Business Expansion Essay

697 Words Nov 12th, 2014 3 Pages
The Process of Expanding a Business into a New Region

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The Process of Expanding a Business into a New Region Business expansion gets defined as the process of enlarging the operations of an enterprise either by launching new products or building more branches. Each year, thousands of companies consider exploring new markets by expanding their operations into new geographical locations. According to Awe (2006) the drive to enjoy high-profit returns, and economies of scale are some of the primary reasons why companies keep migrating from one region to another. Stiff competition within the domestic markets may also force some firms to seek alternative markets. Given the importance of this
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Prevailing socio-cultural norms may discourage or encourage an expansion process. According to Awe (2006), some cultural ordinations or practices may be unfavorable for incoming firms. For instance, Islamic cultural norms that prohibit the consumption of ‘unhealthy’ animals may directly impact on the ability of a firm to expand its operations into such cultures. On the other hand, social values and beliefs held by potential consumers influence their consumption behavior (Strauss, 2013). Consequently, companies should put these elements into consideration before expanding their businesses. It is because socio-cultural variables influence the aggregate demand of the general population. Hantula (2012) identified economic forces as key to the business expansion process. From his analysis, a number of the economic variables are found to have a directly bearing on the ability of a firm to successful expand its activities. They include recession, rate of inflation, levels of consumer income, monetary policy stability, and the cost of capital. Regions experiencing high inflationary pressure get characterized by relatively low demand for goods and services. Moreover, high cost of capital and unstable monetary policies discourage direct foreign investments in the economy. On the other hand, Awe (2006) asserted that fall in consumer income gets a companied by a significant drop their purchasing powers. As a result, it is preferred for businesses to expand their

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