Key Steps to Take Before Expanding Markets

Any market expansion project requires careful planning, strategic adjustments, and a deep understanding of your new market. No news here. It’s a given. However, it’s also something that business finds hard to get right.

Most of the time, business leaders think they know enough when they decide to act on business expansion. History shows that in many instances, they don’t. Remember Starbucks expansion plans to Australia?

In this article you’ll learn the key steps your business must take before expanding, focusing on how to adjust your market entry strategy and adapt your product effectively.

Is market expansion a good idea?

Before you get too excited about the possibilities of a new market, start by asking yourself a crucial question: “Of all the things I could do, why do I want to do this, and is it the best use of my time and resources?”

Expansion often takes longer and costs more than anticipated. It’s essential to understand your motivation and the potential return on investment. Is there a significant demand for your product? Do you have the resources to support this venture? These initial reflections can save you from costly mistakes down the road.

Once you’re clear on your motivation, it’s time to delve into the very first step: market research.

Market Research

At first you might think that market research is just a matter of determining if there’s a genuine demand for your product or service in the new market or a look into where else customers can get a similar product or service and understanding the competitive landscape. There’s more to it than meets the eye.

It doesn’t matter if you’re a B2B or a B2C business. Neither if you’re a service provider or a product manufacturer. Whatever your business does, it will always be purchased by another human being. Therefore, understanding who your new customers are is critical.

Cultural difference, for instance, is one of the major factors. You should ask yourself just how well your product or service will go across international borders. It’s not just about overcoming the language barrier or adjusting to local prices. You’ll need to adjust every aspect of your market approach so your business feels like a local insider rather than an unwelcome outsider.

READ: International Expansions Failures due to misunderstanding local customers.

Consider also the legal requirements and necessary product modifications for the new market. For instance, if you’re selling a food product, different countries have varying regulations on ingredients, packaging, and labelling. Compliance is non-negotiable and could require significant adjustments to your product. Get this wrong and you face costly recalls, prosecution or other sanctions.

Proper market research will help you make informed decisions for your market entry strategy

Market Entry Strategy

Next, develop a robust market entry strategy. You might have not done this when you first started your business and have enjoyed success anyway. Good on you. You’re an exception. But when it comes to market expansion plans, there’s no exceptions.

It involves evaluating different models for entering the market (partnerships, direct exporting, or establishing a local presence). Each model has its pros and cons, and the right choice depends on your resources and business goals. As mentioned in the previous topic, pricing is another critical factor.

Can you supply the product at a price point that is attractive to the new market and still profitable for you? A deep understanding of the local economy, purchasing power, and competitive pricing should come from the Market Research step.

Preparation and Scalability

Successful market expansion and effective market entry strategy hinge on preparation and scalability. Question your assumptions and seek information from knowledgeable sources. This might involve consulting with local experts, attending industry events, or partnering with local businesses.

Evaluate whether your business is performing well in its current market. If you’re struggling domestically, adding the complexity of a new market might not be wise. Identify the right new market and assess your ability to scale operations to meet increased demand. This includes having the production capacity, supply chain logistics, and quality control processes in place.

READ: Learn here how supply chain can boost growth plans.

Resource Management

Resource management is another cornerstone of successful expansion. Ensure you have the resources to adapt your product or service to meet new customer needs and standards. This might mean investing in new technologies, hiring additional staff, or upgrading your facilities.

Cash flow is critical. Expanding into a new market often means longer lead times, longer payment terms from new buyers (note the associated credit risk), so evaluate whether your financial reserves can handle this. Additionally, understanding the laws and regulations of the new market is essential. Compliance can be complex and costly, so it’s crucial to have a clear picture of what’s required.

READ: Securing Cash for Growing Operational Costs.

Operational Readiness

Operational readiness involves confirming that someone in your business can focus on building the exporting side. Expansion requires dedicated attention and cannot be a side project. And this person will not operate in a silo – they will need time from management, procurement, marketing, finance and legal. Determine if your company is committed to dedicating staff, time, and resources to ensure the long-term success of the market entry strategy.

READ: Hire to grow or grow then hire?

Competitive Edge

Finally, develop a clear and compelling selling proposition. Why should customers in the new market choose your product over local competitors? This might involve highlighting unique features, superior quality, or better customer service. Additionally, ensure your intellectual property (IP) is protected. Expanding into new territories can expose your business to IP risks, so it’s essential to have protections in place.

Know the warning signs!

The human condition is a fascinating study. We are said to be motivated to move away from ‘pain’ and toward ‘pleasure’. Market expansion is typically driven by the latter. And this is where the ego can ironically lead us astray. Many are attracted to the notion that travel, especially international travel, and selling products or services into new markets is a symbol of our success, that it somehow implies to our friends, family, staff and everyone else that we must be doing well.

That it somehow validates the very thing we do, the very person we are. It is our ego that leads us to overlook the obvious. We seek confirmation of our views because we want the answer to be ‘yes’. Therefore, beware the assumptions you make. Beware the spreadsheet that translates those assumptions into big numbers. If there is any part of you that wants this for you – and not for the business – think it over.

Expanding your market is an exciting growth opportunity, but it comes with its challenges. At BridgePoint Group, we’ve assisted numerous companies with their expansion plans, ensuring our clients successfully navigate the complexities of entering new territories. Preparation and adaptability are essential. If you have ambitious growth plans that include overseas markets, we would be more than happy to help your business thrive in new regions.