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Expansion Strategies

Expansion Strategies 2018-06-29T18:28:00+00:00

Seven Ways to Expand: From Local to Global

1. Increase your sales and products in existing markets. This is obviously the easiest and most risk-free way to expand. This tactic may require a bigger location, different pricing strategies, new/improved marketing techniques – but it will be in a customer group with whom you already have a relationship. If you get off track, your present customers will let you know!

2. Introduce a New Product. You have a successful product/service that you have been offering for some time and have been collecting data, customer feedback and doing the tinkering on your newest product. This is a normal evolution in business, not just an expansion tactic. When positioned as adding value and being responsive to customer needs, this can be a relatively risk-free way to expand.

10 Rules of Exporting

  • Identify the specific market niche you intend to target.
  • Be honest.
  • Be professional.
  • Be diligent.
  • Be prompt.
  • Be respectful of cultural differences.
  • Plan for long lead times.
  • Be patient.
  • Maintain your sense of humor.
  • Partner early in the process.

Types of Financing You May Need for Expanding and/or Exporting

  • Export Canada’s Expoert Check Service
  • Increased Line of Credit
  • Accounts Receivable Insurance
  • Political Risk Insurance
  • Bank Guarantee Insurance
  • Medium- to Long-Term Buyer Financing
  • Contract Bond Insurance
  • Additional Equity Investments or Loans

3. Develop a New Market Segment or Move into New Geography. Both of these areas require cost outlays and uncertainty. Moving your products into new categories or demographic segments requires market research, beta testing and new marketing strategies, i.e. a message for a 16-year old will differ that one for a 60-year old. Management of new remote locations may absorb significant time and attention. While the risks are more, the payoffs are large – and for most businesses looking to expand, these two methods of expansion are inevitable.

4. Start a Chain. A restaurant, retail or service business that’s easily reproduced and can be run from a distance is all you need to launch a chain. But, you must be cognizant of what made the first location a success – was it location, your staff or you? If it is just you, then duplication is only possible through detailed operations plans and sharing staff between locations. You will need to duplicate the plan of your first location while meeting increased customer demands. Starting a chain gives your current staff a crack at "management" duties, training opportunities and an opportunity to expand their horizons.

5. Franchise or License. While it’s a quick way to grow, a franchise agreement can cost (minimally) $100,000 to prepare. You will need to be a good teacher, be able to prepare the training manuals (preferably in more than one language), be very organized and willing to travel. Licensing can carry less risk, but demands giving up a certain amount of control. Licensing a patent, trademark or industrial design means that you sell manufacturing, distribution or production rights.

6. Join Forces / Strategic Alliance. A merger or acquisition combines the best of two companies, expands your customer base, increases intellectual capital and delivers operational efficiencies. The trick is finding the right partner. These partners may be new distributors, but be forewarned large retailers exact heavy performance expectations. Can you perform to the letter of your promise? Can you meet high standards of quality (ISO, or the like) and adapt your procedures to meet just-in-time delivery? Due diligence and strong contractual arrangements are essential here.

7. Go Global. You can decide to go global in a number of ways. Growing markets, rising consumer spending, improved business climate–sometimes the only place to find these things is overseas. Doing business internationally can take the form of exporting, licensing, a joint venture or manufacturing, but whatever form you choose, the basic business rules apply: assess customer demand, gain legal and accounting assistance, protect intellectual property and obey regulations.

More difficult to understand than the regular business affairs may be the cultural nuances – ignore them at your peril. In some countries, particularly those in Asia, a local partner is virtually a requirement. Your first stop should be your target country’s economic development agency, which can help marshal local resources to get you on your way, possibly with a small financial boost. Be patient. Growing your business globally can take more than one "sightseeing trip" to the region. Here are some steps in going global, from easiest to hardest.

Four Ways to Go Global:

1. You can fill orders from Canadian buyers who then export your product. This is the lowest risk of all, but does not put you in the driver’s seat. You will have to rely on others to spot the opportunities and take a passive role in the research and negotiations.

2. You can find foreign buyers operating in Canada.
Multinational corporations, foreign government and international retailers can buy goods from you in Canada to export to their particular market. There aremany on-line websites on which you can list your product or service, and increase the chances of your selection as a company of choice.

3. You can work through agents and distributors.
By working through export management, sales agents or trading houses you can access foreign markets while still being involved in control of the sales and terms. These intermediaries will build your export expertise and be able to provide information about new trends or market shifts.

4. Marketing and delivering your product directly.
This option calls for a large commitment in resources, resolve and business savvy. The best way to begin is to join forces with non-competitor businesses and "package" your offerings. Together you can share advice from government trade representatives, financial institutions, freight forwarders, distribution networks, agents and even shipping space. Perhaps also, look for the cultural bridge in your partnership – do they speak the language or have they lived in the country? Whether you go it alone, or partner, going global has risks – and the ultimate reward. Bonne chance!

The next section will discuss the various ways to finance expansion strategies. Remember there is no magic formula, and each financier will consider the application on a case-by-case basis.

Business Expansion

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