Business Growth/Expansion: SWAN-Purchase of a Larger Facility
Most successful entrepreneurs are the endless challenge seekers, often driven by a desire to succeed. A motivation for more profits and a need to cover more and bigger geographical markets are factors that can make an entrepreneur want to expand their business. Naturally as it may be to any small or medium business, growth is the next big challenge once it has picked up well and everything is humming along as planned. This is indeed exciting as it makes good business sense; it would go a long way in building value for both employees and customers, offer a wider range of services and products to a bigger geographical market and create ‘economies of scale’. However, the rewards for a bigger business have to be rationalized and a sound expansion implementation plan strategized. In this, the rewards and risks for growth have to be carefully weighed, for these are the factors that would make or break the business.
In the case of SWAN Rehabilitation Company, purchasing a larger facility would be an integral step towards expansion. As the founder and by default the Chief Executive Officer, Kay must understand what such a move would mean to the company. Several factors must be taken into consideration, ranging from finances to operations and general service delivery (Page, & Tosh, 2005). How would each be affected and to what extent would such an effect be felt by the company at large? In the growth implementation plan analysis, such negative and positive considerations would have to be considered.
As far as positive considerations would go, the age old concept of economies of scale would be a major motivation (Kay, 2008). In bigger businesses, administration dollars are stretched over a larger service and product line and lower costs are achieved per unit. This would imply that by purchasing a larger facility, SWAN would be positioning itself to incurring lower professional and marketing fees .In addition, this would significantly lower insurance and banking charges. Consequently, this would make more money available for employee education and training, investing in new technology and increasing employee productivity and performance (Jolly, & Design Council, 2009). Better machines for therapy could be bought with the money saved as thus.
Clearly, acquiring a bigger facility would mean an increased ability to handle more and possibly new patients. In the business sense, this is a broader customer base (Hunt, 2010). The company would be exposed to a wider audience, a factor that would dramatically improve and increase services, even sales of therapy machines. The end result of this is greater profitability .It is noted that customers, in this case patients, are an important part of the company. Therefore, a bigger facility would increase the company’s muscle to handle more patients, who would possibly come from a wider geographical area. This would be a significant step in handling competition, since there are smaller companies competing with SWAN. This would be most effective if the facility was centrally located, in a relative way, to most places. This would ensure easy access and general convenience to patients.
On the negative end, a larger facility would automatically dictate that more personnel be recruited. Since members of staff are one of the most important assets of the company, this would provide an opportunity to staff new and expectedly more qualified staff. In this regard, this poses a challenge since the hiring of qualified staff could be an uphill task (Hunt, 2010). Such personnel could be scarce, and if less qualified ones are hired, they would lead to compromised quality in performance and general service delivery (Page, & Tosh, 2005). Patient trust and confidence in the company could be highly dented by such a development, giving an edge to competitors and leading to losses. Equipping the facility with more therapy machines would call for more people who know how to operate them, a factor that could increase costs through salaries. This might have negative financial implications on the company, as it w.
Another negative consideration for a larger facility would be the possibility of the number of patients remaining constant, or not going up significantly .This would mean minimal or no return on investment in terms of the capital that would have been pumped into purchasing the facility. That is why a deeper analysis is necessary before making such a move, to make proper assessment to determine if it is necessary, and therefore viable.
These considerations have to be considered immensely to determine the weight and implications of each. The urge to expand may be strong since the company has been performing well in the recent past. Its reputation has grown and funding seems to be readily available since tracking its performance and popularity, most potential associate companies and financiers are ready to invest in it. They know doing business with SWAN would be more profitable than it would otherwise be. In spite of that, it would still be important to reflect upon the idea of purchasing a new facility, to determine if it will really make business sense.
All in all, considering the positive aspect of financial implications of such a move, one would recommend that a bigger facility be purchased. This is because the expansion of such a nature would by default place the company at a better position as far as acquiring financing is concerned. Such financing would be a lifeline to the company in the expansion process. Ultimately, the company will have a solid market share and acquire a solid financial position, factors that could be the company’s pillars in case of any future economic instability. Given the company’s current nature, one would also recommend that any plans to sell it immediately be halted since it has been noted it appreciates at a very high rate. This appreciation will see it increase its asset value, hence a greater market value built over a longer time, and it would fetch a more attractive profit.
References
Hunt, S. D. (2010). A general theory of competition: Resources, competences, productivity, economic growth. Thousand Oaks: Sage Publications.
Jolly, A., & Design Council. (2009). Innovation: Harnessing creativity for business growth. London: Kogan Page.
Kay, J. A. (2008). The economics of business strategy. Cheltenham, UK: E. Elgar.
Page, R., & Tosh, P. (2005). Leading your business to the next level: The six core disciplines of sustained profitable growth. Westport, Conn: Praeger Publishers.
