Business expansion may occur through organic growth at an existing location, by expanding geographically or by changing the business structure. Creating new divisions that utilize a different business name offer an expansion method well-suited for new product lines, international requirements and certain organizational designs. Determining the benefits of opening a new division requires reviewing marketing, financial, technological and managerial preferences for business growth.
Business names are closely associated with the branding of products and services. Opening a new division offers a chance to differentiate new business lines from other company offers. Branding changes may be necessary due to geographic differences in language, consumption patterns or product requirements. New divisions are a branding asset when new products are significantly different than existing products.
Establishing a new division may create a new organizational design. New manufacturing units, engineering groups or international locations may need distinct managerial and chain-of-command requirements than the ones used in the primary business. A new division allows the creation of different employee requirements, operating goals and product requirements. New divisions may overcome governmental objections for international expansion.
Serving customers faster creates a solid foundation for business growth. Opening a new division may place employees and services closer to customers and help align customer needs to a new business unit. For example, a new division may be designed to meet the communication, pricing and support requirements for small-business clients.
Delegating responsibility, control and decision-making is often a struggle in growing businesses. Developing new divisions may make the delegation process easier by clearly organizing business unit heads. Executives may be appointed to head each division. These smaller business units allow each division head to make decisions based on its needs and goals rather than the organizational as a whole.
A strategic business unit, or divisional, approach to business growth allows a company to retain the entrepreneurial feeling and potential of a smaller business while maintaining the stability and financial benefits of a larger company. Employees may be offered a wider span of control and authority that helps propel new products, sales and development goals.
Businesses that grow through mergers or acquisitions may allow the new entity to remain a functional division apart from the primary business. This decision may help maintain employee morale, minimize cultural differences and allow the business to obtain funding without hampering growth from bureaucracy.
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