What are the expansion strategies, and the pros and cons of the expansion strategy of the expansion

Expansion strategy refers to a strategy for enterprises to expand their business scale, or to increase production capacity and product quantity within the scope of the original enterprise, to invest in new areas, or to promote the alliance and merger between enterprises through competition, so as to promote the continuous development of enterprises. [1]

Chinese name. Expansion strategy.

Foreign name. expansion strategies

Nickname. Growth-oriented strategy.

Scope of application. Enterprise.

Main types. Horizontal integration, vertical integration and diversification.

Fast. Navigation.

Type. Reasons for adoption:

Conditions apply. Pros and cons analysis.

Precautions. Conceptual features.

Compared to other types of strategic postures, an expansion strategy has the following characteristics:

1. Businesses that implement expansion strategies don't necessarily grow faster than the overall economy, but they tend to grow faster than the markets in which their products are located. The growth of market share can be said to be an important indicator to measure growth, and the embodiment of the expansion strategy should not only have an increase in absolute market share, but also an increase in relative share on the basis of the growth of total market capacity.

2. Enterprises that implement expansion strategies often achieve profit levels that greatly exceed the average profit rate of society. Due to the rapid development speed, it is easier for these enterprises to obtain better economies of scale, thereby reducing production costs and obtaining excess profit margins.

3. Enterprises that adopt an expansion strategy tend to use non-leading means to compete with competitors. Because the enterprises that have adopted the expansion strategy not only work the development of the market, but also strive to have a competitive advantage in the development of new products and management models, they will not rely on the competitive advantage to damage their own war, but generally speaking, they always use relatively more innovative products and services and high efficiency in management as a means of competition.

There are generally three types of business expansion strategies: focus strategies that use a single product or service, diversification strategies, and integration strategies.

1. Focus strategy for using a single product or service: that is, enterprises can provide products and services that they really need to specific target customers by concentrating their own resources and organizational energy.

2. Diversification strategy: It refers to entering a new business that has a competitive and valuable "strategic matching relationship" with the current business of the enterprise in the value chain. Strategic alignment exists between businesses that have very similar value chains and can bring different opportunities to the business in terms of technology sharing, greater bargaining power over the same business, and sharing common sales.

Sales channels and sales forces, the use of common sales agencies and the same wholesalers or retailers, joint after-sales service, joint creation or use of the same well-known trademark, the transfer of competitive valuable technology or production capacity from existing business to the business that has just entered, and the consolidation of the same or similar value chain activities for lower operating costs.

Thirdly, the integration strategy includes two aspects: horizontal integration and vertical integration. Horizontal integration is horizontal integration, through the acquisition of similar enterprises to achieve scale expansion, is a form of enterprise production capacity expansion, this expansion is relatively easy and rapid. Vertical integration is an expansion strategy for enterprises to expand their existing operations in two possible directions, including forward integration and.

Backward integration.

The external expansion strategy refers to the business development of the enterprise through acquisitions, mergers, alliances, etc., in order to obtain more market share, technology, brand, resources, etc. This strategy is generally used in situations where companies are pursuing rapid growth or when they are sensitive to improving their competitiveness.

An external expansion strategy usually includes the following ways:

Acquisitions: Acquisitions of other companies or business segments in order to quickly expand their scale or gain market share of their target market.

Alliances: Partnerships with other companies or organizations to jointly develop markets, technologies, and resources for mutual benefit.

Enterprises need to be aware of the risks and challenges when carrying out their outbound expansion strategy. For example, when acquiring or merging with other companies, you need to consider post-merger integration issues, cultural differences, management team cooperation, financing, and other issues. When expanding across borders, there are legal, tax, and cultural differences to consider in different countries.

Therefore, an outbound expansion strategy requires a comprehensive investigation and risk assessment to ensure that it can be implemented smoothly and with the expected benefits.

1. Enterprises can expand their own value through development, which reflects the increase in the company's market share and absolute wealth after expansion. This value can not only become an honor for the employees of the enterprise, but also become the driving force for the further development of the enterprise.

2. Enterprises can create higher production and operation efficiency and effectiveness through continuous change. As a result of expansion and development, enterprises can obtain new opportunities that were not available in the past, avoid the aging of the business organization, and make the enterprise always full of vitality and vitality.

3. Expansion strategy can maintain the competitive strength of the enterprise and achieve a specific competitive advantage. If competitors are adopting expansion strategies, and if companies are still adopting stabilization or contraction strategies, then there is a good chance that they will achieve a competitive advantage in the future.

The disadvantages of an expansion strategy are:

1. After adopting an expansion strategy to achieve initial results, it is likely to lead to blind development and development for the sake of development, thus disrupting the balance of resources of the enterprise. To overcome this drawback, enterprises must re-examine and analyze the internal and external environment of the enterprise before making every strategic situation decision, and judge the resource status and external opportunities of the enterprise.

2. Excessive development is likely to reduce the overall quality of the enterprise, so that although the adaptability of the enterprise is good on the surface, there is an internal crisis and chaos in essence. This is mainly due to the fact that there are too many new institutions, equipment, and personnel in the enterprise and the failure to form an organic and coordinated system. In response to this problem, the enterprise can consider setting up a temporary organization for strategic management, which is responsible for the overall planning and management of the coordination between various departments and personnel within the enterprise after the expansion, and then consider abolishing this organization after all factors are integrated.

3. The expansion strategy is likely to be that the enterprise management pays more attention to the investment structure, rate of return, market share, organizational structure of the enterprise and other issues, and ignores the service or quality of the product, attaches importance to the macro development and ignores the micro problems, so that the enterprise can not achieve the best state. To overcome this drawback, enterprise managers need a correct and comprehensive understanding of the expansion strategy, to realize that the strategic situation of the enterprise is a part of the enterprise strategy system, so it must be considered in the implementation process.

Expansion strategies, also known as growth strategies, attack strategies, and growth strategies, are a kind of business growth strategy. From the perspective of enterprise development, any successful enterprise should go through a period of different expansion strategies, because in essence, only an expansion strategy can continuously expand the scale of the enterprise.

Coarseness enables enterprises to develop from small enterprises with weak competitiveness to large enterprises with strong strength. The main types are horizontal integration, vertical integration and diversification.