When expanding your business, you should explore all the strategic alternatives available to you. Select the one that makes the most sense and then prepare a plan on how to implement that strategy. There are at least a dozen common strategies and a variety of strategic combinations or special situations to choose from. We present some of those alternatives below.
Expansion of Present Location
Learn to spot telltale signs of saturation in your present facilities. Grocery stores, for example, keep track of abandoned carts. When a shopper fills a cart and then leaves because the checkout line is too long, the grocer should realize that there is a serious problem. If you are experiencing bottlenecks, think about adding to your facilities. Determine how many additional customers you could service by building up or out and compare the additional sales to the cost of construction and temporary inconvenience.
If it appears unlikely that you can draw more customers to your present location (at a reasonable cost), consider moving closer to your customers. A location on Main Street, in a shopping mall or an industrial park may cost you more in rent, but if you gain exposure to new customers it may be a sound investment.
Reaching the most customers may require opening several outlets at convenient locations throughout your market area. In addition to the added costs of real estate and multiple inventories, carefully analyze the cost and availability of labor and training, and the cost of hiring a manager for each location and installing an efficient monitoring system. Your advertising dollars may become more efficient since your radio, TV and newspaper ads cover your entire market. The multiple locations will make it more convenient for customers to find you.
Downward Vertical Integration
If your profits depend on the prices you pay for raw materials, your most profitable growth strategy may be to buy a farm, mine or processing plant to produce your own materials. This strategy also may make sense if your product quality is based on a consistent supply of goods at an acceptable quality level.
Upward Vertical Integration
Most small manufacturing businesses that start are forced to conform to the existing marketing channels and sell through established manufacturers’ representatives, jobbers or dealers who have access to the market.
As you grow, however, it makes sense to analyze your distribution system to see when you can improve your situation by hiring your own sales team, contracting with distributors, buying a truck fleet, opening retail stores or factory outlet stores or doing anything else you need to do to get closer to your market.
Remember, every time someone gets between you and your customer, it either reduces your revenue or increases your operating costs. Also, it impedes the provider- consumer communication that is essential to a good marketing program.
Exporting Goods or Services
Literally, there is a world of markets available to you if you are willing to learn how to get started. The U.S. Department of Commerce’s U.S. and Foreign Commercial Service and the U.S. Small Business Administration can help you explore potential foreign markets for your product or service.
When you are looking for new customers, don’t ignore tourists who could be attracted to your area. Work with your local convention and visitors’ bureau to determine the impact if you cooperate with local tourist attractions or hotels and restaurants to get more people to visit and spend money in your community.
Franchising as a growth strategy offers advantages if you are short of expansion capital, yet have a concept that can be packaged and taught to people who wish to invest in a business. The legal problems can seem overwhelming, but with a good plan and competent advice, you can develop a franchise system that could prove extremely profitable.
If you have a technical process or service, you may be able to find people in other markets who would be willing to pay you a royalty for the rights to use your process. Perhaps you could You might also be able to sell raw materials, secret ingredients, special tooling or promotional materials to your license holders.
Selling directly to your customers is one of the oldest and most effective methods of marketing. Today, there are few door-to-door salespeople; most direct marketing is seen via direct sales companies, in party plan selling and through email, ‘snail’ mail, TV and magazines. Direct selling requires good selection and training techniques and a commission plan plus liberal incentives.
If you have a good list of prospective customers, telemarketing may be an effective method of informing them about your business, qualifying them for sales follow-up or selling your product or service to them. Professional firms can be used, or you can set up your own telephone room. Here again, recruiting and training are critical because only a few people can do telemarketing well.
One method of reaching out to new markets is to sell your product under the name of your distributor or retailer. One drawback is: However, you cannot build customer or brand loyalty because the consumer does not know you are the producer. Another potential problem is that, should the owner of the label find a cheaper producer, you may be out of the business.
For more help implementing these ideas in your company, please contact David Brydson of BestFit Solutions at 503-206-0333.