What However, the ease of access adds to the pile of companies competing for the attention of international audiences. Thus, standing out among your competitors requires careful strategizing.
This detailed guide outlines the steps you can take in building your market expansion strategy. By the end, you'll be equipped with a list of handy tools to set you on the path of success in foreign market entry.
Overview
- What is market expansion?
- Examples of market expansion strategies
- Things to consider when expanding a business internationally (+ a practical checklist for market expansion considerations)
- Four Steps to developing a successful market expansion strategy
- FAQs
- Finding the key to success in the global market
What is market expansion?
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
If you want to understand the different strategies involved in market and product expansion, check out the Ansoff Matrix. The model displays the four main expansion strategies pursued by businesses:
- Market penetration: Expanding the sales of an existing product in an existing market
- Product development: Introducing a new product in an existing market
- Market development: Introducing an existing producing into a new market
- Diversification: Introducing a new product to a new market
Simply put, there are many ways to pursue market expansion that does not necessarily involve crossing national borders.
In today’s world, however, most business owners will want to take advantage of the opportunities offered by globalization and extend the reach of their target market to other countries. 9 out of 10 executives surveyed by CFO in a 2020 study said they had experience with international expansion.
In that same study, more than half of the managers kept up their plans for global expansions despite the challenges brought on by the COVID-19 pandemic. The benefits simply outweighed the potential risks.
Why do businesses want to go global?
So what benefits are there to global expansion? It goes without saying that having a larger audience for your marketing will increase sales. But there are also other, less obvious reasons to expand into new markets abroad, such as to
- Grow revenue potential
- Gain access to new talent
- Earn market share
- Improve competitiveness
- Lower risks through diversification
- Increase production levels
- Reduce operating costs
- Access new investment opportunities
In short, you are likely to benefit from global expansion whether you are a small business, a promising tech startup, or a Fortune 500 company.
If your product or service is already established in an existing market, exploring growth opportunities in other geographic areas will be beneficial to your company's development.
Why are market expansion strategies important?
Managers need to approach growth ventures with a solid business plan to avoid failure. Having a solid market extension strategy before scaling your business for new markets helps you identify opportunities, clearly define your goals, and allocate the appropriate resources.
But following through on strategy is easier said than done. Research suggests that a lot of companies are good at strategizing, but often fail to execute it. Strategy execution is number one on the list of major challenges facing corporate leaders in Asia, Europe, and the United States.
Why? One reason is that a lot of strategies are inflexible and fail to adapt to changing market circumstances. While striving to reach objectives is part and parcel of any business, the fact of the matter is that business strategies must be adapted to the target market, and not the other way around.
The differences between translation, localization, and globalization
Localization is often used interchangeably with translation, but the two are very different. Translation is to express the words or text of one language in another, while localization adds the process of adapting a product or service to the customs of a particular language, culture, or place.
Localization is a great complement to the efforts of globalization (and vice versa). However, if you want your business to be competitive in an unfamiliar market, it is not enough to just present your product to the audience.
You also need to make sure it is presented in a way that will resonate with them. This is where translation and localization come in.
The latest translation statistics show that 65% of non-native English speakers prefer content in their native language. Hence, most companies will usually start with translating their website and marketing copy into the local language.
While that is a great start, if you want to increase your revenue potential among consumers in the international market, you need to do more than just translate the text.
{{banner-component}}
Examples of market expansion strategies
It is easy for a company to go astray without paying attention to localization, as shown by some select market expansion examples.
- The Swedish company Electrolux took a real gamble when they used the infamous tagline “Nothing Sucks Like an Electrolux” to market their vacuum cleaners in the US.
- And have you ever heard of when Apple entered the European market without including letters from local alphabet on their keyboard design? I doubt the Germans were very impressed with the tech company when they couldn’t find their umlauts.
To get an idea of how it should be done, let’s look at a successful example of market expansion from Netflix, a company that accelerated its growth across the globe with a localization strategy.
Case Study: Netflix Market Expansion Strategy and Localization
In just a little over 20 years, Netflix has transformed from a local DVD rental company to a global media company and online streaming service available in over 190 countries. Starting their global expansion in 2010 after a period of slow growth in the US, Netflix succeeded with its global expansion using these three methods:
- Translating content for international audiences: Netflix started out their strategy by providing subtitles and dubbing in the language of their target market. This has included making dubbing more available in countries that prefer subtitles when streaming foreign-language content. Moreover, their user interface and customer support are fully available in the target language, making sure that the customer experience from start to end is localized.
- Creating content for the target countries: As a next step, Netflix partnered with local production companies to create original content set in their targeted countries. Who would have thought that Netflix’s most-watched series in 2021 would be Squid Game, a South Korean TV series based on a group of people fighting to their death in local children’s games?
- Adapting content to new locales: Recently, Netflix started making adaptations of existing stories in different lingual and cultural settings, such as its multi-million-dollar deal with American mystery author Harlan Coben.Now, you can watch Coben’s books be played out in Polish, Spanish and French, alongside English language adaptations.
Instead of taking for granted the global appeal of the US media industry, Netflix went one step further to reach its international audience by localizing every step of the customer journey. It’s no wonder their international revenues have now surpassed their domestic revenues.
If your business is just at the start of its market expansion journey, there are a few things to keep in mind if you want to replicate the successes of companies like Netflix. Let’s dive right in.
Things to consider when expanding a business internationally
There are four main factors you must take into account when preparing to introduce your product or service to a new market. We have listed them for you in this handy checklist below, along with the questions you need to ask yourself as you go along.
You can either screenshot the following table or download your market expansion checklist here.
A Checklist for Market Extension Factors
While there are many more things to consider, finding the right answer to these questions sets you on the path to success in expanding your business operations into foreign markets.
The next steps will provide you with practical, actionable tips on how to do just that.
Four steps to developing a successful market expansion strategy
No matter your industry, a good strategy will leverage data to set tangible goals for introducing your product or service into a market. It will also establish an appropriate budget and a plan for how to navigate challenges like:
- linguistic and cultural barriers
- local regulations
- travel restrictions
- talent recruitment.
Nevertheless, just like when it comes to consumer markets, no one size fits all. In the end, the best strategy for expansion into new markets is one that suits your business.
It might seem a bit overwhelming at first, so to make it simple, here are the basic steps we recommend you take to expand your business into new markets:
- Review your current business performance using KPIs
- Do market research
- Set clear goals
- Adapt your product and marketing materials
1. Review your current business performance using KPIs
Businesses should not try to expand before they have reached their peak in the domestic market. This means you need to determine whether market expansion is the right direction for your company based on measurable data on your current business performance.
A natural part of business development is to keep track of metrics, or key performance indicators (KPIs). Examples of KPIs that can help you determine whether your business is ready for international expansion include:
- growth rate
- sales revenue
- sales conversion rate
- market share
- website traffic volume.
Keeping track of data can also help you in the early stages of defining market opportunities abroad. For example, do you have a fairly large share of visitors from a certain country, but no accessible website in their language?
That might tell you it is time to start localizing your website for greater sales conversion and revenue potential.
Tools For success:
Your company likely already has a set of objectives and ways to measure the results of your strategies in your internal data tracking. External tools like Google Analytics and Similarweb provide you with valuable insights on website traffic and can help you track where the traffic is coming from. This can be anything from different social media channels or the geographic locations of the people that visit your website, along with their user journey from lead generation to final sales conversion.
2. Do market research
The first step to market entry is to make sure you are equipped with all the information about the opportunities and challenges for expansion within the country.
You need to find out the size of your industry in the target country, whether there is a demand for your product or service in the new market, who the competitors are and whether you need to adapt your product to local needs.
Then you have to figure out the practical matters. For example, what are the most common distribution channels in the market, and how do you gain access to them? What are the local regulations that could provide barriers to entry?
It is impossible to succeed in any market without understanding the potential customer. Typically, you want to know their pain point, figure out how your product or service can solve it with a unique selling proposition (USP), and pursue a marketing strategy that effectively gets your brand message across. That requires research, research, and more research.
Tools For success:
Marketing research typically involves both primary and secondary research, but you can choose whichever approach works best for your business.
Primary research will require you to conduct interviews, surveys, focus groups, and visit the location directly. If that’s not feasible, you can get the information you need from databases like Statista, NielsenIQ, Pew Research, OECD, Euromonitor and Google Market Finder.
3. Set clear goals
A business needs to have clearly defined goals and objectives, and that is no less true when it comes to international expansion. You have to ask yourself what is the ultimate goal of wanting to expand into the market, what you can realistically achieve within a set time frame, and how you are going to track the progress. In other words, your goals have to be SMART:
- Specific
- Measurable
- Achievable
- Relevant
- Time-bound
Examples of goals your business can set for market expansion are:
- Open two new office locations in Portugal and Spain by 2023.
- Increase company share in the South Korean market by 2% over the next three years.
- Enter into two new strategic partnerships with local suppliers by the end of the year.
- Earn $2 million in gross revenue in the second year after entry in a new market.
Having such clear goals will help set the stage for planning your strategy and tactical moves for foreign market entry. Just like in the beginning stages, tracking KPIs and metrics continuously as you go along is important to check how you are doing with reaching your goals.
Tools For success:
If you haven’t done so already, consider using project management tools like Asana, Jira, or Notion to track your short- and long-term goals and assign action items to get them done.
4. Adapt your product and marketing materials
Now that you have established an idea of what the market looks like and defined your priority areas for entry, it is time to plan out your expansion marketing strategy. This will require translation and localization to adapt your product and marketing copy for the local market.
If you don’t have any employees on your team with the cultural knowledge or linguistic skills for the local market, consider hiring freelancers or looking at online language service providers (LSPs). If you don’t know where to start looking, check out Redokun’s directory of places to find translators online.
Once you have your team in place, translating your entire website and other business materials may seem like a daunting task. Every part of the customer journey, from things like marketing collateral to the user interface of your website, will need to be translated and adapted with the local consumer in mind for the best results. You also need to make sure everyone is on the same page when it comes to brand guidelines and industry-specific terminologies.
If you opt to do this manually, it will likely be very time-consuming with files and spreadsheets sent back and forth all over the place. Luckily, there are automation tools available to make this process easier for your business.
Tools For success:
Invest in a translation management system (TMS) like Redokun that allows you to easily coordinate your multilingual projects by gathering translation tools, communications, and progress tracking in one place.
Redokun offers features such as translation memory and computer-assisted translation to cut down on time spent on repetitive tasks. That makes your team’s translation workflow more efficient, reduces opportunity costs, and increases productivity as you can spend your valuable time on other core tasks.
Redokun: Have a Sneak Peek
Want to see Redokun in action? Have a sneak peek at how Redokun works without any commitment:
FAQs
What does it mean when the market is expanding?
Market expansion is a growth strategy which involves offering your existing product/service to a new market.
What is market extension?
A market extension merger is a type of merger where two companies in the same industry with similar products or services merge to expand their market reach.
Why is expanding market reach important?
Expanding to new markets is important because it drives growth and profitability.
Finding the key to success in the global market
As each country has its own unique characteristics, paying sufficient attention to translation and localization is key to any successful market expansion strategy.
A one-size-fits-all approach may have worked for Ikea, as the assembly instructions for their flat-pack furniture can get away with using only diagrams and illustrations that can be easily understood by anyone without any need for translation or localization.
But it is unlikely to work when you prepare to launch into a new market, especially if the audience is not aware of your brand from before.
In the words of Google: if you want to grow global, you first need to think local. Fortunately, the wide availability of translation resources and tools has made thinking local an easier task than it used to be.
Till next time,
Via
