Expansion Planning for Small Retail Firms

By Bitner, Larry N.; Powell, Judith D. | Journal of Small Business Management, April 1987 | Go to article overview

Expansion Planning for Small Retail Firms


Bitner, Larry N., Powell, Judith D., Journal of Small Business Management


EXPANSION PLANNING FOR SMALL RETAIL FIRMS

At some point in the life of a successful retailer, the question of expansion arises. While retailing is one of the last strongholds of the small owner-run business, current economic and market trends make it more and more difficult to remain small and successful. The economically healthy firm which has decided to expand faces many strategic decisions crucial to orderly and profitable expansion.

Once a single-unit firm has moved from start-up to success, in many cases the next step is growth.1 The growth period may be divided into two stages: "early growth' and "later growth.'2 Early growth is characterized by testing of initial market strategy and direct contact by the owner with all major activities. Later growth, for retailers, is typically characterized by expansion to multiple sites. Successful expansion requires considerable strategic planning, not only to implement the expansion but also to improve the chances of survival once the expansion is in place.

1 Neil C. Churchill and Virginia L. Lewis, "The Five Stages of Small Business Growth,' Harvard Business Review (May-June 1983), pp. 30-50.

2 R. B. Robinson, J. A. Pearce, G. S. Vozikis, and T. S. Mescon, "The Relationship Between Stage of Development and Small Firm Planning and Performance,' Journal of Small Business Management (April 1984), pp. 45-51.

Strategic factors which influence success have been well documented for large firms, but few such studies have been done in the retailing sector,3 particularly among small retailers. Yet the small firm is a major force in the retail sector: half of all retail firms in 1982 were sole proprietorships, and 95.8 percent of retail firms operated from a single outlet.4 In this article, two major expansion considerations for small retailers are discussed. These are the level of autonomy given to the new outlets and adapting the accounting information system (AIS) for the new organization.

3 See Richard Miller, "Strategic Pathways to Growth in Retailing,' Journal of Business Strategy (Winter 1978), p. 17.

4 Census of Business, Retail Trade Reports (1982), U.S. Department of Commerce, pp. 55 and 146.

EXPANSION CONSIDERATIONS

In order to compete in an economy dominated by large chains and franchise organizations, successful small retailers may turn to the opportunities available through expansion. "If the concept of the business and its execution is reasonably successful, the firm may choose to extend . . . into regional or, ultimately, a national area of operations.'5 Expansion allows one to move beyond areas of "natural dominance' to add outlets under different names to cover diverse market segments.6 As markets increasingly vary in wants, needs, and buying power, a single way of doing business may not appeal to all market segments.7

5 Richard Miller, "Strategic Pathways to Growth in Retailing,' pp. 16-29.

6 Elizabeth C. Hirschman, "A Descriptive Theory of Retail Market Structure,' Journal of Retailing (Winter 1978), pp. 29-48.

7 Jagdish Sheth, "Emerging Trends for the Retailing Industry,' Journal of Retailing, vol. 59, no. 3 (1983), pp. 6-18.

While the positive benefits may justify the decision to expand, certain drawbacks must be considered, even after the decision is made. Probably one of the most frustrating changes to come with expansion is diminished contact with clients. The success of owner-operated units is often attributed to the owner's informal information gathering from customers and the owner's ability to respond quickly to such information.8

8 G. Albaum, R. A. Peterson, and G. Kozmetsky, "Perceptions of Major Problems Facing Small Businesses,' Texas Business Review (July-August 1983), pp. 117-179.

Prior to expansion, the owner has probably served as the major managerial force, but new management positions must be created when an organization expands. …

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