[Column] Exploring the Possibilities of Expansion Centered on New Business (3)

I would like to introduce a column article.

The method of vertical expansion is fundamentally either upstream or downstream expansion. The criteria for upstream and downstream depend on whether a company is moving from its current business model to manufacturing (upstream) or to retail (downstream). Additionally, approaching the final end user is also a consideration. Upstream expansion refers to cases where a business enters into operations that have manufacturing or construction functions. This does not necessarily require the company to make capital investments; it can involve outsourcing or subcontracting to acquire manufacturing and construction functions while executing its own plans. A representative company is Uniqlo. A typical example of downstream expansion is when a lumber company undertakes new housing or renovations and transforms into a housing company (Tama Home). Downstream expansion is a method of entering fields that are closer to consumers. Next, horizontal expansion involves entering peripheral or niche fields. For example, a housing company or construction firm may enter the remodeling sector in a different division, or a building materials sales company may engage in termite extermination or house cleaning services, all of which are expansions into peripheral fields related to housing. The key points of horizontal expansion are entering fields where a higher gross profit margin can be achieved compared to the current core business, leveraging existing personnel from traditional businesses, and targeting niche areas with few or no competitors that have future potential.

Management SeminarManagement Seminar