Business expansion entails the diversification of the area of operation, market and the increase in the number of staff. As a result, an expansion would involve moving or hiring a bigger space that will be able to cater for the expanded operations. Business expansion/growth can be internal, external, or franchising. Internal growth is inferred when the entity buys more equipment and recruits more staff. External growth, on the other hand, occurs when the business merges or takes over another entity for the purpose of synergy (Breen & Karanasios, 2010). Finally, franchising is the lease of ideas, which leads to the opening of new branches. It might also require the opening of new outlets in other areas that will result in the particular entity concentrating the market. The members of staff would be increased so that they are able to offer services for the diversified market. This is because the expansion would definitely come with increased responsibilities and job categories (Ahlstrom, 2010). However, one thing is for sure is an expansion in business results in growth, which is critical for a number of reasons. This expansion makes the business organization gain several advantages over its rivals. For instance, it would ensure that the organization has a bigger say in the setting of prices especially where the prices are set by market demand. Specifically, it will have more influence over the market prices.
The expansion of business is important as it leads to the enjoyment of the economies of scale. These are the advantages that will arise out of increased production and output. The economies of scale are a competitive advantage to the big forms that continue to expand. Specifically, the benefits arise due to the lower costs of production per unit. Additionally, according to Breen & Karanasios (2010), the expanded organization can ensure that it spreads the high costs that are associated with the marketing campaigns as well as other overheads across its larger sales. Additionally, although the organization might charge lower prices than those of its competitors, it still amasses huge margins of profits. The expansion will also be important in the attraction of top talent and the retaining of employees. Notably, employees will always look forward to working in organizations that are increasingly growing and that will offer them challenges. Additionally, with the huge profit margins, huge organizations are able to retain their best performing employees through good salaries and better methods of motivating them. As such, business expansion is very important.
When expanding a business, it is critical to look at a variety of aspects. One of them is the viability of the expansion. In this regard, individuals and companies should evaluate whether he expansion is worth in terms of the returns that will come from the expansion. Additionally, in the view of Ahlstrom (2010), the customer clientele is a factor that should be considered in expansion. If the number of customers is very low, an expansion is not necessary. However, a large market for commodities offered by an entity would necessitate an expansion. Another critical consideration to make is advantages that would arise out of the expansion. Specifically, the length of time that will be taken to recoup the money that is used in the expansion should be evaluated. This would ensure that an expansion does not result to loss of monies for the organization. Indeed, a business expansion requires an evaluation of the type of customers who live in the area of expansion as well as their tastes and preferences.
Ahlstrom, D. (2010). Innovation and growth: How business contributes to society. The Academy of Management Perspectives, 24(3), 11-24.
BBC - GCSE Bitesize: Benefits of a growing business. (2016). Bbc.co.uk. Retrieved 28 August 2016, from http://www.bbc.co.uk/schools/gcsebitesize/business/aims/sizeandorganisationrev1.shtml
Breen, J., & Karanasios, S. (2010). Growth and expansion of women-owned home-based business. The International Business & Economics Research Journal, 9(13), 33.
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