Expansion Strategies

Definition: The Expansion Strategy An organization adopts the Expansion Strategy when it aims to grow rapidly in comparison to past successes. The Expansion Strategy is used by a company to expand its business operations in order to achieve significant growth. This can be done either individually or collectively.

There are many reasons why expansion is necessary. These include survival, higher profits and prestige, greater social benefits, economies of scale, higher market share, and larger market shares. Firms with highly respected and accomplished managers will adopt the expansion strategy. They are determined to grow regardless of any risks or obstacles.

There are usually two ways to increase market share. These are:

1. You can introduce more products to the market, allowing you to reach multiple customers.
2. Make Use of products that are especially popular

The firm can follow either of the five expansion strategies to accomplish its objectives:

1. Expansion through Concentration
2. Expansion through Diversification
3. Expansion through Integration
4. Expansion through Cooperation
5. Expansion through Internationalization

Expansion through Concentration- 

TheConcentration is the Key to ExpansionThis is the Expansion Grand strategy’s first level. It involves investing in product lines, catering to identified markets with proven technology.

The strategy of combining resources in one or more businesses to meet customer needs, functions and technology options is expansion through concentration.

Expansion through Diversification – Diversification is the Key to GrowthThis is when an organization wants to change the business definition. Either developing a new product, or expanding into new markets individually or together. To prepare for economic downturns, a firm may adopt the expansion through diversification strategy.

Diversification is generally used to offset losses and maximize profits in one business. This may be due to adverse market conditions.

Expansion through Integration –

Combining one or more current operations of the business without changing the customer groups. This can be achieved through a value chain.

A value chain is a collection of interconnected activities that an organization performs, starting with the procurement of raw materials and ending with the marketing of final goods. A firm can move up or down in the value chain to better serve the customers.

Expansion through Cooperation-

The Cooperation is the Key to Expanding This is when an organization enters into a reciprocal agreement with a competitor to conduct business operations and compete against one another, in order to increase the market potential.

You can expand through cooperation by following any one of the strategies below.

1. Merger: A merger is when two or more companies combine their assets and liabilities in an exchange of shares or cash.
2. Takeover: The other way to expand through cooperation is by takingover strategy. This is when one company acquires another in such a manner that it takes over all operations. The first scenario is when both companies are open to a takeover and both feel that it will be beneficial for them both. In the case of a hostile acquisition, however, the firm attempts to take over the operations of the target firm.
3. Joint Venture: The joint venture allows both firms to merge and share the business operations. Joint ventures are generally formed to maximize the strengths of each firm. Joint ventures are typically temporary and last until the task is completed.
4. Strategic Alliance: The strategy of cooperation is a way for the companies to expand their business operations by combining or combining. However, they can still operate independently and work towards their individual goals. The strategic alliance is generally formed to leverage the technology and manpower expertise of one of the firms.

Expansion through Internationalization –

TheInternationalization is a way to expandAn organization’s strategy to expand beyond its national market. When an organization has exhausted all possibilities of expansion domestically and is looking for international expansion opportunities, the Expansion through Internationalization strategy becomes necessary.

But, globalization isn’t an easy task. The organization must adhere to strict benchmarks for price, quality and delivery time of goods and services. These standards may differ from one country to another.

To better understand the expansion strategy, take a look at the following examples. These examples are within the context of customer functions, customer groups, and technology alternatives.

1. Baby diaper company offers diapers to older people in addition to babies.
2. Apart from the normal stockbroking business, the company also offers personalized services for small investors. This is done in order to have more business and to take on more risk.
3. Banks upgraded their data management system, recording information on computers and reducing the amount of paperwork. This was done in order to increase efficiency.

All the above examples show how companies have made major changes in their products and customer groups to achieve high growth.

which of the following is not a motivation for a company to pursue international expansion?