Is your thinking about corporate expansion right now?
The idea of corporate expansion is to identify ways that work in increasing the position of companies in the market and thus increasing their profits, but before making a decision there are a number of things that you need to determine first.
Table of Contents
Important factors for corporate expansion
There are a number of factors that you should consider and ensure when expanding your company, including:
- Objective of corporate expansion
- The current state of your company.
- Suitability of the company’s activity in relation to the new location.
- The state of the market and the opportunities available to you.
Objective of corporate expansion
The current state of your company
Before expanding, you have to determine the goal of making such a decision, the goal can be to increase profits, increase spread in the market, move to increase productivity, or reduce costs.
Setting an expansion goal may discourage you from making this decision because you can achieve this goal through less risky or more effective methods, or it may guide you to the right strategy for expansion.
You have to determine the financial situation of the company, the position of the company in the market, and the extent to which customers accept or reject what your company offers, as expansion for a company that does not make profits or a company that the customer does not feel satisfied with needs to think a little.
For example, if the goal of corporate expansion is to increase profits because the company does not make profits, you have to determine if the reason for not making a profit is to increase costs, and therefore expanding the company in a less expensive location will be in your interest, either if the loss is caused by dissatisfaction with what you offer, you have to fix the company internally first. And so on.
Suitability of the company's activity to the new site
Market status and opportunities
And you can confirm this by PESTEL analysis :
- P-Political: That is, the political situation and the political climate will not be a major obstacle to your company’s activity.
- E-Economical: Checking the economic situation in the new country and its impact on your activity, and how to use the available economic resources for the benefit of your company.
- S-Social Culture: The success of companies in one place does not necessarily mean that the expansion of companies in another place is in the interest of the company, because each society has a certain culture formed by environmental, social, cultural and religious factors that make what is desirable in some places forbidden and completely rejected in others.
- T-Technological: You need to make sure that the technology available in your company’s new location is suitable for what you need so that you do not encounter any technical problems that affect the workflow.
- E-Environmental: Climate and natural disasters have an impact on many businesses, so make sure that environmental conditions will not be a hindrance to your company.
- L-Legal: Every country has laws that govern it, and what can be legal in your country, may be a punishable crime in the new country, so before companies expand in a new place, check the laws of the country.
Study the needs of new customers, market situation, competitors and their weaknesses and strengths to make sure there is a strong opportunity that allows you to step into new places.
Expansion Strategies
There is more than one way to process the corporate expansion , each of which suits some companies to achieve the desired goals, including:
Expand through focus
corporate expansion through concentration means investing all available resources in focusing on the current activity of the company, and it is implemented in more than one way:
- Focus on the current product and market.
- Focus on the current product in new markets.
- Focus on the current market with new product development.
It is the easiest mode of corporate expansion because it usually focuses on a single product or market, but economic fluctuations may topple the product or affect the market.a
Expanding through diversity
Companies resort to it to avoid economic fluctuations by heading to new markets and developing their products, and there are two types of the process of corporate expansion through diversification:
- Focused diversity: that is, a focus on all products or services related to a particular product.
- Agglomerative diversity: that is, bifurcation in many activities even if they are not relevant.
Scaling through integration
This is done by combining one or more processes for more comprehensive production, and this expansion is done in two ways:
- Forward integration: for post-production stages such as opening retail branches in new markets.
- Backward integration: for pre-production stages such as manufacturing or extracting resources used in production.
Expand through collaboration
In the sense that the company agrees with another competing company to cooperate to make the most of the market potential, and expansion through cooperation can take many forms, including:
- Integration
- appropriating
- Joint Venture
- Strategic Alliance
Expansion through internationalization
It is the corporate expansion outside the local market with the aim of reaching a larger customer base beyond national borders. But that expansion strategy needs to comply with price, quality, shipping and delivery standards.
In the case of corporate expansion through internationalization, there are several strategies followed, including:
- International strategy: It means that the company provides the service or product to markets where this product is not available, with the possibility of making some adjustments to suit the new market.
- Multi-personalization strategy: The company aims to provide services or products that are customized to suit the conditions of each market separately, and this means high costs in research and development, production and marketing.
- Global Strategy: The company delivers one product to specific places around the world. It relies on a low-cost business structure.
- Cross-border strategy: It is a combination of a multi-personalized strategy and a global strategy, as it relies on a low-cost business depending on the local conditions of each market, i.e. it provides a unified service that suits all countries.
AHG is a leading regional auditing and chartered accounting firm, present in the GCC and North Africa. Since 2014, AHG has helped companies operating in the UAE to maximize success. We are fully prepared to help your business in the UAE through a team of trained tax experts to prepare your business for corporate tax in the UAE.
AHG-Dubai Group serves a wide range of clients and multinational companies. This comes in light of the company’s strategy to focus on two main pillars: geographical expansion in frontier markets and driving a positive community culture. By combining our strengths and expertise in the region, we offer our clients best-in-class services tailored to their needs to maximize their investment goals in a rapidly changing environment.
