Business Expansion: Definition, Examples & Strategy
Etymologically, the word "expansion" itself comes from the Latin 'expandere' and in English "expansion" which means to spread.
Well, for novice entrepreneurs, of course, they need to understand all aspects of this term, from understanding, goals, methods to examples of business expansion.
Here we has summarized a variety of important information about what business expansion is. Happy reading!
What is Business Expansion?
The word expansion itself has the meaning of a process or action to make something wider.
Expansion arises from the word expandere which then turns into expansion which means to spread or expand.
Meanwhile, the definition of business expansion is various business activities carried out to expand or enlarge the network of the company. This activity is carried out both on the production and distribution side.
Where in practice, the purpose of business expansion is to increase the economy, enlarge facilities, create new markets, and as a development of the business.
Usually business expansion activities in a company run for at least four to five years, but there are some that are achieved in just a matter of months depending on each strategy.
Business Expansion Goals
The main objective of doing business expansion is to expand the scope of the company and generate more profits.
The other reasons why the company carries out business expansion activities are as follows:
- To get consumers
- Sell more products and make more profit
- Can dominate the market by controlling a higher share of the market
- Build bigger resources and increase competition
- To lead the market thereby influencing the market price
- Increase bargaining efforts of stakeholders, suppliers, consumers, and distributors
- Expanding costs thereby increasing economies of scale and lowering unit prices
In addition, along with the increase in nominal profit will also affect the value of investors in the company.
This is because investors have the opportunity to get higher dividends, where the amount is obtained through net income.
However, it should also be remembered that in an effort to achieve the goal of business expansion, the right strategy is needed.
This is because in doing business expansion also has many risks, so it cannot be done carelessly without going through careful planning first.
Business Expansion Strategy
The steps or strategies that must be taken in carrying out business expansion are as follows.
1. Make a plan
Have a certain period of time to guarantee that the company has the product and brand and can produce it themselves.
Develop a stable business for distribution and regular customers, and ready to expand.
For sales to be more effective, new employees need to run the company's business well. Increase the number of products to meet consumer demand.
Creating new products to give consumers a variety of choices.
Establish new markets to enable sales if large markets and high demand already exist.
2. Define the business model
The necessary and important step in a business expansion strategy is to determine which business model to use.
When a company experiences development, the business model used will be different from the old one. You need to create a new SOP (Standard Operating Procedure).
In addition, in business expansion activities, you also need to add a number of new employees who will likely change most of the company's activities as well as various strategies and methods that previously will change.
3. Prepare capital
There is one thing that is important and needs to be done in a business expansion strategy is capital.
There will be many things added during the expansion process, such as building and renting offices, paying emplyees, building warehouses, and marketing strategies.
Capital can be expanded using the company's profits. However, the flow of business funds can be slightly disrupted before the expansion process is complete.
Business Expansion Example
There are many activities that can be done through business expansion, from opening a new branch, building partnerships with other companies, creating new products, to increasing marketing and much more.
Thus an explanation of the meaning to examples of business expansion that you should know.