Expansion into new markets can help businesses find new revenue streams and increase brand awareness or stave off competition.
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One of the best ways to grow a business is by expansion. There are two ways of achieving this: by expanding your current product offering to new geographical locations, and by expanding your product breadth by offering new products or services to existing customers.
At Diamond and Diamond, we expanded our personal injury footprint from one location in Toronto to many locations across Canada. Simultaneously, we grew our product offerings to include real estate law, family law, corporate law and other types of law.
In most cases the need for expansion is caused by growing demand for a product or service by customers. But it can also be used by businesses to find new revenue streams, increase brand awareness or stave off competition.
While this is usually a carefully planned and thought-out process, the timing could hinder the expansion from being successful. As a business owner, you might ask, when is the best time to enter a new market?
This is often a difficult question with no concrete answer. However, I’ll share with you four strategies that’ll make the process of timing your entry into a new market as painless as possible.
Invest in research and development.
Research and development (R&D) is the backbone of any business that’s serious about entering into a new market. If you miss this step, there are chances that your entry into a new market will fall flat even before you take the first step.
By research and development, we mean the strategies used by your business to know about the possibility of growing in the new market, and what can be done to develop it. This is a major step that big companies spend a huge amount on, in order to increase their dominance.
One problem for most businesses however, is knowing what they should budget for it. To achieve success with this, it’s better to have a team within your company that’s solely responsible for research and development. When you do, your business will benefit immensely from it.
Perform market research.
Market research is an important step that you must consider when your business wants to enter a new market. To define the term, market research involves the collection and analysis of information about consumers, competitors and the effectiveness of marketing programs.
With it, you can determine whether your new business is feasible, testing the interest in your product or service. At the macro, market research also involves monitoring industry and economic trends.
Similarly, it helps you to learn about your competition, develop strategies to promote your business and put in place a solid competitive strategy. A major obstacle faced by many businesses in this is knowing how best to research a new market. Common techniques include:
- Conduct customer surveys using online medium such as Google forms, SurveyMonkey etc., and one-on-one customer interviews and phone calls.
- Request that your customers provide feedback about your products and services on your website and on social media.
- Perform live product trials and usability studies in the new market.
When you do these, you’ll be able to research the market before coming in as a new entrant.
Evaluate your competitors’ strengths and weaknesses.
In every new market, there’s always competition. If you’re not careful, competitors could out-perform your business and make it difficult for it to thrive in the new market.
It’s important to evaluate the strengths and weaknesses of your competitors in the new market before you delve into it. When you do this, you’ll be able to know where to target, and areas you need to improve.
To evaluate your competitors in the new market, you can use web-based research tools. They help you study trends in your industry and the markets your competitors are targeting, so that you won’t be caught unaware.
Determine the potential market share you can achieve.
According to Investopedia, market share represents the percentage of an industry’s or a market’s total that’s earned by a particular company over a specified period of time. With it, you can have a general idea of how well your company will perform in a new market.
To understand it better, consider: If consumers as a whole buy 100 bars of soap, and 40 of them are from a particular company, then that company holds 40 percent market share.
As a business in a new market, you must determine the market share you can achieve there. If your market share is projected to be high, then it indicates your products will be preferred by the consumers.
In fact, a higher market share means that your business will sell more in the market, spend less on marketing and promotion and become the market leader too. To determine the market share you can achieve in a new market, you’ll divide the total sales or revenues you’re anticipating by the industry’s total sales over a period of time.
This is a crucial step you must not miss before entering a new market.
Now calculate the risk.
Expanding into a new market is a process that is of interest to businesses due to its numerous opportunities, and potential for success. However, it could be risky.
As a business owner, you should take a deeper look into your business’ goals, to know whether you should expand in your current market or join a new one. You should also consider speaking with specialists such as a corporate lawyer to find out if the risk is worth taking.
The goal of every business owner is to break new ground and grow their business by entering new markets. While this is a great business strategy, most businesses still find it difficult to know the best time to do this. At the end of the day, many fail woefully and wished they never considered entering the new market.