Business Expansion Strategies - Essay Example

Business expansion strategies of Introduction The paper aims at answering certain questions related to a company’s productions and expansion in international market while adopting related diversification strategy. The company has been following unrelated diversification strategy since its inception and has product lines such as, luggage, writing instruments, LED televisions and paper and plastic tags. Evaluating relevance of bases of the four products manufactured by the given company In order to develop a relative base between products that are highly unrelated, it is important to focus on their line of production. In this regard, it is important to note that when there is no common thread or relationship between various lines of productions of a company, it is known as conglomerate diversification. In other words, it is a process of undertaking two or more unrelated product lines for the purpose of diversification. The rationales behind adoption of this concept are: cost advantage by diversifying production activities, maximum utilization of resources and mitigation of risk associated with operations in single market (Wiersema & Bowen, 2008). The only relevance that can be developed among the products is that all four products of the company cover low, mid and high level markets. The luggage line covers the lower section of the market; the writing instruments cover mid-level consumers, while the LED TVs are sold at higher end of the market. Lastly, miscellaneous plastic and paper tags are useful across all kind of markets. In conglomerate diversification, it is difficult to relate diversified products of the same company as a part of same base. However, the brand equity of each product indirectly adds to overall brand equity of the company. Conglomerate diversification is a major growth strategy that brings forward different hidden opportunities that a company can pursue, when market for one of its line of business is saturated. It is important to realize that with product line diversification, a company can achieve greater market share and growth rate within comparatively small period of time. In addition, this is one of the most suited strategies for internationalization. Identification of the product that is not suitable for being included in the related diversification strategy for internationalization In international venture, most companies pursue two kinds of strategies: horizontal or related integration and conglomerate or unrelated integration. The main advantages of related integration is that the company can continue growing in the same sector by producing or introducing similar or related product under the same branch. The following section focuses on product elimination, when a company switches from unrelated to related diversification strategy (Wan & Hoskisson, 2003). It was observed in this paper that management of the company, for growing its revenue and for the purpose of internationalization, would like to pursue related diversification strategy. Consequently, the production manager is given the responsibility of eliminating the unrelated product. In this regard, the production manager can propose to stop production of LED television, which is completely unrelated when compared to relativity of other products such as, writing instruments, luggage line and paper tags. The justification for this choice is that luggage can include bags and baggage of different size and for multiple purposes such as, school, college, office and travelling purposes. Similarly, writing instruments such as, pen and pencils, are used in almost all activities. Therefore, in aggregate, paper and plastic tags, writing instruments and bags can be categorized under office stationary or necessity. On the other hand, LED televisions are meant for entertainment purpose and belong to a completely different segment. If the company discontinues the production of LED televisions as a part of its related diversification strategy, first advantage that it will enjoy is reduction of production cost. Additionally, company will experience economies of scale in terms productivity and can concentrate its selling and advertising activities on similar product lines. Identification of two countries outside U.S. where there is scope for potential expansion and reason behind the selection Keeping in view the current market growth, two countries can be suggested for the purpose of expansion, where the company will be able to achieve growth. These countries are United Kingdom (UK) and United Arab Emirates (UAE). London, UK London is world’s one of the important centre of finance and commerce for international business. Almost every multinational company is present in London. London is an important location for expanding business in the UK. London has been proposed for the company because the city mainly comprises financial and business houses, which require products that are part of company’s product line. Moreover, the company can get in partnership with big corporations as well as act as a manufacturer and master distributor to small distributors, retailers and wholesalers (Martin & Parker, 2003). Dubai, UAE Dubai is one of the most economically developed cities of the UAE and has increasingly become a well-known centre for international trade, sports and entertainment. The development of Dubai has attracted a number of foreign companies to enter its market. The company by entering the market of Dubai will be one of the few international companies to establish in the office stationery and relevant segment of the UAE. This may prove advantageous for the company as international companies with diversified product range are usually preferred over local companies. After initiating business in Dubai, the company can slowly expand in other regions of the UAE (Davidson, 2008). The reason for proposing the UK and the UAE market for extension of the company’s business is that these economies have numerous business organizations with dissimilar interest operating; but all of these organizations require office stationery products, which is a great opportunity for the company. In addition, business in the locations may help the company recognize further opportunities for greater expansion. However, before entering these foreign markets, the company must develop its entry strategies and frame business policies as per culture and economic environment of these countries. Identification of two other businesses that are related to the group above that the company might target for acquisition Business acquisition is defined as the process of acquiring shares of a company partially or completely for building on strengths or covering weaknesses of the parent company. There are numerous advantages of business acquisition. The company will have easy access to resources and supplies, pre-established customer or client and supplier base. Goodwill of the acquired company will be an added advantage and the parent company will gain experienced employees, thereby reducing the cost of training (Becherer, Finch & Helms, 2006). In office supplies segment, the company can diversify its business by including a range of products. Primarily, the company can expand in product manufacturing such as, notepads, diaries and office stamp. The company can target small businesses that engage in manufacturing of notepads, diaries and office stamps. Notepads and diaries are essential parts of office stationary, while office stamps are generally customized in nature. The company by acquiring such businesses will have a list of clients who purchases office stamps and as a result, it can supply them with other stationery products. On the contrary, the company can access its old client base and inform them about the new ventures. The diversification will result in growing market share for the company as most business clients prefer having a distributor, who can supply all sorts of products within a particular segment. Conclusion The paper has described both related and unrelated diversification in context of the given company. The paper has further explained ways in which the company can grow on international level. It has also highlighted importance of acquisition for a company and products that can be included in its product line through acquisition. References Becherer, R. C., Finch, H. & Helms, M. M. (2006). The influences of entrepreneurial motivation and new business acquisition on strategic decision making. Journal of Small Business Strategy, 16(2), 1-13. Davidson, C. M. (2008). Dubai: The vulnerability of success. New York: Columbia University Press. Martin, S. & Parker, D. (2003). The Impact of Privatization: Ownership and Corporate Performance in the United Kingdom. London: Routledge. Wan, W. P. & Hoskisson, R. E. (2003). Home country environments, corporate diversification strategies, and firm performance. Academy of Management Journal, 46(1), 27-45. Wiersema, M. F. & Bowen, H. P. (2008). Corporate diversification: the impact of foreign competition, industry globalization, and product diversification. Strategic Management Journal, 29(2), 115-132. Read More