SWOT analysis and location: the keys to your expansion strategy
Written by Ángela ·
In the business cycle, growth leads to expansion. It is an important segment which requires cautious planning from choosing the right product type to performing the legal procedures. But when does a company decide to expand? The idea usually originates from two scenarios:
1) When an owner plans an expansion at his/her own initiative
2) When a company is subject to unexpected growth due to the sudden increase in sales or the growing demand of the novel product that attracted the market
The latter is prone to problems and requires attentive planning to succeed in the rapid environment. This does not make the former method any easier than the unforeseen development; the only fact the owner, the enterprise, and the employees are well informed and equipped with tasks for the future situation. So, in general, how to plan an expansion? What factors need to be considered for this vital business segment?
To begin with, there are few traditional approaches to a growth strategy. Firstly, some companies might want to begin by selling or exporting their products to international customers establishing a cross-border relationship and by creating overseas brand awareness.
Secondly, commencing operations overseas. This option allows a better understanding of local customer preferences in tandem with increased investments, time, and labor.
Thirdly, expanding through merger and acquisitions. Though the approaches have reduced risks, chances are high for the decision to go wrong and increased response from competitors. In addition to the nuances of traditional strategies, there are different levels to effectively create a growth strategy such as macro (country, territory, points of sale counters, etc.), micro (specific location), and in-house strategies. However, the effective method to plan for a growth is to first a conduct a SWOT analysis. This assessment will help know better the status of your company and the feasibility to carry out the development.
To begin with the strengths of a company, a sustained profitable growth arises from the necessary capability to monitor the development, a good management team with adequate skills and competencies, and the improvement of your best performing product/service. That said, where could you find your company’s outstanding factors? You might have a product/service that is doing exceptionally well and out-performing all the other similar ones in the market. This may reveal the prevailing customer loyalty and the space for product innovation. Also, you might have resources that your competitors are unaware of or have ignored including in their operational process.
Most importantly, identifying your competitive advantage. It helps customers effortlessly recognise your brand in the competition field. It will happen best if the goals of your organisation are in alignment with the values of employees and the corporate culture. By focusing equally on all domains from production to public relation, you will gain the sustained and strategic competitive advantage. Hence, a business development will be profitable if it has its roots in the evolution of strongest points.
Let’s see how recognized companies and brand are doing:
- Giorgio Armani clothes and apparels are hand stitched and not machine stitched.
- Zara has 1923 stores across 88 countries in Africa, America, Asia pacific, and Europe. Higher number of stores mean greater distribution network and customer reach.
Every organisation has some low performing factors or areas in which they fail to perform efficiently. In that case, the idea of growing, national or international, should not be included in a company’s future mission. This is solely related to issues within the organisation and differs with industrial type. For e.g., if your company is a service provider, probable frailty could be an unfriendly staff who is diminishing the customer relationship and sales. This could be devastating when the core characteristic of a service company is to establish a firm liaison with its consumers. Another factor originates from financial risks (transaction, debts, over reliant on the customers), employees (tardiness, communication problems, lack of enthusiasm, poor comprehension of products/service), innovation; in today’s dynamic environment with changing consumer habits and preferences, it is an unavoidable need for the company to embrace innovation in every process they delve into, to ward off the competitor pressure. It is therefore essential to recognise your internal weakness and take them as a base for improvement.
Following the fashion retail industry, what are the main weakness of some top brands?
- Outdoor clothing and equipment brand, Mountain Warehouse, has limited product range compared to the other international brands.
- North Face, an American outdoor product company, lacks athletic and ethnicity variety. This is critical for the company when the changing consumer tastes are inevitable.
A company can make use of new opportunities to generate more profits and improve its performance. Some can be predicted, while others will present themselves unexpectedly. Either way, keeping an eye on the external factors and trends are crucial for the growth of the business. The opportunities originate from scenarios such as changes in the technology and market, changes in the government regulations specific to your field (low interest rates, more stabilised political environment, tax and duty exemptions, etc.), changes in the consumer lifestyle (what interests the target population more? How frequently do they vary? Are they shopping more online or at physical stores?) are important factors to consider in your analysis.
Performing a SWOT analysis will expose the strengths and the weakness of your enterprise connecting the business operations to the next level. An effective approach is to analyse the strengths and ask yourself whether they could seize new opportunities. Alternatively, analyse the weakness and see if they could open up new opportunities upon elimination. For example:
- H&M has great potential in the emerging markets such as Africa and Asia to cater to the rapid demand.
- Burberry’s expansion in product line will lead to its growth outperforming its competitors’.
They are the external factors that deform the performance of your enterprise. The most obvious, is the threat from competitors. Knowing where your competitors stand in terms of 4 factors will help you understand how customers evaluate your business against the similar players in the field. Moreover, in the event of an expansion, you will look for new locations that suit your business model. But is that location free from competitors? How can you get an accurate data about this indicator? Mostly, frequenting the next location multiple times is the solution to evaluate the competitor presence. But, it is strenuous and consumes lot of time and money.
Additionally, menaces from government regulations, economic hindrances such as recession, changing consumer patterns (will my consumers continue to purchase/use my product/service? How will my target market change in the coming business years? Will my company be able to adopt the changes?) are some instances that threaten a growth plan. The other difficulties originate from product liability and rapid technological development.
- The high cost of GAP Inc. It is a major threat to the global retailer when its competitors are offering fashionable products at a much better price.
- Similar products with reasonable prices in other high street brands is a threat to the UK based global retailer French Connection.
How Location Intelligence (LI) helps perform the SWOT analysis?
Since the threats and opportunities are external to a company, it could be laborious for a manager to get the bottom of all necessary details. Here is where Location Intelligence intervenes and facilitates the growth process by analyzing the surrounding area with data analytics.
It helps you navigate effortlessly the external factors you might encounter in your future location. LI not only points out the detractors you should be aware of but also helps you identify similar points of interests (schools, universities, tourist attractions, health care, etc.) in proximity to your store and areas that have rich demographic data. But, how to integrate LI in your business strategy?
Geoblink, a LI solution, helps organisations assess their location specific potentials and diffciulties with solid socio-demographic and economic data.
If you would like to know how Location Intelligence can help your business:
Thus, expansion is exciting, but profitable growth (better brand recognition and value, a wide range of products and services in a different market) requires weighing the risks and benefits equally. It can be carried out through proper assessment and calibration of innumerable indicators which will eventually land your new business on the right path.