Strategic alliances are increasingly being used as a means of expansion, especially global expansion. PHOTO | FOTOSEARCH
Growth and expansion are expected for any business after a few
years of operating. The growth stage is characterised by expansion and
increased market share.
Expansion should, however, be
done strategically to avoid hiccups. Rapid expansion may expose the
business to other risks, for example liquidation risk.
There are several ways a business can expand, from simple methods to more complex ones.
One
way is through partnerships and strategic alliances. The partnership
can occur when two businesses decide to collaborate for a period and on a
project.
For example, when tendering, some procurement entities allow applicants to form a consortium.
This will enable the individual entities to build capacity in
terms of expertise. It is best to have a collaboration agreement to
safeguard the relationship of the parties and their obligations.
A
partnership can be formed by admitting new owners into the business.
Equity partners are those who buy a stake while other partners may be
admitted due to their expertise in an area.
In both
cases, it is advisable to have in place a partnership deed to manage the
relationship and it is also important to register the new entity as a
partnership.
Strategic alliances are increasingly being used as a means of expansion, especially global expansion.
There
are several specialist alliances, for example for lawyers and other
specialists. Such deals serve as referral networks, capacity building
and accessing new markets in new territories.
To be able to maintain and achieve growth, consider joining a strategic alliance.
You
can work with like-minded businesses, for example forming a specialist
association you desire and inviting other businesses to join.
A merger and acquisition also works for market share expansion.
A merger occurs when two independent businesses form an entity. The old outfit ceases to exist and the new entity is formed.
Mergers
can be regulated according to the provisions of the Competition Act.
During a merger, several legal issues come into play, for example,
recruitment, asset transfers, registration of the new business, and
licensing.
A lot of mergers have occurred in the
banking sector to enable the lenders gain a larger market share among
other considerations.
Diversification is another way to
expand. It can occur where your business gets into a new sector or into
a new geographical area.
A lot of businesses are taking advantage of new opportunities to diversify and grow.
A
licence or a franchise can give your business access to global markets.
A franchise is granted by the franchiser, allowing the franchisee to
open a new outlet in the domestic market.
The
franchiser allows the franchisee to use the its trademark but the
franchisee must run the business according to the owner’s rules.
For example, if it is a restaurant, the franchiser’s operation manual can dictate the uniforms and recipes.
The franchiser is paid a fee in exchange.
The last way of global expansion is setting up presence in a new country by registering a new entity.
This
is a more permanent but expensive way of expansion as there are
attendant costs such as registration fees, licensing fees, work permits
and other costs.
In most countries, taxation for a foreign business is higher than for local ones.
No comments :
Post a Comment