21 Jun

The Intelligent Thing To Do Is Expand Laterally

The Intelligent Thing To Do Is Expand Laterally

What is expansion in business terms? Why of course, it is growth. Any form of growth that does not arise solely from greater sales but out of new ventures or diversified markets is called expansion. Take a newspaper for instance. It decides to expand its horizons by venturing into another country. That is an expansion because of diversified markets. Next, it decides to cut raw material costs and sets up a newspaper recycling factory. This is vertical expansion. If the paper now decided to move into magazine printing, that would qualify as a horizontal expansion.

Basically, horizontal expansion is the practice of venturing into sectors or practices that are closely related to what your business currently does. For a newspaper, magazines are close, but music CDs are not. Magazines, therefore, qualify as a horizontal expansion.

The commercial meaning of horizontal or lateral expansion is to acquire companies competing with you in your own niche. However, that definition mostly applies to large conglomerates and multinationals. 

Business experts and analysts suggest horizontal expansion because it is easy to implement and cost effective too. As a mechanic, you already make repairs to customer vehicles. Maybe you also own a garage. In this case, the horizontal expansion would be to buy a van and turn it into a mobile garage. You know how to run a garage, and now you are venturing into a new segment of your trade, which is offering mobile assistance. The learning curve associated with such an expansion is small. A towing service is also another example of a horizontal expansion. Refurbishing used cars, offering at-home repairs and motorway servicing, annual maintenance contracts, MOT service are all good alternatives.

The investment required to expand laterally is significantly lower. An example of vertical expansion for a mechanic would be to invest in a battery and spare parts shop. While this does bring in more sales and reduces the cost of spares for your own garage, it needs greater investment and is no longer in your realm of expertise.

Motor trade industry offers plenty of opportunity for horizontal expansion. The possibilities are simply endless. Best of all, because almost all motor business practices run from a garage, your insurance cover should include your new venture. You do not need additional covers though increasing indemnity and reducing the voluntary excess is always advisable.

You can speak with our advisors and insurance experts by calling 01782 880140 and learn which ventures qualify as a lateral expansion of your existing business and how it affects your current policy. We are always here for any queries or questions and love to see our customers doing well.