When a company can no longer grow in the channels within which it already operates, market expansion becomes a necessity. And, in recent years, stagnation and economic instability in certain markets have led more and more companies to consider venturing abroad.
However, not all of them achieve their desired objectives because they do not develop an effective strategy to expand into new markets. To ensure the success of this expansion, the strategy must be based on:
- Reducing costs. Aiming the products and services at markets in which the demand already exists or could exist.
- Reducing risks. Taking account in advance of the contingencies that might arise.
- Seizing business opportunities. By being careful not to concentrate all your business resources in any one single market, you will have the flexibility you need to be able to take advantage of any attractive new business opportunities as soon as they arise.
- Ensuring legal certainty. By taking account of other countries’ legislation, you not only make sure you comply with it, you also make sure of not missing out on any advantages and benefits offered by governments and other bodies and thus maximize the return on your investment in the country.
- Improving your positioning within the market. A well organized market expansion will result in the company being seen as occupying a better position within the market and projecting a more favorable image to potential clients, suppliers, strategic partners and institutions.
What are the best strategies to expand into new markets?
Strengthening the marketing of your existing products and services.
The first step for the majority of companies looking to increase their market presence involves boosting the sales of their existing products and services.
This can only be done by having a sound knowledge of the culture and language of the country in which you set up your operation so that you can communicate using the nuances and specific features of the language. It also means you will be able to draw up documents that do not seem like literal translations but like texts written directly in the target language.
Redefining products and services
This is based on the creation of new products to be launched also in the markets in which you are already operating.
The most effective approach without doubt is to redefine the services or products that you are already selling by making them better or different in a way that the market will perceive as adding value.
Developing the market
The objective is to enter a new market on the back of products you have already developed. This is extremely effective for those who wish to go beyond the initial development phases of a product.
This involves using new products to reach new markets. It is, without doubt, the riskiest strategy and the one that involves the most work, but it can also be one of the most successful.
How do you develop your expansion strategy?
The marketing of a product or service in an overseas market, be it directly or through a third party that takes charge of selling. This is the method most used by organizations to penetrate new niche markets and can involve anything from opening a new store in a country to the start-up of an international courier service via an online store.
When, in addition to selling in the overseas market, the company also sets up a production facility there. Generally, this is the most profitable approach, but it also involves more risks as it requires a significant investment.
Franchising or licensing
When the company assigns the brand, patents, processes and systems to a third party which operates the business in exchange for a royalty, generally expressed as a percentage. This is usually the least profitable way in which a company can internationalize because the aforementioned percentages are generally small. However, it is without doubt a strategy that provides a certain degree of security, as it is the franchisee who assumes the risks in the target market.
This is when a company subcontracts another on a temporary basis until the former is ready to take full control. This strategy involves a trial period in which to adapt to internationalization, preparing the workforce to gradually take control.
When the company directly acquires a foreign company or one or more of its business lines. This is the riskiest alternative, although if the strategy to expand into new markets works, it is also the most profitable.
Whatever the case, the key to a successful market expansion must go hand-in-hand with translation, interpreting, website localization and training by eLearning that takes account of the culture, language, customs and legislation of the target country in order to ensure attainment of the desired market expansion objectives.