All companies, throughout their life cycle, go through one or more stages of growth for which they must be sufficiently prepared. In this context, it is key to have a correct market expansion strategy, which is well planned and defined, and which tries to ensure the permanence and durability of the business model as much as possible.
This process can be more or less complex and, at times, can even block the company’s own growth if things are not clear. The lack of a well-defined strategy is not necessarily an impediment for the company to carry out market expansion, but it does make the process more difficult.
How to expand your company’s market?
When a company decides that it is time to grow, the first thing it must keep in mind is that, in addition to opportunities, market expansion also brings associated risks. There is no doubt that its main objective is to increase sales, but this is often accompanied by an increase in costs that can sometimes exceed the growth in turnover, at least in the initial stages of the project.
Therefore, when carrying out a market expansion strategy, the first step is to carry out good planning, for which it is advisable to follow these steps:
Establish your expansion objectives, which will not only help you know where your company is going and how to get there, but also to subsequently measure the results of the analysis. In this case, you must be clear about where your company is going to go and what new markets it will attack.
Conduct market research based on these objectives to obtain data and information that will help you discover in which direction you will need to expand your business. At this stage, you need to clearly identify what proportion of the target audience you can reach, what the competition is, the culture of the new market, and the type of target customer.
Develop an action plan with all the actions that will be carried out to ensure this market expansion and the tools that will be used to achieve it. In general, it is important to identify what resources are available and which ones will be necessary.
Communicate all the details to the team. Once you have clear objectives and the resources needed to achieve them, it is important to communicate this information to all team members. To do this, a good presentation is a surefire way to remember everything that has been achieved to date. This should serve as a guide to carry out the expansion of the business from a firm base and follow the established guidelines.
Market expansion strategies
There are four different market expansion strategies, depending on the needs, capacity, and interests of each company: market penetration, product development, market development, and diversification.
Market penetration
This strategy is based on increasing the company’s sales without making any changes to its activities. It is usually carried out with more aggressive marketing campaigns, advertising campaigns, large price discounts, or major promotions.
The objective of this expansion strategy is to increase market share by controlling different variables, such as increasing the frequency of use of your product or service or increasing sales based on the quantity of product purchased.
Product development
Unlike market penetration, product development involves making significant changes to the products or services marketed. Essentially, this market expansion strategy is based on adding one or more functionalities to the product or improving its features to satisfy a need demanded by users.
With this strategy, the company focuses its marketing efforts on offering a new product that will attract the attention of new customers, without this necessarily having to influence the price. In this way, companies can take advantage of a new position thanks to their product.
Market development
In market development, the company seeks to preserve all the characteristics of its product(s), but also tries to enter new markets or expand its business internationally. These new markets can be of different types:
New geographic markets, reached by selling products internationally.
Different segments of an industry.
New applications for existing products. Examples include the entry of smartphones into multimedia device markets or the creation of new financial services by some technology companies.
Diversification
This is the most disruptive market expansion strategy of all and consists of proposing a structural change or expansion of the company’s activity to reach a different type of customer than the usual business model.
In other words, it represents an almost complete change from the usual activity, which does not mean that the company’s philosophy and culture, or even the original business, are being abandoned. Its objective is to continue with the constant growth of the business.
Which market expansion strategy is most appropriate for your business?
There is no market expansion strategy that is better than another since everything depends on your company’s activity, the type of product it sells, and its ability to undertake one strategy or another. Among the factors that most influence a decision are technological, social, economic, the industrial context, or the market situation, among many others.
In any case, there is no doubt that expansion into new markets is a constant in any business growth process. In fact, it often happens naturally to meet the needs of potential customers from different countries or geographic areas.