Company expansion is a major step that can take your business to a new level. If you intend to reach a bigger audience, you will have to make such important decision once in the future. Whether you want to expand within the margins of your country or go international, you will need a good expansion strategy that will make this transition smooth and unnoticeable.
Why expansion is essential?
Some companies do believe that they can remain in the same condition forever. However, competition drives the development of each field and you never know when you will come across a competitor that will be much better than you. Reasonable risk makes business appealing and profitable. If you play safe most likely your company will never achieve the pinnacle. Company expansion is essential as you cannot stay in the same place in business. Either you improve and gain a competitive advantage or you degrade little by little before your company becomes part of history.
When is the right time for expansion?
Aiming too high to achieve goals is not always the right choice. When startups go instantly international to reach everyone with limited resources, they get crashed with unforeseen obstacles. Company expansion is an important step that can either threaten the success of your company or give you the opportunity to reach a much wider audience and increase profit. Even writing the flawless expansion strategy might be pointless if you don’t choose the right timing.
To decide whether your company is ready or not for such major step make sure you positively respond to all these questions. Even if you are reluctant about one of them you may be wasting time and resources for nothing.
Do you need to find a new segment?
A new segment is always full of new opportunities, but moving to a different segment requires major investment in terms of advertising that is sometimes a waste of money if not implemented properly. If you fail to meet customer expectations, you may damage your company’s name forever. If there are opportunities in the existing segment it is too early to target new audiences.
It is an audience that you already know and you can increase sales with minimal investments. Expansion is only necessary when the current segment becomes saturated. You can always create an expansion strategy in advance and consider future opportunities for the company. Having ambitious goals is essential, but easily achievable goals are not always the right ones. Develop gradually, wait for your moments, and expand your reach as your market becomes saturated. Focus initially on what is in front of you before following such ambitious goals.
However, this doesn’t mean that you have to avoid a new segment entirely during this gradual development. You can increase awareness in the prospective segment and study-specific characteristics that can affect your product/service. Use the power of blogs and post well optimized relevant content to observe the customer behavior. When the time comes you will already have the foundation that will allow your business to expand exponentiallywith the available resources.
Is your product/service unique?
This is an important question that you have to ask yourself before thinking of company expansion. Solely the fact that the current audience admires your product/service doesn’t mean that the new audience will admire as well. It is not easy to gain trust especially when you are a company that people are not aware of.
Why they will buy your product when they can buy from the local seller that has already gained their trust and loyalty? If your answer to this question is the price you may be mistaken. Competing with local companies with price means having noticeably low production price. Distribution usually adds at least 10% of the price depending on the distance and you may encounter unforeseen obstacles if you follow this path. Moreover, be aware that most of the customers still favor local companies if the price is only slightly different. Hence, you must be able to offer an unbeaten price without sacrificing income.
Will cultural differences affect your product /service?
Every person is a unique individual and for a reason. You simply cannot offer the same service to all the customers. Many factors affect the needs of the customers including cultural characteristics. Let’s take an example of milk industry problems in the US for representation. In the 19th century being “manly” was the main priority for each man and milk was usually perceived as a drink for babies. Hence, this industry was suffering and milk was not able to compete with more “manly” drinks. Without major advertising campaigns including the manliest actors enjoying milk, this product would still be suffering as it did before. Your offer might even be offensive in some parts of the world and you have to be aware of such factors beforehand.
Make sure your product/service will not become the victim of cultural differences. It would be painful to see your business suffer after thorough planning and major investment. Stereotypes exist in every culture and they may become insuperable obstacles for your company if not dealt collectively. Not only the image of your company but rather the image of your country will significantly affect customer perception. For instance, if you go and promote your product in France as a British product most likely you will not be able to gain as many customers as you could because of their complicated history.
Will there be a language barrier?
Let’s start with the example. Peugeot is an international car manufacturer, but they struggle in China mainly because of the meaning of the brand name in the Chinese language. It translated directly as “Biao zhi” which means prostitute. Most likely buying any Peugeot model as a gift is not the best decision if you live in China.
This example clearly indicates that before expanding your reach, you have to make sure that there are no unforeseen factors that can affect the customer perception in the new market. The language barrier is usually an important factor and not only because of the word similarities among different languages.
The communication gap is another problem that the language barrier can cause. Writing an unparalleled expansion strategy might help you to plan everything accordingly, but if all the members of the company are not fully aware of your plans the performance might suffer. You have to be sure that the responsible person that will lead this expansion strategy can overcome language barriers and implement necessary changes that will make the product/service relevant to the market.
Are you financially ready?
At first glance, company expansion seems harmless action that in the worst-case scenario will not bring extra profit. However, you cannot expect to sell the products/services in the new market when no one knows about your company. There are usually a plethora of unforeseen expenses that you have to be ready for. This is especially true if you intend to open physical stores in relevant locations. For instance, keywords are the pillars of the website and if you cannot use the same keywords on the new market your website will never gain the popularity that you were hoping for. Choosing the keywords are essential for SEO and any changes may affect the performance significantly.
Unfortunately, while implementing the expansion strategy many companies find themselves in horrible circumstances. They make an initial investment, but in the process, they find out that unpredicted expenses keep appearing out of nowhere. If the company is not ready for such expenses most likely the seemingly far-reaching plans are doomed.
Do you have enough supplies?
Let’s say everything goes as planned and your company becomes unthinkably successful in the new market. Are you ready in terms of resources to satisfy the needs of all customers? Some companies become greedy and unless they sell more, they don’t mind about the unsatisfied needs of other customers. Even though this might bring profit in the short term it will definitely fire back in the long run.
The most difficult and vital stage for each company is gaining customers’ loyalty. If you have the opportunity you have to seize this moment and satisfy the needs of each customer. This will not only increase your income exponentially, but it will also help you to gain the trust of multiple other customers. Despite the claims of numerous corporations, there is no company that cares more about the customers rather than the income of the company. Gaining the trust of customers is hard, but losing it is drastically easier. If you cannot satisfy their needs even once, you may forget forever about gaining their loyalty in the future.
Can you provide high-quality services depending on the demand?
Quantity may grow in line with profit in most cases, but it can also shatter the image of your company into pieces. Company expansion always requires providing more products/services to a wider audience. Every enterprise has the capability to increase production at least to some extent. However, in certain circumstances, the quality might suffer.
It is extremely difficult to keep quality steady while taping into a new audience. Your expansion strategy must include the information on appropriate action in such situation. If you are not sure that you can keep the quality unchanged, such drastic changes are too early for your company. The image is what makes the company stand out. If your image is affected, the performance of the company will suffer not only among new audiences but also in the current niche. We live in a communication era and social media channels can either make your company thrive or destroy it in the blink of an eye.
Can you offer optimal delivery services?
Distribution is a crucial factor when considering company expansion. The customers are lazy and they want to get everything fast. Multiple studies suggest that a 1% delay in website loading causes a 7% decrease in sales. This example clearly shows how customers value time. If you don’t satisfy their needs on time, you can forget about them altogether. Similarly, you may have to optimize your website from the scratches to make sure that it gets the potential customers’ attention instantly.
In your expansion strategy, make sure you include your plan to deal with a spontaneous rise in demand. As I have already mentioned, if you don’t satisfy the needs of the customers they will go to your competitors and they are lost for good. If your company provides products, you have to consider opening a warehouse. Similarly, if your organization provides services, look for local employees who will be always available to comply with customers’ requests. Whether it’s pandemics, bad weather conditions, or any other issues, you must have the resources to provide high-quality and timely services.
Does company expansion have to be abrupt?
When it comes to business, snap decisions in most cases lead to undesirable consequences (unless you are a broker). Yes, in many cases you may need to make such abrupt decisions and that is understandable, but it is always better to take your time and consider all possible outcomes when possible. In everyday life, we make many similar mistakes and they usually don’t have drastic consequences. However, in business even small mistake can sometimes become fatal and lead to reasonable losses.
Company expansion is a major change that cannot be a snap decision. You have to consider your capabilities, possible risks, customers’ willingness, and only make a positive decision if your company is ready for such challenges. Take your time to include all the necessary information in your expansion strategy document and make sure you take into consideration all possible obstacles that you might come across.
Choose the expansion strategy
We have used the term “Company expansion” multiple times, but it is not as self-explanatory term as it seems. There are four main expansions strategies that you can choose from based on the target audience and the company goals.
Market penetration
The aim of this strategy is to get the most out of your existing product. If you follow this strategy you don’t have to find a new audience, but rather you have to concentrate much harder on the existing one. Trigger your existing customers to buy more frequently or win over the customers of your competitors (within the segment). The goal of this strategy is to increase the market share and get rid of all the competitors from the segment.
Market development
Similarly to the previous strategy, the aim of this strategy is to get the most out of the existing products. However, you will do so on previously unexplored markets. This strategy is a little bit riskier because you target those segments that are not aware of your product or don’t have the willingness to purchase it. By following this strategy, you will have to access the capabilities and specific characteristics of the desired target audience. If you do believe that your product has unique features then this strategy is the best option.
Product Development
This strategy has a slightly different approach. It incorporates the elements of the previous two methods. The goal is to saturate the existing market as much as possible and win over the customers from the competitors within the market. As the name suggests this strategy means investing in Research & Development (R&D) to develop new products that will complement the existing ones. For instance, Gillette offers a full package of self-care products and they focus on the same audience. Their business model is based on this strategy but minor changes as such enterprises cannot focus on a single strategy.
Diversification
This is the riskiest strategy that incorporates the risks of two preceding methods. This happens when a company wants to go into a different sphere and sometimes transforms into a holding company. The goal is to invest in R&D to develop new products and target new segments that don’t know your company well. In such case, it is essential to perform research beforehand for determining the willingness of the target audience to consume your product.
Even minor flaws in this method can lead to unsuccessful company expansion. This is why it is vital to create an explicit expansion strategy that will cover all the possible outcomes that you might face and the required steps to overcome them.
Is global expansion essential?
Expansion is a general term that can usually refer to different actions. Probably the most widespread term that you will come across in such case is global expansion. It means crossing the borders of your country to reach a wider audience. However, this strategy is not the best option for everyone despite its seemingly harmless nature.
You cannot offer the same products/services to all the people around the world as their income level, culture, religious beliefs, personality traits, and many other characteristics affect their perceptions. Sometimes you will come across twins that noticeably differ from each other. Similarly, you cannot expect that you can create one product that will fit the needs of all customers.
Going global is a drastic change that requires thorough planning, research, and important investment. It is only necessary when you have already used the full potential of your target audience in your country. Even though you can always do so, it is advisable to use the full potential of the existing market because you already know them well enough.
Crucial details that you will need for an expansion strategy
Being proactive pays off in most cases and especially in terms of company expansion. You cannot even think of an expansion strategy if you don’t have the information that will allow you to make relevant assumptions and make appropriate decisions.
Define short and long-term goals
The business always comes down to goals. If you don’t define what do you want to achieve, you will never be able to use the full potential of your company. Going somewhere without direction is a waste of time that you have to avoid by all means. Company expansion doesn’t happen abruptly and you must have not only a final goal (long-term goal) but also short-term goals to check constantly the progress of your strategy.
Short-term aims are necessary to stay motivated and keep following your long-term goal. When you know where you want to be in the near future, you will be able to create an expansion strategy that will include all the necessary information.
Determine the potential niches and their sizes
As we have already mentioned you must focus on distinct segments initially. List all the markets that might be interested in your product. You will need this information to research their willingness and specific characteristics that affect their buying decision. However, initially it is enough to list them based on the interests of your company. For instance, the size will be the most important factor as some segments may not be interesting if there are not enough customers in this group.
Take into consideration cultural and religious factors
As I have already mentioned such factors are vital when it comes to company expansion. Culture and religion play an important role in the development of overall perception. If your product/service is not in line with the customers’ beliefs, then all the hard work might be in vain. Make research beforehand to access the likelihood of success on the market in question. Similarly, find an adviser from the same market and show the product to determine any possible difficulties that you might encounter. When you get all the details that you need, you will have all the information that you can later include in your expansion strategy.
Determine the customers’ willingness to pay premium
Expansion is not as easy as it seems and, in most cases, requires significant expenses. If you choose the strategy that will require the transportation of the products from your current location, you may have to increase the price of the product noticeably. However, don’t forget about the local competitors that will not have such expenses and most likely will be able to offer better prices. You will have to access your competitive capabilities on the market to make sure that the customers will be eager to pay a premium for your product.
Decide How you are going to represent your company in the target market
Before thinking of an expansion, you have to decide whether you want to have a branch, sales office, domestic partner company, distributor, or a separate company. If everything indicates imminent success you can always go all in and choose a riskier strategy. However, if you are reluctant about the market, choose the safest method to make sure it is the right market, and focus on full expansion when you get more information about the possible risks.
How to make your expansion more effective
Know your enemy
Imagine the situation, you enter the market with the product that has the most extraordinary features and have high hopes. However, you encounter a competitor that is already monopolist in the market. This is the most undesirable situation that you might encounter if you don’t research your competitors. Attracting the loyal customers of your rivals is possible if you offer something better, but you will need a time and noticeable investment for advertisement. In some cases, this might not even be worth the struggle especially if you truly offer a unique product. Such goods have the potential to bring higher profit if you market them on the right segment. With the same expenses, you can reach more customers and increase your sales spontaneously if you choose the market without a dominant competitor.
Create Customer profiles for a new market
Every company needs to categorize their customers based on their gender, age, cultural traits, beliefs, income level, and many other factors. Such customer profiles usually differ from segment to segment. Even if you market the same product worldwide, make sure you create new profiles that you will need for a more personalized approach.
Make relevant changes to the product
As you have seen one size fits all strategy doesn’t always work when it comes to expansion. You always have to consider the special characteristics of a new audience when renovating the product. This will give your product a competitive advantage and make it more relevant to the new audience.
The same applies to services. In every country, you cannot simply offer the same package and expect to gain loyal customers instantly. Even the same position might have different roles attributed to it depending on the culture and the religious beliefs.
Create an unrivaled point of difference
Put yourself in the shoes of your customers. No one likes running a risk and especially for no reason. Why do customers have to consider moving from their favorite brand to yours? If you don’t offer something unique even a competitive price might not help you to achieve your goal. Company expansion has to be worth it and without a lever that you can advertise for competitive advantage, your product/service might be doomed for failure.
Improve your network in a new country
This step is especially important if you look for B2B partners. An advertisement may be effective, but it will never work as well as word-of-mouth (customers spreading the word about your product/service). The reason is simple, every company thinks about profit firstly, and only after this they consider customer satisfaction. On the other hand, getting these details from an existing customer is much more trustworthy. They don’t intend to boost the sales of the product in question but rather simply want to help you make a decision.
The best way to make good use of WOM is to improve the network in the country beforehand. This will be a great opportunity to get know to the audience much better and increase brand awareness without much effort. Consider attending different business events and simply getting in touch with potential partners that might be happy to cooperate with your company. Events are great source of free marketing activities. They do help your brand to gain popularity and, in most cases, you will achieve this goal without any expense.
Write an expansion strategy
After you gather all the information that you might need, start working on a company expansion strategy that will list all the important details. Below you will see the main categories that usually are good for such document, but you can always make necessary changes based on your company specifications.
1. Executive Summary
Even though this part starts your document make sure it is the last paragraph that you write. Basically, it has to be brief and it has to sum up the whole idea of your company expansion plan. Leave this part blank and fill in only after finishing the whole document. Think of it as a summary that usually comes at the end of each essay.
2. Define your company’s strengths and weaknesses
This paragraph is essential as it will help you to determine how you can improve and what makes you special. Talking openly about your company’s weaknesses is essential as these flaws may hinder its successful expansion. Moreover, such changes will also improve the performance of your organization even in the existing markets.
On the other hand, an expansion strategy must also include information about the advantages that make your company stand out. Be aware that such differentiating factors from the current market may not provide any benefits to the new market, but it never hurts to take your chances.
3. Define new market and expansion method
It is essential to know the exact margins of the market and the method that you are going to use. As we have already discussed, whether you consider opening a new store, finding new partners, or any other methods it is essential to have a game plan beforehand. In most cases, it is advisable to deal with such issues before you plan any other steps. For instance, you may encounter that you cannot find the right partners in the target location and all the hard work might be in vain. This is the main factor that is a fundamental element of each decision.
4. Analyze the market and create a marketing strategy
Marketing is the main driver of sales and increasing brand awareness. It is vital to plan beforehand what kind of marketing activities you will implement and analyze the market. Moreover, without increased brand awareness it will be hard to penetrate new market. Sometimes the best option is to invest moderately for awareness ads before you create a full expansion strategy. Such ads are significantly cheap and the results might be unimaginable.
5. Organization and Management
Managing a business is not an easy task and the situation escalated when the company focuses on multiple markets. The distance is usually the problem and managing a business from a distance is not an easy task. Even if you find a local person who manages a business there will always be a communication gap that is difficult to eradicate.
6. Financial Plan and Projections
Even though it is difficult to estimate how the product/service will perform in the new market it is essential to have some projections to have the goal. Here are the financial details that you will need before company expansion:
- Required Budget
- Profit and loss projections for the next 12 months
- Cash flow predictions
- Estimated expenditure projections
- Long-term financial goals and estimations
Takeaway
Company expansion is not an easy decision and as you may have seen there are many factors that you have to take into consideration. Many do believe that to prepare for such drastic changes simply writing an expansion strategy is enough, but there are many other steps that one cannot skip. Make sure you plan everything thoroughly beforehand and it will be much easier to expand the company more efficiently.