Survival
Increase in Sales
Increase in Market Share
Greater Power to Control The Market
Increase in Profits
- Expanding businesses and achieving higher sales is one of the ways of becoming more profitable. As we know, business growth results from an increase in output which is goods produced and services provided. If this output is sold, then sales increase. Increased sales, when prices remain unchanged, will consequently increase sales revenue. In order t...
Economies of Scale
Protection from The Risk of Takeover
Increased Status and Recognition
Spreading Risk