[Column] Exploring the Possibilities of Expansion Centered on New Business (3)

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The method of vertical expansion is fundamentally either upstream or downstream. The criteria for upstream and downstream refer to moving towards manufacturing if transitioning from the current business model, or towards retail if transitioning from the current business model. Additionally, approaching the final end user is also a perspective to consider. Upstream expansion involves entering businesses that have manufacturing or construction functions. It does not necessarily require capital investment by the company itself; instead, it can involve outsourcing or subcontracting to have manufacturing or construction capabilities while executing projects based on the company's own plans. A representative company is Uniqlo. A common example of downstream expansion is when a lumber company undertakes new residential construction or renovations and transforms into a housing company (Tama Home). Downstream expansion is a method of entering fields that are closer to consumers. Next, horizontal expansion involves entering peripheral or niche fields. For example, a housing company or construction firm may enter the remodeling sector in a separate division, or a building materials sales company may engage in termite extermination or house cleaning, all of which are expansions into peripheral fields related to housing. The key points of horizontal expansion are entering fields where a gross profit margin can be obtained (compared to the current core business) and being able to leverage existing personnel from traditional businesses. It involves entering niche areas where there are few or no existing competitors and which have future potential.

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