Question

When it comes to expanding for a business it does not always go the way one will think. When one expands into a new area of a town or a new industry, one does not think it through. It takes a lot to make an expansion work in the long-term. One needs to think through other competitors that are in the same area or industry. One way this can be attacked by the firm who is looking to expand is perform a SWOT analysis in order to see what one can and cannot do. One can expand to soon or into a market that is already saturated and hard to break into to make a name. One example of a company not preparing for expansion into a new market is Blockbuster. When the change from rental movies in person to online streaming services and online rentals. Blockbuster was once was one of biggest movie rental stores in the country. The company tried to make a switch but was hindered by fraud by its CEO. This can relate to economies of scale based on the fact the streaming service could be offered to a larger crowd. The issues are not always apparent and could arise anytime.

Please respond in at least 150 words

Answer 1

Business expansion is always trickier for the fact that either the market is saturated by large number of players or is driven by very few firms wherein large scale innovation is must to stay ahead of the curve.

Businesses thus must use first mover strategy in unexplored territories and must use fast mover strategy in saturated territories. This helps businesses competitive with ninimum profit margins in short run at cost of higher market share in long run and thus revenues are maximised.

Firms are also driven by various risks like compliance, market, credit, sovereign, etc. Financial frauds, forex rates, compliance accounting loopholes, market fluctuations are all part which hinders business expansion and hence firms must be aware and do thorough SWOT and Pestle Analysis as Framework. Various other models like GE Leadership Model are best described for turnaround strategies and complexity elimination in business expansion .

Very good example we have seen is of Zomato In Indian region specifically which is driven by high taxation policies and multiple licenses to start new expansion routes. However Zomato has adopted such policies and have optimised resources and achieved economies of scale to bring down costs as well as adoption of streamlined supply chain management which has brought down costs substantially and increased profit margins despite of high taxation. Zomato has acquired various small firms in competition and has stayed ahead of curve.

Hence risks is always higher for rewards which are much higher.