Modern age and time have witnessed an explosion of a continuous pattern of small firms to expand their territories. The phenomenon is equally similar to large businesses. The pressures on small and medium-size enterprises largely emanate from internal as external forces such as market trends. The pressure to expand into other markets presents the forms with opportunities to market their products and at the same time, they are faced with several threats in the process of maintaining their position in the global market. It is from this background that this paper seeks to inquire into the forces behind the expansion of small, medium, and large business firms.
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In the attempts to examine the pressure on firms to expand, the topic shall be tackled in three systematic sections. Section A looks into the external and internal forces within a firm that pushes for an explosion of services to cater to a wider base. Section B investigates and reports on the opportunities available to the firms as they become large and reach a wide pool of customers. From the context, the firms are not immune from threats that present themselves. Section C identifies and analyses those threats.
Business analysts are convinced that an entrepreneur who chooses to pursue a philosophy of slow growth or limited expansion is allowing the business to slowly atrophy. This limited growth means stagnation and no change. The methodologies that small and large firms employ for expansion vary from business to business. Small businesses have to aggressively look into possible channels of expansion to survive in the competitive business world. This eventually presents varying opportunities and challenges to small and large firms in a fast-growing business environment.
Pressures and forces behind firm’s expansion
Every business has the potential in finding ways to increase sales and services in the existing markets and even venture into the foreign market. Market concentration is a very strong force pushing for a business’ expansion. Customers also buy from other businesses and hence there is a great need to increase the customer’s turn out. In a firm’s life, business expansion is a stage that presents great opportunities. All successful small firms eventually are faced with the issues of handling business expansion. Small business expands their operations by increasing product innovations. Erick Koshner in human resource planning asserts, “the growth process begins with an honest assessment of strengths and weaknesses’ … the organization identifies the key markets or… Future market opportunities the company is likely to capture”. Market forces are very pivotal in shaping the direction of business growth.
Business innovation is another motivator for a firm’s expansion. These involve ideas for new products and show to improve the existing products. There are tactics for introducing new products in the existing market as an initiative to expand the business. These involve the change of appearance of products in the packaging and color, and this is meant to re-energize tired products and give them life. In the current technological era, e-commerce is a vehicle for innovation. By offering digital services, the firm can reach a wide pool of customers. Innovation involves completely new ideas over a wider menu of services.
Harvard Business Review (1998) examines the results of the booming economy as a force behind the expansion of firms. Business pioneers of all kinds are motivated to navigate into strategic thinking and panning as a springboard for both established and emerging entrepreneurs business expansion has been motivated by the availability of private equity and venture capital linked with loan stock, This is designed to fund growing firms by extending loans and grants reliant on future earnings to repay the debt. Senior debt finance (traditional secured bank lending) funds the lowest risk elements of the firm’s needs (3-5 yrs). This is a repayable firm with a sustainable cash flow when the form is generating sufficient stable profit. Such sources of capital have been pivotal in the expansion of small firms.
The availability of information and advice from business consultants helps firms to build a solid foundation. The practical information allows small and large firms to take control of their destination, continuously grow and experience a sense of accomplishment that is pegged on transferring an idea into an available tangible thing. Expanding a business is both a personal and professional quest.
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Small business can expand their operations by the acquisition of another existing firm usually smaller in size compared to the recipient firm. Growth through this avenue has resulted in the expansion of firms in their product and service delivery. Methods and techniques from the two firms are merged into common practice. This results in opening of new branches and hiring more staff to handle the operation of the growing business. This move should be taken after the firm has pursued the necessary groundwork i.e. an identification of the implication of the merger and the development of structures that will facilitate the retention of customer’s confidence in the new management.
Opportunities presented to firms
Business growth carries with it an increase in financial fortunes, for business owners and the employee’s staff members who have been part of the business for a long time are key beneficiaries of the expansion. The business managers delegates responsibilities to satisfy the needs of the employees in their urge to grow in their personal and professional capacities. Expansion is seen as a validation of the entrepreneur’s initial kick-off idea and hence it presents an opportunity to bring this idea to fruition.
Increment in product and service inventory is the common methods of small firm’s expansion. This presents an avenue for pursuing new market routes and developing business agreements with distributors and other partners. This is a boost to the business as it opens up the outlet channels of the forms products. Advertising and purchasing are also uplifted when the expanding firm joins industry cooperatives.
“… Once entrepreneurial thinking becomes second nature, you will be able to continuously identify uncertain yet high-potential with speed and confidence” (McGreth, G.R and Macmillan 1 2000, pg 1). The process business expansion creates a richly stocked opportunity register in which great ideas for redesigning existing products and reconfiguring market spaces. The future of the business consequently is sustained by the execution of dynamic ideas and the creation of a vibrant entrepreneurial climate.
The firm is also put in apposition to attract viable man power and skills o boost its operations. Expansion is the hallmark of affirms sustainability in the market. The firm is also put in apposition to attract viable is the hallmark of a firms sustainability in the market. The firm is well placed among its competitors to attract the required skills and personnel. This is line with achieving the best output without endangering the business. To maintain a consistent bottom line profit the firm has to look at the economic and consumer trends in order to source indications of the firm’s strengths and survival in the competitive economy.
Aligning the firm with similar types of companies who share in its vision, objectives and operations is an opportunity worth embracing. This helps the company to identify new markets and borrow ideas from other partners. To avoid loosing control of the product in such a situation, it is important to license the products. This is an effective, low-cost growth medium that presents an opportunity to the firm upon expansion. This involves finding out companies that produce similar products. This is aimed at maintaining the firms performance and place in the market an also increases opportunities in other markets.
Expansion of a firm offers a chance to diversify products and goods. This is an exceptional growth strategy that helps to maximize sales and profit by allowing multiple inlets of income. Diversification opens up more market for the product and even catapults the expansion of the firm to the internet. Effective web site is an important domain of modern business as foreseen by Bill Gates by 2002, he states that “there will be only two kinds of business; those with an internet presence and those with no business at all”.
Threats faced by firms while expanding
Business growth causes a variety of changes in the firm. This ranges from legal, managerial and financial challenges. To the firm, it means an expansion in the work force hence the need to restructure the processes and infrastructure of the firm to accommodate the new staff that will enhance the firm’s objectives. Demands associated with new production, new marketing campaigns and strategies, record keeping and managerial requirements calls for a careful hiring procedure. Expanding firms in most cases have been known to concentrate on marketing and production policies at the expense of the employee’s personal needs.
Expansion of small business triggers the mass departments of employees who are usually unable to cope with the emerging who are usually unable to cope with the emerging cages. Come along with vigorous reshuffling, redeploying and re assignment of duties. Workers who are unwilling to adjust to the new environment and prefer the conservative, relaxed atmosphere abandon their jobs. Ambitious expansion may result into affirm loosing its most valuable, experienced and well-oriented employees. It is painful to the firm to loose these employees who cannot grow with the firm despite their loyalty and experience.
Expansion capital is another threat facing affirm in its road to expansion. Small businesses urgently need finance to sustain the expansion. For an unprepared entrepreneur, sourcing for expansion capital might be very tedious and even threaten the firms operation. Failure to review business plans to monitor and update marketing strategies can be very frustrating in the advantageous times of expansion. “… Obviously, the first priority of a seed stage company is to develop a product/service concept. This would involve sketches of any innovative technologies, plans…” (Stathis, M 2005, pg 3). A expanding company is faced with a task of building new structures to cope with the changes. Changes in technology calls for the acquisition of hardware and software to support the new venture. IN situations where the firm cannot afford the new technology or runs short of the professional manpower to drive the new technologies, this presents a threat to the company and threatens its expansion.
Ambitious and talented firms exhibit a tendency of ‘growing too fast’ Rapid and spontaneous growth and success can overwhelm the company. Hyper0speed expansion is a threat to ill-prepared firms. This problem is mostly evident in the operational and of a business. For instance, the physical needs of affirm shall outgrow the present facilities. This results to the out spacing of production of a product by the demand. The firm can no longer meet the rising market demand. Doubling the size of affirm means doubling shall be paralyzed.
When the workload and operations of a growing from increases, there is a tendency of reducing services to the client. Customer service is significant to growing business and it becomes difficult to sustain the services during a tremendous expansion period. This threatens the effectiveness of services, retaining customers and securing new business opportunities.
A firm’s expansion is an integral part in the sustainability of the firm in the market. All successful small and large business have to prepare for expansion. This is stage that presets a company with opportunities and threats. Expansion is seen as a validity measure of the initial business idea and plan. Growth comes along with financial, legal and administrative adjustments such as hiring new staff, new marketing strategies to compete in the expanded market. The desire of affirm to expand is hinged on an understanding of a worthy, long-term profitable growth spearheaded by effective management and planning. Expanding a form is not only pegged on opening new braches, rather it revolves on the opening new branches, rather it revolves on the adjustment and management of a whole new collection of challenges. It is paramount for expanding firms to maintain a system of monitoring the cash flow, managing finances human resource development and tracking all deliveries and inventories, growing firms should also be ready to invest in more sophisticated systems in order to coordinate and evaluate the various business operations and transactions.
A research on the market trends also come in very handy when expanding a business. Market intelligence should inform the firm on the decision to expand. Gathering information on the competitors gives the firm an upper hand on the market patterns. Learning from the success and failures of competitors is very essential in positioning the business on a success trend. Growth and expansion requires careful planning and not just a decision a person takes all of a sudden. This is a product of a vigorous extensive thoughtful process ranging from an in-depth analysis of financial, logistics and the preparedness of the firm to venture into other markets. Expansion decisions should be pegged on the availability of untapped opportunities that can profit the firm. This is because not all opportunities that present themselves to the business are viable in the current context. Expansion does not always mean more profits. For expanding small firms the entrepreneur should determine the economies of scale that will sustain and benefit the business ahead of others even in the process of expansion. The ability to finance the expansion should also be looked into. A careful consideration of the cash flow and the ability of the incoming cash to support extra investment are critical before taking any expansion decisions. In this regard it is advisable to only expand after proving that the demand for the product still exists.
- McGrath, G.R and Macmillan, L. (2000). The entrepreneurial Mindset: strategies for continuous creating opportunity in an age of uncertainty. Harvard business school.
- Gold, K., S., (2005). Entrepreneurs Notebook: pratical Advice for starting a New Business venture learning. London; Ventures press.
- Harvard Business review on Entrepreneurship (1998). NY; Harvard Business school
- Stathis, M. (2005). The complete Guide for Building successful Companies and raising venture capital London; AV Publishing.
- The Academy of management journal. Vol 45,no.5 (2002)