Market Expansion Strategy – this is how you proceed de

Expansion can bring many benefits. Ultimately, it aims to penetrate a new market or address a new target group.

By expanding your business activities, you lay the foundation for sustainable growth and increasing sales of your products or services.

However, before you start your project, you need good preparation. And this is where the Market Expansion Strategy comes into play. Without it, it will be difficult to expand successfully.

But what does a market expansion strategy look like, what advantages does it bring and what options do you have?

Let's get started.

Table of contents

• What is a market expansion strategy?
• Why consider market expansion?
• What are the advantages of a market expansion strategy?
• What market expansion strategies are there?
• How to go about developing a market expansion strategy?
• What if the market expansion strategy fails?

What is a market expansion strategy?

A market expansion strategy is a strategic plan to expand your business into a new market. You are tapping into a customer segment that you have not previously addressed with your products or services. Overall, market expansion strategies are actually your maps that show you the way, be it geographically and/or in relation to a target group, to growth, increased sales and market placement.

Why consider market expansion?

There are various reasons why a company decides to expand its market. One of the most frequently mentioned is increasing sales.

Especially if your own market is saturated, it is worth thinking outside the box and expanding into a target market where demand and, as a result, sales potential are still high.

Usually, a business starts in a specific region or offers everything in English.
So basically, it starts with one language only.

Now think about offering your content in other languages, starting with your website.

Do you think this is not relevant?

Ok, then consider this article.

According to it, 40% of consumers say they will never purchase from a website not in their native language.

While 75% say they are more likely to use a business again if aftersales care is in their native language.

Effective localization ensures your product meets the needs of your demographics and helps you reach new audiences.

With nearly five billion smartphone users globally, the localization of apps and websites ensures customers can enjoy your product wherever they are.

You won't add or change any features. You simply offer what you have in a few more languages.

Here are the top 10 most spoken languages in the world:

1. Chinese — 1.3 Billion Native Speakers
2. Spanish — 471 Million Native Speakers
3. English — 370 Million Native Speakers
4. Hindi — 342 Million Native Speakers
5. Arabic — 315 Million Native Speakers
6. Portuguese — 232 Million Native Speakers
7. Bengali — 229 Million Native Speakers
8. Russian — 154 Million Native Speakers
9. Japanese — 126 Million Native Speakers
10. Lahnda (Western Punjabi) — 118 Million Native Speakers

When we count the top 10 most spoken languages according to the total number of people who speak them (whether or not the language is their mother tongue), it looks slightly different:

1. English — 1.348 billion total speakers
2. Mandarin Chinese — 1.120 billion total speakers
3. Hindi — 600 million total speakers
4. Spanish — 543 million total speakers
5. Standard Arabic — 274 million total speakers
6. Bengali — 268 million total speakers
7. French — 267 million total speakers
8. Russian — 258 million total speakers
9. Portuguese — 258 million total speakers
10. Urdu — 230 million total speakers

A little mind experiment: What if you offered your website and product in Chinese, Hindi, and Spanish, besides English?

You would target an additional audience of 2.266 billion speakers. This makes a potential growth of 268%!

With a market expansion strategy in hand, diversification always goes hand in hand. This gives you the significant advantage of spreading the risk that you have when you only depend on one market. Even in the face of fluctuations in the economy, political events or the unforeseeable, your company remains much more robust.

Also take advantage of the economy of scale. By spreading your expenses over a larger output, you can multiply your efficiency but reduce your costs in the long term.

Being present in multiple markets inevitably leads to greater visibility and therefore greater brand awareness. This means that not only sales but also the market value increase. At the same time, you can keep up with your competitors or even set yourself apart from them.

From an even different perspective, market expansion gives you access to new talent that can prevent a shortage of skilled workers. You may also discover new, advanced technologies and business practices in a new market that you were not aware of before, but that could significantly increase your productivity and competitiveness.

What are the advantages of a market expansion strategy?

A well-planned market expansion strategy is, to put it bluntly, half the battle when it comes to your expansion. Above all, it helps you achieve your long-term goals and ensure that your growth is continuous but controlled.

Advantages of a Market Expansion Strategy are:

1. Risk reduction

By carrying out market research and analysis and starting pilot projects in a market expansion strategy, you can avoid possible risks of market expansion Proactively identify, take appropriate countermeasures and thus minimize them. With a strategic approach, you avoid having to pay expensive fees and at the same time increase the likelihood of a successful market entry.

2. Resource allocation

Your resources, be it capital, staff or time, are limited. So that you can really use this effectively for your expansion, a market expansion strategy is essential. For example, you can identify the most attractive markets in advance, use the economies of scale and create synergies between different markets and your business areas.

3. Competitive advantage

If your market expansion strategy is successful and you open up new markets, you will build sustainable competitive advantages. In other words, a market expansion strategy enables you to meaningfully differentiate your products and services from your competitors, to establish them strongly in the market and to build a loyal customer base.

4. Innovation and learning

In addition to the advantages of risk minimization or resource distribution, a market expansion strategy always promotes internal company development, which you should not despise. Ultimately, a market expansion strategy requires new ideas, progressive business models and engagement with other cultures, target groups and competitors.

Market expansion can also mean that you have to optimize your products or services for the new market or even be inspired to create completely new ones. Furthermore, the experience and knowledge that you will gain from the expansion will be available to you in the long term, which you can then transfer to other areas of your company.

5. Brand perception and the global image

An equally notable advantage of a market expansion strategy is that you can use market expansion to build up your image and the perception of your brand in a controlled manner. Be it with an international market expansion strategy or global market expansion strategies. Once the foundation has been laid, you can strengthen the trust of customers, investors and business partners and manage the entire process yourself, which contributes significantly to ensuring a reasonable reputation.

What market expansion strategies are there?

A distinction is made between four market expansion strategies that you can use depending on your goals:

• Market penetration
• Product development
• Market development
• Diversification

Fortunately, these are not just purely theoretical approaches, but rather market expansion strategies that you can immediately implement in practice. We'll tell you what this might look like in the next sections.

Market penetration (existing product, existing market)

With market penetration as your market expansion strategy, you focus on strengthening your existing products or services in your current market and increasing their sales. Ergo, you try to sell more of what you offer - be it to existing customers or new customers. The approach is often the first step that companies implement as part of their market expansion strategy. Importantly, market penetration only works effectively if the market is not yet saturated. However, your risk remains low because you neither venture into unknown territory nor have to spend a lot of money. What helps you with this market expansion strategy with the goals of increasing market share, competitiveness and profit maximization are pricing strategies, advertising campaigns, sales promotions or improving services such as customer service. However, the growth potential remains manageable with this approach.

A classic example of market penetration is a company lowering its prices to attract more customers. A wireless carrier offers discounts or improved tariff plans to attract or persuade customers to switch from a competitor.

Product development (new product, existing market)

When developing products as part of your market expansion strategy, you optimize your existing products and services for your market, modify variants or introduce a completely new offering. The aim is to better penetrate your existing markets or open up new market segments. This can be achieved by focusing on increasing customer value for your product range. With this market expansion strategy, always make sure that you take customer wishes into account in all innovations and improvements in order to stand out from your competitors in the long term.

Since you have to spend a little more money on product development, the risk also increases compared to market penetration. To avoid bad investments, you can pursue the virtual prototyping approach. You test your innovation BEFORE the actual development within a virtual environment under completely real conditions and marketing levels. This includes setting up a web presence.

An example of product development is introducing a new smartphone model with improved features and performance to encourage existing fans to upgrade and attract new, tech-savvy customers. An outstanding role model for such a market expansion strategy is undoubtedly Apple.

Market development (existing product, new market)

Do you have an excellent product and want to conquer a new sales market? Then market development is your market expansion strategy. In market development, you strive to take your existing products or services into new markets. This can mean both geographical expansion (domestic or international) as well as addressing new target groups or opening up additional sales channels. The main goal is to discover new sales potential and expand your customer base. One advantage of this market expansion strategy is that you don't have to spend any money on further developing your products. However, market developments require that you have a thorough knowledge of the new field, its players, opponents and spectators. Furthermore, it is essential to carry out very finely graded target group marketing, which takes the respective cultural characteristics into account.

An example would be a food company that wants to sell its products internationally to reach new geographical markets.

Diversification (new product, new market)

Probably the most comprehensive, risky, but also, if successful, strongest market expansion strategy is diversification. This means you are introducing a new product to a new market. There are two main types of diversification: related and unrelated diversification. With related diversification, you expand your offerings into areas that are logically related to your current environments. With unrelated diversification, you enter completely new business areas that have no direct connection to your previous activities. Note that these market expansion strategies involve an investment of money and time. However, if the equation of the two unknowns works out, the effort will undoubtedly have been worth it due to the enormous increase in sales.

An example of diversification would be a clothing manufacturer starting to produce and sell sports equipment - if this is related diversification - or entering the technology industry - if it is an unrelated diversification.

If you can't decide between the four market expansion strategies or would like to benefit from the advantages of several strategies, there are intermediate solutions:

• Market expansion: strategy of selling established products within new geographical markets while maintaining target group consistency.
• Product Modification: Approach to bridging the gap between market penetration and product development by making slight adjustments to existing products to reintroduce them into the current market.
• Limited diversification: adapting existing products to enter new geographical markets.
• Partial diversification: strategy that involves either distributing new products into geographically new markets or introducing modified products to new target groups.

How to go about developing a market expansion strategy?

Now you know what a market expansion strategy is, its advantages and its four common models. Now let's get to one of the most interesting parts: How do you develop such a strategy in practice?

1. Set the goals

Before starting your market expansion, you should set clear, measurable and realistic goals. All goals should address different aspects of your expansion, including sales, market share, customer acquisition, and brand awareness. Use the SMART principle when setting goals.

What are SMART goals?

Specific: Define exactly what you want to achieve in each new market. For example, you could aim to achieve a certain level of sales or capture a certain percentage of market share within the first year of entering the market.

Measurable: Make sure you can quantify your goals. This allows you to track progress over the long term and measure your successes. Examples of measurable goals could be: selling 10,000 units of your product in the first year or acquiring 500 new customers in the first six months.

Attainable: Your goals should be challenging but realistic. To do this, consider your resources, competition and market conditions.

Relevant: All of your goals should be closely tied to your company's overall business goals and overall strategy. They should help carry and support your company’s long-term vision and mission.

Timely: Set clear deadlines for achieving your goals. Timelines help you stay motivated, plan and monitor progress.

A complete example goal according to the SMART variant could be: “We increase sales by 20% within one year of market entry by selling product X in the new target market Y.”

This goal is specific (increase revenue by selling a specific product), measurable (20% increase in revenue), achievable (based on a realistic estimate), relevant (contributes to overall revenue growth), and time-bound (within a year).

By incorporating clearly defined goals into your market expansion strategy, you can better measure the success of your measures and ensure that all activities are aimed at achieving these goals - and, above all, remain so.

2. Market research and analysis

Once your goals are clear, the Market Expansion Strategy involves creating a comprehensive analysis of potential new markets. Take a close look at demographics, economic indicators, cultural differences, legal frameworks and technological developments. Study the competitive landscape to understand your competitors' strengths and weaknesses and identify gaps in the market that you may be able to exploit.

• Use online resources such as Statista, MarketResearch.com or national statistical authorities to collect relevant market data.
• Conduct surveys or focus groups with potential customers to get direct feedback and understand customer segments.
• Analyze social media and customer reviews to gain insight into trends and preferences.

3. Define target market

Based on your market research, you should now be able to select the most attractive markets for your market expansion strategy. Your decision will be based on factors such as market size, accessibility, growth potential and fit with your product or service offering. Always take your own company goals and resources into account.

• Create a ranking of your preferred markets based on quantitative and qualitative criteria.
• Consider market entry costs and operational costs in different markets.
• Conduct a SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis for each potential market.

4. Develop market entry strategy

Is your new target market located? We are entering the hot phase of the market expansion strategy. Decide now how you want to enter the market: through export, licensing, franchising, setting up a subsidiary, partnership or acquisition. Each of these options entails different investment requirements, risks and levels of control. So take your time and look at each of the options carefully.

• Consider establishing strategic partnerships or joint ventures with local companies to overcome potential barriers to entry.
• Evaluate the advantages and disadvantages of each market entry option in light of your business goals and resources.
• Consult local experts or advisors to be able to meet legal and regulatory requirements later.

5. Adjust marketing and sales strategy

Of course, you want to reach your target group as quickly as possible after entering the market. This is achieved by designing marketing and sales strategies that are specifically tailored to the target market. Take cultural characteristics, language, local trends and target group behavior into account. Adjust your product offerings, pricing models, advertising messages and sales channels accordingly.

• Develop culture-specific marketing materials and campaigns that resonate with the target market.
• Carefully select sales and distribution partners who have good knowledge of the local market.
• Use digital marketing and social media to effectively reach your target audience.

Website and translation management

Your market expansion strategy should prioritize the establishment of a comprehensive localization strategy. This involves the adoption of a sophisticated translation management system (TMS) and a well-orchestrated approach to localization that ensures your website resonates with the target audience both linguistically and culturally.

Invest in a robust translation management system that streamlines the localization process, ensuring efficiency and consistency across all digital content. A TMS can facilitate collaboration among translators, editors, and project managers, significantly reducing the time and effort required for large-scale localization projects.

Develop a localization strategy that extends beyond mere translation. Understand the cultural nuances, consumer behaviors, and market trends of your target region. This strategy should encompass local customs, values, and preferences, ensuring that your website, from content to visuals, aligns with the local culture.

Collaboration with local experts or professional translators is crucial for achieving authentic and culturally relevant content. They can provide insights into local expressions, units of measurement, holidays, and other cultural specifics, enhancing the local appeal of your website.

Emphasize the adaptation of your digital presence to mobile platforms, considering the predominant use of mobile internet in many target markets. A mobile-optimized website is not just a preference but a necessity for reaching a wider audience.

Incorporate local customer feedback and analytics into your strategy to continuously refine and optimize your localized content. This feedback loop can identify areas for improvement, helping you better cater to the local audience's needs and preferences.

Engaging with a specialized agency can offer valuable expertise in both localization and the technical aspects required for a successful international web presence. Such partnerships provide access to specialized skills and knowledge, from professional translations to technical optimizations, ensuring that your localization strategy is effectively implemented and aligned with your business objectives.

By prioritizing a translation management system and a comprehensive localization strategy, you position your business for success in new markets by ensuring your digital content is accessible, relevant, and engaging to your target audience. This approach not only enhances brand perception but also fosters trust and loyalty among local customers.

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6. Operations and supply chain management

Every market expansion strategy also requires you to plan your logistics and the associated operational processes in detail. There are few things today that have a more negative impact on your success than an inefficient supply chain. Ultimately, it's about customer service. And they are now used to receiving everything without long delivery times or detours. Also take local specifics such as logistics, customs, taxes and labor into account.

• Establish robust supply chain processes and work with reliable, local suppliers and logistics partners.
• Comply with local regulations and standards regarding production, packaging and labeling.
• Implement effective inventory and warehousing management to avoid supply shortages.

6. Financial planning

With a market expansion you are of course also aiming for an increase in sales. Accordingly, part of your market expansion strategy is to prepare detailed financial forecasts and set budgets. Take into account both one-off costs (e.g. market entry costs) and ongoing operating costs. Also plan buffers for unexpected expenses and potential currency risks.

• Include financial models in your market expansion strategy to run through different scenarios and see how different market situations affect your finances.
• Secure sufficient financing and liquidity to support the expansion phase.
• Implement an effective cost control and monitoring system to keep track of your finances.

7. Monitoring and adjustment

The basis for your long-term success in a new market is continuous monitoring and evaluation of your activities. Within the Market Expansion Strategy, you should consider the progress of your set goals, both your market performance and performance, and customer feedback. It's important that you collect quantitative and qualitative data to get a complete picture of your expansion.

• Use CRM systems, analytics tools and financial reporting to track key performance indicators (KPIs) such as sales, market share, customer acquisition and customer satisfaction.
• Schedule regular sessions (e.g. monthly or quarterly) to assess and discuss progress. To do this, you put together a team from different areas to include different perspectives.
• Actively collect feedback from customers, partners and employees in the new market. Use surveys, customer interviews and market research to gain insights into market reaction and customer needs.

But also be prepared to adjust your market expansion strategy based on the results. Be prepared for changes to products, marketing approaches or even the entire market entry strategy.

What if the market expansion strategy fails?

If your market expansion strategy fails, it is important not to lose heart or jump to conclusions. Failure is a natural part of entrepreneurship and holds valuable lessons that will help improve your future market expansion strategy.

First, you should conduct a thorough analysis to identify the reasons for the failure of your market expansion strategy. Illuminate all aspects of your market expansion strategy, from market research and target group analysis to marketing and sales. Take a close look at which assumptions were wrong, which approaches didn't work, and whether external factors such as economic changes or unforeseen events played a role.

Use this opportunity to learn from your mistakes and optimize your market expansion strategy. This might mean better understanding your audiences, adapting your products or services, or rethinking your marketing and sales efforts. Based on your analysis and the insights gained, you can then adjust your market expansion strategy accordingly. This means both minor optimizations and a comprehensive revision of your market expansion strategy plans. Be open to change and willing to try completely new things.

After you've refocused your market expansion strategy, develop a new plan for entering the market or refocusing your operations. To do this, set yourself realistic goals and milestones and make sure that you have sufficient resources for implementation.

It should be said again: failure is not a reason to give up. Many successful companies initially failed before they found their way to success. Maintain your resolve and stay committed to pursuing your business goals.

What's important is that you learn from every failure and use this unique knowledge to improve your future endeavors. By remaining resilient and willing to adapt and learn, you can increase your chances of future success.