Expanding to a New Location? Here’s What You Should Know Before You Go.

5 August 2019 10:31am
Business development

The prospect of growing a business is exciting. In many ways, success of an organization or its leaders is defined by measures of growth. While some growth can be slow and steady using tried-and-true business development techniques, other avenues—like expanding geographic footprint—seek to catalyze growth through more radical change.

As with anything related to business development, correct implementation predicates largely on thorough and accurate research and preparation.

A new location can open an organization up to many new opportunities, but the potential that exists can go either way: good or bad. The exact same business operating in any other environment may have entirely different success outcomes depending on the variables surrounding the location. It’s vital to research these variables well before breaking ground somewhere new.

In Location, Many Things Impact Supply and Demand

The success of a business requires employees that control operations and customers to purchase the goods or services—this is true whether the customer is a person or another business. Locations must appeal to both customers and employees to truly be successful. For each location, the number of variables that determine the appeal to both parties is a long as it is important.

Recruitment and retention of future employees will likely be impacted by the quality of teachers employed by the local school district. Unhappy parents make unhappy employees. At the same time, a talent pipeline lacking the proper education to meet workforce need will dramatically increase the cost to recruit and retain future employees.

The availability of resources—grocery stores, entertainment, shopping—will influence both customers and employees. Even local weather patterns introduce variables that require research and understanding. These are all ground-level considerations important to the future of an expanding organization.

New Locations Mean New Laws

A deeper level of location-specific research will also examine how laws and regulations in a new area may impact business operations, including an evaluation of how likely laws and regulations are to change. This applies to laws at every level of government, as they all have the potential to impact business operations.

Across the globe, there are recent examples of how laws can both help and harm expanded business locations. In 2008, The Walt Disney Company, for instance, expanded its operations substantially in Atlanta, Georgia following new laws giving substantial tax incentives. Now, just over a decade later, the company may have to reverse course due to pending controversial legislative changes that could trigger an employment boycott.

In the United Kingdom, “Brexit” threatens the operations of dozens of businesses who exist across borders. Some of those considering a post-Brexit exit of their own had only expanded operations to the United Kingdom a few years before the referendum to leave the European Union took place.

Understand How Culture Will Change

The world’s largest global coffee chain, Starbucks, historically failed in past efforts to expand to Australia. Likewise, Tesco, the largest British supermarket chain, had to reverse expansions into Japan and the United States after failing to attract customers in the new countries.

Each of these companies were—and continue to be—wildly successful in their home locales, but poorly understood cultural differences in their expanded locations. Better research, for instance, might have illuminated unique and deeply engrained coffee culture in Australia preferring more local-based cafés and less sweet coffee drinks. These things matter and understanding their implications upfront can positively impact investment decisions.

The list of variables introduced by a new location can be extensive, with each having the ability to cause success or failure for an expanded business venture. Company researchers will want to look at data both quantitative and qualitative, from sources as varied as land records and tax codes, to media reports and school rankings. There’s a lot to understand when investing in any new area, and the research necessary will likely require more than what’s available from a search engine.

Are you set up to research a new market? Learn more about comprehensive research. (Link to Nexis and/or another research blog post on research)

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