Business expansion strategies for SMEs (II)
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- Category: SME toolkit
- Written by Bridget Olotu
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Another set of business strategies that SMEs can use is (1) Alliances and (2) Mergers and Acquisitions (M & A). We find these strategies as a predominant way by which Multinational Enterprises (MNEs) and large corporations expand their business operations. Interestingly, SMEs can also utilise these strategies in their own way when they fully understand how they work. They are complex issues but I will only gloss over their meaning and simple applications as regards this subject.
Growing or expanding your organisation through business alliances
This is when an organisation achieves competitive advantage and growth by entering into fruitful business relationships or alliances. This can be done through two simple ways:
• Bartering of your services in exchange for the realisation of specific organisational objectives. For instance, many automobile companies and media organisations go into this form of alliance in Nigeria by striking a deal involving the exchange of services/products. This way, automobile companies get huge and lengthy advert runs in target media organisations (could be electronic or print) and in exchange, they give out their cars, buses and vehicles in lieu of payment. This is a win-win situation. You can also look at areas in your business where you can barter your services/products for the products/services of another firm that would be interested in that barter arrangement. It will save you money, time and create helpful business synergies and relationships that can snowball into other areas of business.
• Partnerships with organisations with similar interests, etc. Here, organisations partner with other organisations with similar interests to supply a service/product or to execute a project. For instance, a strictly computer software company can partner with computer hardware firms to sell their products to their target markets. Today, Windows operating platform dominates the market because Microsoft has entered into partnership arrangements with major global computer hardware companies. This also creates a win-win situation for both parties. So in your business, look at the different ways you can partner with other firms to achieve business expansion, growth and greater profitability.
Utilising mergers and acquisitions business expansion strategy for your business
Business expansion and competitive advantage and growth can also be achieved through mergers and acquisitions. The banking reforms and recapitalisation under Professor Charles Soludo produced typical examples of mergers and acquisitions in our banking industry. Examples are UBA and Standard Trust Bank merger; Intercontinental Bank, Global Bank, Gateway Bank merger; and many other acquisitions of financially challenged banks by top banks in the country. As an SME, how can you expand your business through mergers and acquisitions? Well, these two areas are open to you:
• Acquisition of businesses related to your core or lateral operations/objectives. In the example I gave last week, I shared with us that a school owner can go into other areas of business that are related to their core or lateral operations and objectives. For instance, a school can decide to own a publishing outfit that publishes its note and text books. University of Ibadan has its own University Press. Now, beyond publishing their books, schools can also acquire large interests/shares in a publishing outfit or acquire them outright for their operations. This is an example of mergers and acquisitions.
• Looking at the possibility of mergers with organisations and markets that can increase your competitive advantage, growth potentials and financial position. This has happened over and over again with the blue-chips. Examples are Hewlett-Packard, Total and Elf, Goldspot and Nigerian Bottling Company and so on. When organisations merge their business operations, they increase their competitive advantage, skill-sets, human and financial resources, economies of scale, experience statements, client profile, market size, brand efforts, and other opportunities open to big companies. Rather than remain small or limited, you can consider M & A as a viable business expansion strategy for your business. In this part of the world, we are so consumed in the “me, mine and I” business paradigm, that many companies don’t mind going under than merging with others of greater strengths to perpetuate their business vision.
Continued next week
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Business expansion strategies for SMEs (II)
Category: SME toolkit Written by Bridget Olotu Hits: 3299
Another set of business strategies that SMEs can use is (1) Alliances and (2) Mergers and Acquisitions (M & A). We find these strategies as a predominant way by which Multinational Enterprises (MNEs) and large corporations expand their business operations. Interestingly, SMEs can also utilise these strategies in their own way when they fully understand how they work. They are complex issues but I will only gloss over their meaning and simple applications as regards this subject.
Growing or expanding your organisation through business alliances
This is when an organisation achieves competitive advantage and growth by entering into fruitful business relationships or alliances. This can be done through two simple ways:
• Bartering of your services in exchange for the realisation of specific organisational objectives. For instance, many automobile companies and media organisations go into this form of alliance in Nigeria by striking a deal involving the exchange of services/products. This way, automobile companies get huge and lengthy advert runs in target media organisations (could be electronic or print) and in exchange, they give out their cars, buses and vehicles in lieu of payment. This is a win-win situation. You can also look at areas in your business where you can barter your services/products for the products/services of another firm that would be interested in that barter arrangement. It will save you money, time and create helpful business synergies and relationships that can snowball into other areas of business.
• Partnerships with organisations with similar interests, etc. Here, organisations partner with other organisations with similar interests to supply a service/product or to execute a project. For instance, a strictly computer software company can partner with computer hardware firms to sell their products to their target markets. Today, Windows operating platform dominates the market because Microsoft has entered into partnership arrangements with major global computer hardware companies. This also creates a win-win situation for both parties. So in your business, look at the different ways you can partner with other firms to achieve business expansion, growth and greater profitability.
Utilising mergers and acquisitions business expansion strategy for your business
Business expansion and competitive advantage and growth can also be achieved through mergers and acquisitions. The banking reforms and recapitalisation under Professor Charles Soludo produced typical examples of mergers and acquisitions in our banking industry. Examples are UBA and Standard Trust Bank merger; Intercontinental Bank, Global Bank, Gateway Bank merger; and many other acquisitions of financially challenged banks by top banks in the country. As an SME, how can you expand your business through mergers and acquisitions? Well, these two areas are open to you:
• Acquisition of businesses related to your core or lateral operations/objectives. In the example I gave last week, I shared with us that a school owner can go into other areas of business that are related to their core or lateral operations and objectives. For instance, a school can decide to own a publishing outfit that publishes its note and text books. University of Ibadan has its own University Press. Now, beyond publishing their books, schools can also acquire large interests/shares in a publishing outfit or acquire them outright for their operations. This is an example of mergers and acquisitions.
• Looking at the possibility of mergers with organisations and markets that can increase your competitive advantage, growth potentials and financial position. This has happened over and over again with the blue-chips. Examples are Hewlett-Packard, Total and Elf, Goldspot and Nigerian Bottling Company and so on. When organisations merge their business operations, they increase their competitive advantage, skill-sets, human and financial resources, economies of scale, experience statements, client profile, market size, brand efforts, and other opportunities open to big companies. Rather than remain small or limited, you can consider M & A as a viable business expansion strategy for your business. In this part of the world, we are so consumed in the “me, mine and I” business paradigm, that many companies don’t mind going under than merging with others of greater strengths to perpetuate their business vision.
Continued next week