Market expansion is a business growth strategy. Companies adopt a market expansion strategy when their growth peaks in existing channels. Success depends on confirming that they have fulfilled existing markets. Companies must then identify other markets that are easy to reach.
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What is Market ExpansionStrategy?
Market expansion strategy develops and discovers new customers, new uses for existing products and new distribution channels, not new products. New financial resources are not essential.
Market expansion basically consists of:
- Developing target market
- Contacting new suppliers
- Establishing new manufacturing facilities
- Developing and expanding existing relationships with all relevant customers and other stakeholders
- Marketing and sales strategy
- Technological innovation
- Financial strategy
Aspects of market Expansion Strategy
- Technology Development
- New Products and Services
- Defining Target Markets
- New Marketing Channels
- New Distribution Channels
- Customer Support
- New Opportunities
Technology Development
Innovations help gain customers’ trust. The most important thing is to ensure that these new technology, products and services are successful and useful for potential customers. Good execution is critical to success.
New Products and Services
New products and services will include different prices, features and functionalities. It is advisable to conduct market research of new products and services before entering them into the market. Businesses must keep introducing new products to gain competitive advantage in the market. Being difficult to replicate is critical to their success.
Defining Target Markets
Businesses start targeting new demographic segments and geographical areas. It is often a good move to enter different value networks than those in which current products are sold. This may lead to new products or to new uses for existing products. This strategy can be risky if the company doesn’t have enough resources to support all its new markets. One must also consider whether one’s current marketing model will work in new markets.
New Marketing Channels
In addition to existing marketing channels, new channels are added. New marketing channels produce new demand for goods and services. New channels may be needed if existing channels are not effective in new markets. New channels may be complementary and support existing channels.
New Distribution Channels
Distributors may be added based on new channels. Their added value should be highlighted. Distributors must be given incentives to sell new products. Technology may also need to be changed or redesigned.
Customer Support
Companies start to offer innovative customer support. The support may be different from those in existing markets. Specialized technical support may be required in areas where new products and services operate. Sampling of products and services is often used to draw customers into new markets.
New Opportunities
New opportunities will appear in new markets. Management should identify these and take swift action accordingly. It is important to differentiate between real opportunities and challenges.
Marketing Mix Strategies for Expansionand Growth
Marketing Mix Strategies are a combination of business decisions about promotion, pricing, place, product and promotion. Each must be considered separately for different markets. The marketing mix should be arranged and adapted to match wants, needs and preferences of different markets. The marketing mix decision may be the same in the domestic and international markets. They may also be different.
Conventional marketing mix strategies will not usually work in the international market. This is why foreign marketing strategies include new products, new channels and new markets. These lead to new products, new demand and new interrelations between companies and channels.International strategies often have a higher price than that of domestic markets.
Different products, services and customer needs mean that the overall marketing mix is different. It should be adjusted to match unique conditions in each market. Companies must determine exactly what they need to make in each market.
How to develop Market ExpansionStrategy?
Market expansion strategy develops when growth opportunities in existing channels are limited. It develops further through feasibility study (marketing, R&D and financial resources), framework (cost, revenue and profit margin analysis) and implementation plan (action plan with estimated costs and time schedules)
- Feasibility Study (Marketing, R&D, Financial Resources)
New products and services are often developed for specific elements in the market. Market attractiveness and demand should be clear. A clear picture of the competition should be presented. New products need to be properly developed to meet standard requirements. Different channels can be vital to reaching new markets.
Feasibility study will include:
- Pricing strategy
- Product development
Pricing Strategy
Pricing strategy will affect market expansion. Pricing strategy must be designed carefully in order to adopt to competitors’ pricing and fluctuations in supply and demand. Demand is the willingness of customers to buy a product or service.
Product Development
Product development strategy must be clearly devised if new products or services are to be introduced. Research and development must be effective and useful for new markets. Products should be profitable for both the company and the consumer.
Pricing strategy and product strategy are used in the main target market. Different pricing and product strategies may be needed in new markets.
R&D demands resources: time, money and people. This is needed to determine how to launch new products or services. Research and development are the top two activities when developing a new product. There are five key stages when developing a new product.
These five stages are:
- Generate and screen ideas
- Review and clear the idea
- Analysis the idea
- Plan development process
- Formulate testing and launch plans
Financial Resources
Market expansion strategy may involve financial resources. These resources should be used wisely as every penny counts.
- Framework ( cost, revenue and profit margin analysis)
Cost involved in the market expansion strategy should be calculated. Revenue should be estimated. Profit margin and potential profit should also be included. Financial resources needed at first should be allocated.
What do you need to financial estimate?
Estimated cost from production up to market launch and maintenance of the product after its launch.
Target markets are potential revenue sources. Forecast sales and revenue from target markets.
Pricing strategies and return on investment at different levels should be included. At each stage, the company should calculate their costs and profit. These stages are:
Stage 1
Launching new products and services in target markets
Stakeholders’ costs and potential profit
Stage 2
Evaluate the sales of new products
Looking into management and after sales service costs
Development costs
Distribution channel costs
Product development costs
Research and development costs
Stage 3
Financial loss three months after the launch of new products or services
Comparing projected revenue with costs and profits
Stage 4
Using lifetime analysis to predict whether sales will increase or decrease
Stage 5
Extending new products into new markets with new sales channels
- Action Plan with Estimated Costs and Time Schedules
This is the final step. It will ensure that the company is able to supply products at an affordable cost. The action plan will detail estimated costs, responsibilities and deadlines. It will highlight the importances to the overall strategic plan.
Implementation
Implementation starts once the success of feasibility study is confirmed. Implementation has three main stages:
- Preparation for market expansion, research and development, development, production and marketing of new products and services
Reaching target markets, conducting market research and analysis.
Product development and research and development from production to after sales service.
New product launches and using marketing mix strategies.
- Initial Stage
Introduction of new products or services.
Testing and analysis
Adoption of successful strategies
- Establishment of new channels and markets
Creation of new business channels and business markets
Extending the product to other target markets
International Strategy
International strategy is for companies who want to expand their foreign market. There are two ways to approach international development, the expand or enter strategy. The international development mode must be clearly chosen.
Expand Strategy
Expanding international market from other markets in order to lower cost and price and to increase market share. Companies can enter new international markets through both exporting or foreign direct investment.
Supplier Power – If company depends on one supplier or use suppliers in few countries, the supplier has high buying power.
Customer power – If company depends on one customer, the customer has high selling power.
Competitive Rivalry – If the company doesn’t employ international strategy, there will be high competition in international markets.
Entry Threats – If the company doesn’t employ international strategy, there will be high threats for entry in markets.
Industry Rivalry – Industry rivalry is high if the company doesn’t employ international strategy.
Developing strong local business – Company’s market share is low in other markets.
Development cost – Developing new product in international markets is higher than those in local markets.
New technology – Technology development is high if company employs international strategy.
Entry barriers – There are many entry barriers if the company doesn’t have a large capital.
Location factor – The company must consider different factors when choosing the target country.
Substitution Factor – There will be substitution if market share is high in other markets.
Buyer power – There will be buyer power if market share is high in other markets.
Distribution channel power – There will be distribution channel power if market share is high in other markets.
Supplier power – There will be supplier power if market share is high in other markets.
Subsidy threat – Subsidy threat is high if market share is low in other markets.
Customer power – Customer power is high if market share is low in other markets.
Buyer preference – There will be different preference if market share is low in other markets.
Location factor – The target country must be considered when choosing entry strategies.
Marketing Strategies – Marketing strategies are essential and various. Let’s see some marketing strategies for international marketing:
International Organization – Different organizations must be set as a coversion between country sales and international operations organization.
Regional Marketing Organization – This is an effective structure to provide management. The organization can control the marketing and operation in different countries.
Standardized Marketing Organization – This is the company adopting minimum to no changes for different marketing. Low cost will be achieved by using this organization.
The Global Organization – This organization involves all marketing, management and operation in different countries under one organization.
Functional Marketing Organization – This is the company functions in one country that is marketing, management and operation being controlled in one person.
Segmenting Customers – Segmenting customers is one of the marketing strategies. There are several segmentation ways that can be used.
Segmentation by Interest – The company can segment customers by products, industries, by markets, by season and several other ways.
Segmentation by Demographic Profiles – If there is a need to know the average income of customers in different countries. This can be achieved through demographic profiles.
Segmentation by Geographical Location – The country of customers can be segmented if there is a need to know the country differences.
Segmentation by Buying Behavior – Different products and services will be purchased by customers in different countries. The company must understand the behavior of customers.
International diversification – Company can expand into foreign market so that its financial position in other countries will be the company’s.
International Strategy in Service Business – Service business are different from manufacturing business because of its product not needed to be installed in order to deliver services. The international service strategy involves several approaches.
Competitive Advantage Factors – Company needs to understand the competitive advantage factors different from local competitors.
Positioning – The company must position itself in order to gain a competitive advantage strategy in international service business.
Product Pricing Strategy – The company needs to understand the economical and psychological factors in each country.
Budgets for Marketing – Budget planning for international service business is low in comparison with local competitors. There will be few competitors also because of the advantages of service business.
Business Strategy of International Services – Company must understand the business strategy to use based on the industry factors in international service business.
Different Global Market Analysis – The company needs to understand aspects such as climate and weather, income and spending, and others.
Global Trends – The company must understand the international trends that will affect the values and attitudes of customers in different countries.
The Global Experience Strategy – Use passion, knowledge and experience of employees in achieving the international strategy success.
Product/Service Evaluation – Evaluation of products and services is essential in order to serve customers in different markets.
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FAQs
What is your go-to-market strategy answer? ›
A go-to-market (GTM) strategy is a plan that helps you define your ideal customers, coordinate your messaging, and position your product for launch. A GTM strategy also keeps key business units aligned on the same plan, allowing you to meet a market need and effectively iterate on your product.
What is a market expansion strategy with example? ›Market expansion is a business growth strategy companies use to expand the reach of their products and services in new or existing markets. This does not necessarily mean going global. You can also expand by: marketing your existing products to a new customer base. developing new product lines.
What are the market expansion strategies? ›Market expansion strategies include: Market penetration: Offering your current product or service to your existing markets on a wider scale. Product development: Adapting or adding new products or services to reach wider markets or customer segments.
What are the 4 basic strategies for product/market expansion? ›- Market penetration. The aim of this strategy is to increase sales of existing products or services on existing markets, and thus to increase your market share. ...
- Market development. ...
- Product development. ...
- Diversification.
Marketing strategies
For example, if your marketing plan is to promote a new product or service, you might have a strategy dedicated to how you're going to use email marketing to support these broader goals. Every marketing plan will most likely produce several marketing strategies as part of the broader plan.
However, expansion is crucial to increase profits and reach new customers. Expansion could involve increasing physical locations or offering more products or services. For example, you may want to diversify your revenue stream so that you aren't reliant on selling just one core product or service.
How market expansion is growth strategy in business? ›Market expansion is a growth strategy which involves offering your existing product/service to a new market. This “new market” is generally outside of the current geographic regions in which you currently operate. Depending on your business, you might have multiple goals to accomplish with your market expansion plan.
How can expansion strategies be improved? ›- 1) Concentrate on new product development. ...
- 2) Increase customer base. ...
- 3) Diversification. ...
- 4) Increase brand awareness internationally. ...
- 1) Market penetration Strategy. ...
- 2) Marketing and promotion.
Your expansion plan must include an executive summary about your company, with a general presentation, describing your business model and goals, and functional aspects such as how many employees it has, how it is organised, what types of products and services it offers, how it operates on a daily basis, etc.
What are the types of expansion in business? ›Different forms of business expansion include opening in another location, adding sales employees, increased marketing, adding franchisees, forming an alliance, offering new products or services, entering new markets, merging with or acquiring another business, expanding globally and expanding through the internet.
Which is one of the methods of growth expansion strategy? ›
The method a company uses to expand its business is largely contingent upon its financial situation, the competition and even government regulation. Some common growth strategies in business include market penetration, market expansion, product expansion, diversification and acquisition.
What are some examples of product expansion? ›There was only one Coca-Cola product when the company started. The company has expanded its line to more than 500 sub-brands worldwide – Sprite, Fanta, and Dasani. Another popular execution strategy is the tech company Apple. The company's main sellers are iPhones and MacBooks, but they have gone above and beyond.
Why growth strategy is important? ›Growth strategies are important because they keep your company working towards goals that go beyond what's happening in the market today. They keep both leaders and employees focused and aligned, and they compel you to think long-term.
How do you grow your business? ›- Do Your Research. ...
- Build a Sales Funnel. ...
- Increase Customer Retention. ...
- Participate in Networking Events. ...
- Practice Corporate Social Responsibility. ...
- Form Strategic Partnerships.
There was only one Coca-Cola product when the company started. The company has expanded its line to more than 500 sub-brands worldwide – Sprite, Fanta, and Dasani. Another popular execution strategy is the tech company Apple. The company's main sellers are iPhones and MacBooks, but they have gone above and beyond.
What are the examples of business expansion? ›Different forms of business expansion include opening in another location, adding sales employees, increased marketing, adding franchisees, forming an alliance, offering new products or services, entering new markets, merging with or acquiring another business, expanding globally and expanding through the internet.
What is retrenchment strategy with example? ›The process of assigning a business function or process to an external partner, often to reduce costs. Outsourcing is only retrenchment when it is done urgently. For example, an IT company that suddenly sells its data centers and outsources to the company that purchases the data centers to generate cash in a crisis.
What do you mean by market extension? ›A market extension merger refers to the coming together of two companies that produce or sell the same type of product but to different markets. The main benefit of this type of merger is to give the companies that merge a larger market reach and client base as a result of its new capacity.