The dynamic business environment calls for periodical changes in the business definitions of firms, in terms of customer groups, customer functions and alternative technologies to broaden their scope for expansion. Growth can never be achieved by a business enterprise, if there is no proper planning for diversification of its business activities across a broad spectrum. Expansion strategies are followed when an organization aims at high growth, by improving its overall performance.
Expansion strategies have a profound impact on the internal configuration as well as internal functioning of an organization. The business firms bear the risk of moving in an entirely new direction, where there is an equal chance for failure as that of success.If only a manufacturer plans to diversify or expand in a field that complements his present business activity, does it make any sense. What is the fun in venturing into a business activity about which you have no knowledge or little knowledge?
Expansion through concentration:
This involves investment of resources in a product line for an identified market with the help of proven technology. A firm may attempt to intensify its focus on existing markets through market penetration strategies. Or new users may be targeted for existing products or alternatively it may introduce new products in existing markets by concentrating on product development. Concentration policy relies on the principle of “A known devil is far better than an unknown angel.” It is a very difficult task for firms to capture new markets or to gain acceptance for new products in existing markets.
Expansion through integration:
A company attempts to widen the scope of its business activities in such a manner that it results in serving the same set of customers. The alternative technology dimension of the business definition undergoes a radical change. Firms try to move up or down in the value chain to meet the demands of the customers by integrating the adjacent activities.
Expansion through co-operation:
It may include mergers, takeovers, joint ventures and strategic alliances. Two firms try to combine their resources, capabilities and core competencies to pursue mutual interests to develop, manufacture or distribute goods and services.
Expansion through internationalisation:
International strategies are formulated in the wake of globalization where most of the developing countries have liberalized their economic policies facilitating foreign direct investments, generating foreign exchange. Many multinational and transnational companies are setting up their operations in developing countries to factorise the economy’s of scale and to enjoy the advantages of cheap labor and availability of resources.
Many firms go for stability strategies that are devoid of any risks. They are quite contented with the modest profit gained from the present business activity and try to maintain the same level of performance, until and unless there is a pressure from the market in the form of competition.Only few firms have that adventurous attitude to take risks in order to have a sustainable competitive advantage.