Before You Embark on Business Expansion, Examine Your Current Capacity

I usually encourage business owners and leaders to take growth and expansion seriously. In fact, we run a growth consulting firm (Thrive Consults). But before you set in motion the necessary apparatus that will engender growth and expansion, you must check whether you have the capacity to sustain it.

The business world is replete with companies that lost customers, revenues and profit because they designed growth path and failed to consider the capacity of those who would run with it.

I like the Red Bull approach to growth and expansion. Let’s consider their approach.

Red Bull was launched in 1987, but it did not expand outside it’s home market,(Austria) until 1992.

The sequence of growing close home, learning and developing a strong brand awareness, and gathering an extremely loyal customer base prior to branching out helped it accelerate it’s growth in new regional markets quickly.

Had Red Bull attempted to go global right out of the gate, it would had had different results. It might have overextended itself, resulting in supply chain issues (sales but no products to ship), and alert future competitors of the high growth opportunity that energy drinks would bring.

McDonald’s story explains this better.

Macdonald’s began as a family business, founded in 1940 by two brothers, Richard and Maurice McDonald. It was more of a roadside restaurant. They sold hot dogs, hamburgers, French fries etc.

In 1953, the McDonald brothers began seeking franchises and soon attracted the attention of a milk shake machine salesman, Ray Kroc, who volunteered to help set up new McDonald’s locations across the country. The chain grew slowly with 34 restaurants in 1958, 102 locations by 1959, and they quickly accelerated. Kroc eventually got so frustrated with the McDonald brothers’ lack of long-term vision that he bought them out in 1961 for $2.7 million.

Kroc’s goal was to make McDonald’s the United States’ leading fast-food chain, setting the stage for the enormous franchise known today as the McDonald’s Corporation.

However, between 2004 and 2014, the most famous chain in the world was struggling. To many it felt stale and unhealthy, a symbol of the hurried, unrefined way the industrial world mass-produces, packages, markets, serves, and eats food.

To overcome the growth stall, McDonald’s divested itself from some of its subsidiaries and decided to focus on its core business of hamburgers and French fries and other flagship items, which is why the company’s next decisions were so misaligned to its stated goals and the context of the market, almost bafflingly so.

Instead of shrinking its menu–and eliminating non-core items such as chicken, fish, yogurt, cookies, coffee, salad, wraps pancakes, desserts and snacks–McDonald’s decided to expand its menu and sell more items. Its goal? To sell more to existing customers while at the same time, hoping to attract new ones.

To put that in context, between 2004 and 2014, McDonald’s menu swelled by 75 percent. The result: between 2013 and 2015, McDonald’s share price basically didn’t move, and the company had lost more than 500 million visits since 2012.

Company executives spoke proudly of McDonald’s robust new product pipeline not realizing that employees who were once preparing 59 foods or combinations now had to juggle 121.

The chain didn’t seem to understand that an option-heavy, visually chaotic manu overwhelmed customers, had led to slower customer service, quality control issues, and a muddled brand identity, all of which had negative effect on the company’s revenues and profit.

The problem was simple: McDonald’s grew faster than the capacity of their employees. That resulted in lost of revenues, profit, and most importantly, customers.

It’s possible your company is facing this same challenge at the moment. You have solid growth plan, but you don’t have the right people that will make it happen. That is where we come in.

Thrive Consults is a Growth Consulting Firm. We usually start with thorough analysis of your company, design Growth Path, and finally outline the sequence of events that will make the plan work.

Send an email to us right away via [email protected]

The business world is littered with companies that didn’t want to change even when the market was changing around them.

If you ignore change, it will close down your business. Take action right now.

What did you learn today? Share your thoughts with others at the comment section below.

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For our consulting services, visit www.thriveconsults.com or send an email via [email protected] or call 07032681154.

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