The Process of Expanding a Business into a New Region (Essay Sample)

The Process of Expanding a Business into a New Region
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The Process of Expanding a Business into a New Region
At startups, many businesses do not foresee the probability of expanding their operations in the future. Businesses that get managed well experience continuous growth in the number of loyal and returning customers. As a result, they have to broaden their supply capacities to satisfy the increasing demand. As this takes place, their capital and economies of scale continue grow (Gaughan, 2011). It is with such growth that firms may decide to venture in foreign investments. However, foreign business environments present unlimited challenges related to operations, management, advertising, communication, and financial control. Because of these, firms have to be strategic in making foreign entries to avoid failure (Agusti, 2012). The best structural approaches to making foreign business expansions encompass franchising, licensing, and the formation of strategic business alliances.
Most businesses that engage in franchising have prospered and established known brand names. They are easy to market and famous for successful business activities. It is because of this that locating business partners with the intention to partner with them remains easy. In this set-up, businesses do not go out into foreign markets to establish new outlets. Instead, they allow other businesses to use their brand names and reproduce their outlets (Alon, 2012). In this way, it becomes easy to earn from their brand name because they do not engage in the costly part of running such businesses. Revenue generated from franchised businesses comes from franchise fees, contract payments, management and training fees, royalties, and promotion fees. Many businesses prefer this approach because it is less involving yet it has returns. Nonetheless, businesses expanding through franchising must research the target market to know if it is favorable (Jonnard, 2012). They must also protect sensitive business information from their franchisees.
The next suitable approach is that of licensing. While a business can issue licenses to others to expand its capacities, those that identify opportunities in other markets can also start by becoming licensees. This process involves the circulation or acquisition of production and distribution rights. In some cases, firms issue manufacturing rights that allow other companies to manufacture their products. This involves relinquishing important secrets about the manufacturing processes of different products (Agusti, 2012). Firms that are not comfortable with this can opt to grant distribution rights and protect their secrets. A typical case of a multinational that has continuously protected the formulas for processing its products is The Coca-Cola Company. Advantages that make licensee firms prosper include uniqueness of products, expanded geographical potential, and the fact that licensing is characterized by numerous adaptable options (Jonnard, 2012).
The last structural approach a business can use to expand into foreign regions involves the formation of strategic alliances. Strategic alliances involve outsourcing and joint processes. Examples of these include partnerships, joint ventures, mergers, acquisitions, conglomerations, and market extension processes (DePamphilis, 2013). Benefits associated with such alliances encompass the existence of a broadened network, increased capital input, efficient management, and expanded distribution capabilities. As a firm gets into a strategic partnership, it must ensure that it bargains for the best limits of shares ...