What is Business Expansion: Analysis of Different Sectors

Business Expansion is a crucial stage in the Life Cycle of a Business. An in-depth analysis of Retail, E-Commerce, Fintech, Edtech and Healthcare sectors explains the impact of expansion on country's startup ecosystem.


The pandemic-stricken year has altered the state of small, micro and medium business enterprises. Entrepreneurs have strained themselves to ensure that their businesses are able to survive the lockdown and they are able to pull through the trials of the economic disaster it caused. While some start-ups struggled to pull through, some had recorded a historic success amidst the global crisis. Many industry sectors in India continued to grow as enterprises manifested strategic business expansion plans and continued to multiply their growth.

How to Define Business Expansion?

The terms ‘Growth’ and ‘Expansion’ are used interchangeably. However, in business terms, there is a minute difference. Expansion is an act of becoming bigger (greater in size, number and amount). In the context of ‘business’, it is a stage where the business reaches that point of growth where it pursues additional options to generate more profit.

Business Expansion refers to enlarging the scale of a company. It is an upward trend in a business cycle which means an increase in production and employment. When there is an increase in the level of economic activity and of goods and services available is Economic Expansion.

Factors Which Lead to Business Expansion

Expansion may be caused by factors external to the economy such as weather conditions or technical change or by factors internal to the economy such as fiscal policies, monetary policies, the availability of credit, interest rates, regulatory policies or other impacts on producer incentives. Global conditions also influence the levels of economic activity in various countries.

Expansion can be done by adding one or more new locations, adding sales employees, adding franchisees, increasing marketing, offering new products/services in the market or acquiring another line of business. When the real Gross Domestic Product (GDP) is increasing it leads to expansion (Real GDP does not include ‘Inflation’ i.e. GDP increase without inflation, is called the real GDP). There are two ways in which a company undergoes business expansion:

Internal Expansion

The internal expansion means a company enlarges its scale through opening branches, developing new products or new businesses.

Integration

Integration means when a company enlarges its scale by taking over or merging with other companies.

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In the context of ‘business’, expansion is a stage where the business reaches that point of growth where it pursues additional options to generate more profit.

Expansion in India’s Retail Industry

In early 1990s, industry reforms led to the liberalisation of policies and changed the face of ‘Kirana stores’ (also known as ‘mom & pop’ stores) or multi-purpose departmental stores located in the residential areas which supplied utility items, into single and multi-brand retail stores. Indigenous companies like Bombay Dyeing and Raymonds introduced the textile retail chains. The Government also established Mother Diary and Super Bazaars due to a remarkable growth in the retail sector.

India’s retail industry is one of the most dynamic and fast paced industries. Departmental stores, Hypermarket, Supermarkets/Convenience stores, Specialty stores, Cash & Carry and Fashion retail are all examples of the growing retail sector in India. For instance, Pantaloons, Shoppers’ Stop and Lifestyle, all have set up their chain of outlets across the country. Post Globalisation and liberalization of Indian economy, modern retails took off. India became an attractive destination for foreign players. Subsequently, international brands like Mc Donald’s, Adidas, Nike made entry into India. Reliance, Tata, Aditya Birla and Mahindra also entered in the sector. Amazon, Flipkart, Snapdeal and Metro also entered in the Business to Customer (B2C) retail sector and the change in Foreign Direct Policies (FDI) gave a way to international premium brands like Gucci, Walmart, Armani, etc. to enter the Indian market.

This sector has been growing really fast due to various factors like Urbanisation, Digitisation, increase in purchasing power and rapid change in lifestyle of consumers. ‘Dual Income’ families are on the rise and these consumers have less time for shopping and more disposable income. The sector has matured over the years from being a fragmented unorganised to an organised sector and the opening of retails stores in Tier II and Tier III cities with a strong presence in Tier I cities.

Reliance Retail Limited is first among the top and biggest retail companies in India which is engaged in the business of Fashion and Lifestyle, Consumer Electronic, Grocery, Petro Retail and Connectivity. Other examples of popular retail stores in India include Future retail, D-Mart, Pantaloons (Aditya Birla Retail Group), Westside, Star Bazaar and Fashion Yatra by Trent limited and Shoppers’ stop.

The COVID-19 has slowed down the economy. According to Retails Association of India (RAI), fashion, electronics and grocery store retailers are hopeful of achieving about 85 percent of pre-pandemic level in the business in next six months.

Analysing India’s FinTech Industry

Few start-ups which picked up the pace in Indian economy are in financial services. Financial Technology popularly known as FinTech is a new industry and has boomed exponentially from the last couple of years and has become a crucial part of the global economy. As the FinTech industry consists of companies which use technology to offer financial services in an efficient manner, it has various segments such as Digital Payments, Alternative Lending, Investment Technology, Insurance Technology, BankTech and RegTech (a technology solution for improved automation of regulatory compliance). It has transformed the Indian market with its various segments and made the services available at ease.

According to Accenture, investments in Financial technology ventures in India increased from$1.9 billion to $3.7 billion in 2019. Thus, making India the world’s third largest FinTech market.

As per India Fintech Report 2020, India is home to more than 2100 fintech startups/companies where Bengaluru and Mumbai represent around 42 per cent of the startup headquarters. Despite the huge disruption due to Covid-19, FinTech companies are growing exponentially. Some of the top FinTech companies are Paytm, Razorpay, Phone Pe, MobiKwik, PayU, PolicyBazaar, LendingKart, MoneyTap, PineLabs, Khatabook, Instamajo and ETMoney.

Understanding Business Expansion in E-Commerce Industry

The history of e-commerce is twined together with the history of Internet. India is going through a digital revolution and over 50 per cent of the country’s population has access to the internet. More than 500 million Indians use smart phones with internet giving a huge user base to the e-commerce industry in Tier II and Tier III cities as well. As per report from Statista, In April 2017, Amazon was the leading online marketplace in the country with more than US $ 500 million in the sale. Flipkart and Myntra were the prominent players in the local market. As per the survey conducted by the team, in May 2020 regarding the permission of e-commerce platforms to deliver goods in India after lockdown due to coronavirus, majority of the respondents voted in favour.
Digitisation of the economy and internet availability at a price which is affordable by all sections of society are the few of many reasons which has added to the growth and expansion of this sector.

In fact, if you observe around, after relaxation of the lockdown, many e-commerce companies like Myntra and Amazon India restarted their deliveries with caution due to coronavirus.

As per India Brand Equity Foundation (IBEF), E-commerce has a direct impact on micro, small and medium enterprise (MSME) in India, by providing means of financing, technology and training and has a favourable cascading effect on other industries. Indian E-commerce industry has been following an upward trend of growth and is expected to become the second largest E-commerce market in the world by 2034. Technology-enabled innovations like digital payments, hyper-local logistics, analytics driven customer engagement and digital advertisements will likely support the sector.

IBEF also quoted that the growth in e-commerce will also boost employment, increase revenues from export, increase tax collection by ex-chequers and provide better products and services to customers in the long term. Rise in smartphone usage is expected to rise 84% to reach 859 million by 2022.

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Investments in Financial technology ventures in India increased from $1.9 billion to $3.7 billion in 2019 making India the world’s third largest FinTech market.

Exponential Growth of EdTech Industry in India

The Indian government has replaced a 34-year-old National Education Policy (NEP) on education in 2020. NEP 2020, approved by the Union cabinet, has made sweeping reforms in school and higher education. Internationalisation of Education and setting up of the National Research Foundation is among the special features of this new policy.

India has about 500 million people in the age group of 5-24 years which is the world’s largest population in this bracket in terms of market size. This provides a great opportunity for the education sector. Over a period of time, there has been a shift in the sector and many e-learning startups have emerged. The mode of online learning has increased especially during Covid-19. India has become the second largest market for e-learning after the US. As per data released by the Department for Promotion of Industry and Internal Trade (DPIIT), the total amount of Foreign Direct Investment inflow into the education sector in India stood at US$ 3.29 billion from April 2000 to June 2020.

As per IBEF data, the Ed tech market received investments worth ~US$ 1.5 billion. Also, the education and training sector has witnessed some other major investments and developments in recent years. For instance, on November 6, 2020, Tata Technologies Ltd. entered into a Memorandum of Agreement (MoA) with Karnataka government for 10 years with an investment of Rs. 4,636.50 crores (US$ 631.90 million) to upgrade and modernize 150 government Industrial Training Institutes in the state to provide standard training for Industry 4.0.

We all have seen a shift in the education from an offline to online mode and EdTech (Education with Technology) companies which already disrupted the Indian education system have been a pillar in these stressful times. The education sector in India is growing swiftly as big private firms are collaborating with the government to develop the sector.

EdTech is the fastest growing industry worldwide. India has the potential to be the biggest online education consumer market in a few years. EdTech companies like Byju’s, Edukart, CueMath, Culturealley, Dost Education, Merit Nation, Unacademy, Upgrad, Vedantu, Brainly, Gradeup, WhiteHat Education Technology are some of the growing start-ups to look out for.

How is the Healthcare Industry in India Expanding?

Healthcare has taken the centre stage now. In recent years, the industry has grown exponentially due to the increase in the investment and expenditure from public as well as private investors.

The Indian government’s focus on providing better facilities in the health sector implemented ‘Ayushman Bharat’ National Health Protection Mission’ in August 2018. It aims at reforming the healthcare system by bringing more transparency, standardization, and innovation. Boston Consulting Group (BCG) and FICCI have stated that the economic value of the benefits covered under the mission are estimated at R.1.5 trillion over the next decade. The government of India also launched other schemes like “Mission Indradhanush” with an aim to improve the coverage of immunization in the country.

The healthcare sector is one of the earliest yet slow adopters of technology and digital innovation. However, a surprising turn in the industry was experienced as the lockdown was induced the sector instantly turned into a connected community of patients and doctors. During COVID-19, the digital turn in the healthcare sector resulted in an unimaginable expansion of the industry. Many digital solutions emerged as innovation led to customer satisfaction.

Telehealth has become one of the safest methods for patient care. According to the reports, the global telehealth market is expected to grow at a CAGR of 25.2% from USD 61.40 billion in 2019 to USD 559.52 billion by 2027. Use of Artificial Intelligence has redefined the doctor and patient interaction. Voice AI (Voice-driven Artificial Intelligence) serves a smart solution. It analyses medical jargon which results in improved patient care and automates the process of writing prescriptions, ensuring speed and accuracy in the process.

Startup Ecosystem in India: Evolving and Expanding

Today, Start-ups are becoming very popular in India. With the introduction of technology in various sectors a lot of start-up companies are shining and are generating employment. Knowledge-driven fields accelerate the growth and add value to the economy.

The evolution of the start-up ecosystem has been disrupting every sector from Information Technology to E-commerce, hyper delivery network to B2B model, Education, Financial services and Agriculture especially with technology and they are big contributors to India’s economic activity.

Tech entrepreneurship is the future. The ecosystem of start-ups will play a big role in fulfilling the dream and ambition of India to be a $5 trillion-dollar economy.

Roopali Kotwal
Roopali Kotwal
Roopali is an industry expert with over a decade of experience. An alumna of Delhi University she writes on Human Resource Management and Business Operations.

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