The Interesting Growth Story of the Davis Service Group
Ways a company can grow
A smart company knows when to expand and grow and when to stay put and continue with the strategies that are working for them. Different company expansion methods are acquisitions, mergers, ventures, franchising, dealerships, and many other techniques (International, 2020). The best way to expand is by entering new borders and markets. For example, international acquisitions allow the company to tap into markets they did not have a reach. Many Chinese companies have used this method to expand and enter into various markets to help increase their sales, profit, customers, and distribution channels (Global, 2018). Analyzing your company well enough is essential to know which expansion method will benefit you. An example of companies merging is when the Walt Disney Company joined Pixar Entertainment for $74 billion in 2007 (Meyer, 2020).
However, the difference between a merger and an acquisition is that in a merger, two separate companies or entities decide to make one new company, whereas, in an acquisition, one company takes over the other entity (CFI, 2021).
It is always believed a company should follow these five steps before expanding its reach.
- Start building relationships with foreign markets: Always be on the lookout for developing new relationships with influencers and partners that may benefit your expansion.
- Go over your Capital: Before making any significant step, assessing the organization’s financial status is essential. Expanding an organization internationally is impossible without the capital for investment. Expansion is not a one-time thing; you must be prepared to put all or nothing in for successfully working.
- Work with a Market-Research Firm: Entering a new market can be very difficult; it is crucial to have done in-depth research on the market. Hence, one of the first steps is to hire a reputable market-research firm that can research hot spots, customer trends, and whether there is a need for your product in the new market.
- Cultural Differences and Language barrier: Remember, when entering a new market, there will be a difference in culture and language barriers. A company must adjust, adapt, and understand these differences to coexist in the same market.
- Prepare Employees for Change: For the organization’s expansion to create an impact, the employees must be on board, trained, and prepared for growth (Thiefels, n.d.).
The growth of the Davis Service Group
Davis Service Group had three leading companies with different products or services operating all across Europe. However, being in the European market for years, the market had started to mature, so they needed to act fast, or they’d eventually lose customers and sales. Therefore, in 2002, DSG acquired a company called Berendsen that operated in many different countries such as Denmark, Sweden, Norway, Austria, Poland, Germany, and the Netherlands. Berendsen was also a leading company in the textile sector of its geographical area.
However, Berendsen struggled with maintaining profitability and had to take up DSG’s offer to acquire it. They both would benefit this way; Berendsen would introduce DSG to new markets while DSG would use its expertise in the management system to reduce operating costs and save fixed costs (netizenme, 2019).
It was a win-win situation for both companies. Therefore, the best fit method for these companies was horizontal integration. Horizontal integration is when one company increases its production of goods and services and acquires another company at the same part of the supply chain (Jurevicius, 2013).
How Acquisition of Berendsen saved Davis Service Group and helped it grow
Acquiring another company can have its ups and downs. However, this was one of their best decisions for Davis Service Group. Berendsen was a strong market leader with a hold of seven EU countries. Acquiring Berendsen allowed DSG to expand its reach with customers and enter a market for which they did not need much cultural understanding. If they had opened their outlet in any of these seven countries, they would have been rivals with an already existing company which would not have benefited any of them. Instead, DSG saw an opportunity, availed it, and grew its profits through this decision. Horizontal integration benefits organizations with a larger market share, a more significant customer base, increased revenue, and minimal competition (TARVER, 2021).
The part played by EU markets in DSG growth.
The European Union has 27 countries, and 500 million customers are ready to purchase products and services. Therefore, it is a vast market to start a business in. Moreover, the transport of goods has developed immensely in the past decade. There are fast trains, buses, trucks, and many other means of transportation, which makes getting the product to the customer simple. Furthermore, with most countries using the Euro currency, it has also made trading goods and services accessible. Therefore, DSG did not face many adjustment challenges when expanding to different countries.
Next step for DSG
The following steps for DSG should be the same as they did with Berendsen; they should acquire other leading markets to expand their reach of customers that would benefit them and the acquired company. Many countries around the world have markets that are in the same category as DSG. With proper research and strategies, DSG can expand in the US, China, and many other world-leading markets (forum, 2021).
Check the following reference articles to learn more about The Interesting Growth Story of the Davis Service Group
- CFI. (2021). Retrieved from Merger vs Acquisition: (URL)
- forum, D. S. (2021). Retrieved from Davis Service Group PLC – Company Profile, Information, Business Description, History, Background Information on Davis Service Group PLC: (URL)
- Global, V. (2018). International Acquisition: Is Your Business Ready? Retrieved from (URL)
- International, F. (2020). Retrieved from Is Franchising the Best Method of Business Expansion?: (URL)
- Jurevicius, O. (2013). Retrieved from Horizontal Integration: (URL)
- Meyer, J. (2020). Retrieved from 5 Successful Business Merger Examples and the Factors That Contributed to Their Success
- TARVER, E. (2021). Retrieved from Horizontal Integration: Benefits and Drawbacks: (URL)
- Thiefels, J. (n.d.). Retrieved from 5 Steps to Take Before Expanding Your Business Internationally: (URL)
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