Regionalisation – a great option to expand a business.


Regionalisation – a great option to expand a business.

To survive and continually grow a business in today’s economic environment is always a challenge.  Businesses are constantly looking for different ways to do this and can often become overwhelmed with what to do or how to do it.

As a professional service provider, if your client is considering expanding to a new area, be it a new region or even overseas, they will have to engage in “regionalisation” to make sure the business is best adapted to its new environment.

Regionalisation is a simple concept, but one that can be very fruitful.  It involves taking the business’s competitive advantage and adapting it to reflect the particular environment and unique needs of the region/area that they wish to target for growth.

Elements of regionalisation

In adapting to a new business environment, there are two very different and important elements for businesses to consider and be aware of – legal and cultural.

LEGAL:  New areas of operation will bring new laws and regulations to comply with. Depending on the industry, this can be a complicated or simple exercise.  Still, with proper advice and caution, this should be a manageable and predictable part of business expansion, unless you end up in a very rare Carlos Ghosn situation.

CULTURAL:  Cultural regionalisation is not so manageable and has stopped several business expansions. Sometimes it does not matter how good you are at your job, you cannot succeed – the ongoing success of Irn Bru in Scotland is a good example. While Coke dominates the globe everywhere else where no trade embargo is in play, Irn Bru remains more popular within Scotland and this is unlikely to change.

image of irn bru

Similarly, the globally dominant Starbucks was not able to expand into Australia successfully. After initially expanding aggressively, the majority of stores in Australia closed, with the remaining stores serving areas with large numbers of tourists.

Key points to consider when operating or advising a business that is considering expanding to a new region

  • Look at your current situation clearly and in context
    • Especially for franchise holders, the new expansion of the business should be viewed as an entity in itself, to be judged by itself. Success elsewhere will not stop you from losing money and if an overseas trend is not picked up in Australia, there is no reason to follow it here.
  • Have a clear idea of the advantages you do hold
    • Specialised products, brand recognition, intellectual property, established supply chains, financial resources, training methods, administrative resources – there is any number of reasons a business could be successful. But make sure these advantages apply to the area you are trading and are valued by your customers.
  • Expect your operations to change for the region you are in
    • Customer service standards, worker attitudes and business environment all vary depending on the region/area. Businesses should understand and adapt to these differences.
  • Success elsewhere does not mean success in your expansion
    • Your experience elsewhere is only as valuable as it is applicable to the situation you are currently in.
  • Expectations need to be aligned with the industry and region/area you are operating in
    • Benchmarks based on international norms may be poorly applied to a new region of operations, being either too lenient or strict.

If you are having concerns about how well adapted a business will be, there are ways you can compare your business performance, not just to your overseas counterparts, but also to local businesses, which may be a better comparison.

To find out more about this strategy, please contact Riad Tayeh on 02 9633 3333, or complete our online contact form.

dVT Group is a business advisory firm that specialise in business strategy, turnaround, forensic investigations and insolvency (both corporate and personal). 

Thanks to Angus Fraser for his contribution to this article.