Both geographical and product line expansion has its benefits for the company. On the surface, the former aligns better with the company’s previous experiences but is arguably less profitable, while the latter poses a range of advantages for business but introduces more risks and restricts mitigation strategies for the team. A more careful analysis of the existing data exposes additional risks and allows to suggest the geographical expansion as a better option despite some difficulties and drawbacks it poses.
Geographical expansion is a lucrative option for several reasons. First, it gives Q an upper hand in the given market segment. Once the company sets up practices in the new location and passes through the initial stage, it gets an opportunity to compete with the existing services. As the presence of competitors is traditionally considered an obstacle rather than an advantage, the time, in this case, is key, so the sooner Q expands to Boston, Atlanta, and Washington, the higher are the company’s chances of establishing its reputation and gaining a customer base (Muhammed 2013). This approach notably coincides with Teran’s strategy of timely countermeasures described by him as the necessity to “put your foot on the gas and go” (Ton & Reavis 2016, p. 11).
Second, the expansion does not require the introduction of new services. This means the company will not have to overcome difficulties associated with the unexplored issues and unforeseen complications. While the cleaning and maintenance practices may differ from those the management is familiar with, as was exemplified by the case of real estate market differences in Chicago (Ton & Reavis 2016), it still leaves the staff within the familiar setting with little to no changes in established approaches and practices.
Third, the existing situation on the market suggests the demand for the services offered by Q across the country. While the exact rates are to be researched prior to the final decision, it can be speculated that the need for transparent and quality services is roughly the same in the target cities. This suggestion can be partially confirmed by the fact of the emergence of copycat companies: the current market is favorable enough to support more than one company without them visibly conflicting in any way.
Finally, geographical expansion is consistent with the intent of preserving the established business model and culture. Besides, by sticking to the established services, the company can make use of the reputation it gained throughout the years. The values and approach manifested by Q are already paying off, which can be seen from the progress demonstrated by Q in recent years, and will aid the penetration process.
This latter suggestion, however, relies on the presumption that the new markets are exposed to the information regarding Q’s success. This may be the case considering the dynamics of information distribution in the Internet age but should be researched prior to including it in the list of strengths. Another disadvantage is the possible difficulties resulting from the different conditions of the labor market and the need for new human resource management strategies. However, the company’s HR department is already familiar with at least some possible booby traps associated with the expansion and, as a result, is better prepared for the change in practices (Simons 2011). Finally, the expansion is likely to create the same distribution of revenues, where the majority of the customer expenses falling into the category with the lowest margin. This essentially means the slow growth resulting from geographical expansion.
Expansion of product line (in this case – software solutions) also presents a range of opportunities. First, it creates a more profitable setting. The software development process is a better option in terms of gross margin, and relies less on a “living, breathing workforce” (Ton & Reavis 2016, p. 11), the factor which was viewed as a complication for geographical expansion. It is also a more technical and predictable process, as aside from the idea and application, it demands little originality and thus is achievable without outstanding effort.
Another advantage is the demand demonstrated by the market. The initial launch of the iPad-based transparent management practices was met with the instant acclaim by the managers contacted by the company, which signals the gaps in managerial capabilities of the business. The functionality the dashboard currently offers can already be viewed as covering the requirements of the cleaning and maintenance departments, both in terms of organization, overseeing, and feedback. At the same time, it is likely flexible enough to be easily adapted to similar tasks in other businesses experiencing problems with control, transparency, or the inadequate means of communication with a customer base (Martinelli, Waddell, & Rahschulte, 2014). Presumably, the demand in other industries is comparable to that Q is engaged in. Besides, the marketing department is already experienced in approaching managers, which increases the possibility of success.
Another advantage is the flexibility which will be gained by the expansion. If the situation on the cleaning services market changes, the company will be left with an independent source of income (Walker 2015). Besides, such an approach allows the management to gain insights into the related business segments, which can help in adjusting the existing practices and change direction in case the situation becomes unfavorable.
Unfortunately, such approach does not easily align with the existing culture. The internal state of affairs and organizational benefits are easily preserved, but the reach to the customer is somewhat compromised in several ways. First, the customers are not likely to associate the company engaged in cleaning and maintenance services with the software service provider, which leaves the majority of established reputation out of the scope. Second, if Q decides to associate its name with providing the platform, it is left with two choices: take control over the new managerial segment by training and overseeing new personnel, which is almost equal to starting a new company or choose the contractor model which can compromise the current favorable reputation and disrupt the established culture in the same way it already did in the initial stage in 2010 (Ton & Reavis 2016).
Thus, the introduction of new services is a more promising and lucrative option, which provides higher revenues, diversifies the business, and guarantees new opportunities. On the other hand, it presents more risks and unpredictable situations. It also requires entering the relatively unexplored area, which also compromises the efficiency of the team. The geographical expansion offers a more stable development, introduces less “booby traps,” makes use of the previously established reputation, and requires largely the experience which the staff members already have at their disposal. The most visible drawback which can not be mitigated is the slow financial gain and the lack of development. Thus, based on the available data it is recommended to expand to other locations and seek long-term growth opportunities unless the company is willing to take the risks and pursue a more lucrative option.
Martinelli, R, Waddell, J, & Rahschulte, T 2014, Program management for improved business results, John Wiley & Sons, Hoboken.
Muhammed, G 2013, How to manage market competition, Lap Lambert Academic Publishing, Düsseldorf.
Simons, R 2011, Human resource management: Issues, challenges and opportunities, CRC Press, New York.
Ton, Z & Reavis, C 2016, Managed by Q. Web.
Walker, O 2015, Marketing strategy: A decision-based approach, McGraw-Hill Education Australia, New South Wales.