Expansion in real terms is growth, therefore, in business terms 'expansionÃÂ´ is the growth of a firm in terms of turnover, profits or asset base.
Growth of a firm is quite difficult to measure but the most widely used criteria for growth are sales and net assets.
Firms can grow using two different methods, organic through growth of sales or inorganic, which is a faster method of expansion involving takeovers and mergers with other businesses in the same market.
Birth of Dixons
Dixons Plc started off as a photographic studio founded by Charles Kalms in 1937. There was high demand for portrait photography. Above all conditions for growth, there must be a gap in the market. The belief that the firm can quickly recognise and profitably supply some area of consumer demand.
Stanley Kalms, the son, was quick to recognise the publicÃÂ´s newfound interest in photography, which was growing rapidly.
They started selling simple cameras and accessories. The challenge to the firms is to market the product so that the value to consumer exceeds its price and price exceeds costs of production.
Dixons customers valued their products higher than the price charged. Consumers priced the cameras and accessories as exceeding its retail price. By very clever management and efficiency Dixons were able to produce the goods as a lower cost than the retail price. The gap between consumer valuation and producer cost is not only the source of profit but also the 'potential differenceÃÂ´, the energised gap that drives business activity.
Growth of sales were achieved by gaining market share relative to competitors. Consumers were convinced that DixonsÃÂ´ products offered better value for money.
Diversification of product range and services
Diversification is offering a wider range of products. It occurs when firms spread risk by producing a...