A Complete Guide to Market Expansion Strategy

4 years ago

Market expansion is a business growth strategy. Companies adopt a market expansion strategy when their growth peaks in existing channels. Success depends on confirming that they have fulfilled existing markets. Companies must then identify other markets that are easy to reach.

What is Market Expansion Strategy?

Market expansion strategy develops and discovers new customers, new uses for existing products and new distribution channels, not new products. New financial resources are not essential.

Market expansion basically consists of:

  • Developing target market
  • Contacting new suppliers
  • Establishing new manufacturing facilities
  • Developing and expanding existing relationships with all relevant customers and other stakeholders
  • Marketing and sales strategy
  • Technological innovation
  • Financial strategy

Aspects of market Expansion Strategy

  1. Technology Development
  2. New Products and Services
  3. Defining Target Markets
  4. New Marketing Channels
  5. New Distribution Channels
  6. Customer Support
  7. New Opportunities

Technology Development

Innovations help gain customers’ trust. The most important thing is to ensure that these new technology, products and services are successful and useful for potential customers. Good execution is critical to success.

New Products and Services

New products and services will include different prices, features and functionalities. It is advisable to conduct market research of new products and services before entering them into the market. Businesses must keep introducing new products to gain competitive advantage in the market. Being difficult to replicate is critical to their success.

Defining Target Markets

Businesses start targeting new demographic segments and geographical areas. It is often a good move to enter different value networks than those in which current products are sold. This may lead to new products or to new uses for existing products. This strategy can be risky if the company doesn’t have enough resources to support all its new markets. One must also consider whether one’s current marketing model will work in new markets.

New Marketing Channels

In addition to existing marketing channels, new channels are added. New marketing channels produce new demand for goods and services. New channels may be needed if existing channels are not effective in new markets. New channels may be complementary and support existing channels.

New Distribution Channels

Distributors may be added based on new channels. Their added value should be highlighted. Distributors must be given incentives to sell new products. Technology may also need to be changed or redesigned.

Customer Support

Companies start to offer innovative customer support. The support may be different from those in existing markets. Specialized technical support may be required in areas where new products and services operate. Sampling of products and services is often used to draw customers into new markets.

New Opportunities

New opportunities will appear in new markets. Management should identify these and take swift action accordingly. It is important to differentiate between real opportunities and challenges.

Marketing Mix Strategies for Expansion and Growth

Marketing Mix Strategies are a combination of business decisions about promotion, pricing, place, product and promotion. Each must be considered separately for different markets. The marketing mix should be arranged and adapted to match wants, needs and preferences of different markets. The marketing mix decision may be the same in the domestic and international markets. They may also be different.

Conventional marketing mix strategies will not usually work in the international market. This is why foreign marketing strategies include new products, new channels and new markets. These lead to new products, new demand and new interrelations between companies and channels.International strategies often have a higher price than that of domestic markets.

Different products, services and customer needs mean that the overall marketing mix is different. It should be adjusted to match unique conditions in each market. Companies must determine exactly what they need to make in each market.

How to develop Market Expansion Strategy?

Market expansion strategy develops when growth opportunities in existing channels are limited. It develops further through feasibility study (marketing, R&D and financial resources), framework (cost, revenue and profit margin analysis) and implementation plan (action plan with estimated costs and time schedules)

  1. Feasibility Study (Marketing, R&D, Financial Resources)

New products and services are often developed for specific elements in the market. Market attractiveness and demand should be clear. A clear picture of the competition should be presented. New products need to be properly developed to meet standard requirements. Different channels can be vital to reaching new markets.

Feasibility study will include:

  • Pricing strategy
  • Product development

Pricing Strategy

Pricing strategy will affect market expansion. Pricing strategy must be designed carefully in order to adopt to competitors’ pricing and fluctuations in supply and demand. Demand is the willingness of customers to buy a product or service.

Product Development

Product development strategy must be clearly devised if new products or services are to be introduced. Research and development must be effective and useful for new markets. Products should be profitable for both the company and the consumer.

Pricing strategy and product strategy are used in the main target market. Different pricing and product strategies may be needed in new markets.

R&D demands resources: time, money and people. This is needed to determine how to launch new products or services. Research and development are the top two activities when developing a new product. There are five key stages when developing a new product.

These five stages are:

  1. Generate and screen ideas
  2. Review and clear the idea
  3. Analysis the idea
  4. Plan development process
  5. Formulate testing and launch plans

Financial Resources

Market expansion strategy may involve financial resources. These resources should be used wisely as every penny counts.

  1. Framework ( cost, revenue and profit margin analysis)

Cost involved in the market expansion strategy should be calculated. Revenue should be estimated. Profit margin and potential profit should also be included. Financial resources needed at first should be allocated.

What do you need to financial estimate?

Estimated cost from production up to market launch and maintenance of the product after its launch.

Target markets are potential revenue sources. Forecast sales and revenue from target markets.

Pricing strategies and return on investment at different levels should be included. At each stage, the company should calculate their costs and profit. These stages are:

Stage 1

Launching new products and services in target markets

Stakeholders’ costs and potential profit

Stage 2

Evaluate the sales of new products

Looking into management and after sales service costs

Development costs

Distribution channel costs

Product development costs

Research and development costs

Stage 3

Financial loss three months after the launch of new products or services

Comparing projected revenue with costs and profits

Stage 4

Using lifetime analysis to predict whether sales will increase or decrease

Stage 5

Extending new products into new markets with new sales channels

  1. Action Plan with Estimated Costs and Time Schedules

This is the final step. It will ensure that the company is able to supply products at an affordable cost. The action plan will detail estimated costs, responsibilities and deadlines. It will highlight the importances to the overall strategic plan.


Implementation starts once the success of feasibility study is confirmed. Implementation has three main stages:

  1. Preparation for market expansion, research and development, development, production and marketing of new products and services

Reaching target markets, conducting market research and analysis.

Product development and research and development from production to after sales service.

New product launches and using marketing mix strategies.

  1. Initial Stage

Introduction of new products or services.

Testing and analysis

Adoption of successful strategies

  1. Establishment of new channels and markets

Creation of new business channels and business markets

Extending the product to other target markets

International Strategy

International strategy is for companies who want to expand their foreign market. There are two ways to approach international development, the expand or enter strategy. The international development mode must be clearly chosen.

Expand Strategy

Expanding international market from other markets in order to lower cost and price and to increase market share. Companies can enter new international markets through both exporting or foreign direct investment.

Supplier Power – If company depends on one supplier or use suppliers in few countries, the supplier has high buying power.

Customer power – If company depends on one customer, the customer has high selling power.

Competitive Rivalry – If the company doesn’t employ international strategy, there will be high competition in international markets.

Entry Threats – If the company doesn’t employ international strategy, there will be high threats for entry in markets.

Industry Rivalry – Industry rivalry is high if the company doesn’t employ international strategy.

Developing strong local business – Company’s market share is low in other markets.

Development cost – Developing new product in international markets is higher than those in local markets.

New technology – Technology development is high if company employs international strategy.

Entry barriers – There are many entry barriers if the company doesn’t have a large capital.

Location factor – The company must consider different factors when choosing the target country.

Substitution Factor – There will be substitution if market share is high in other markets.

Buyer power – There will be buyer power if market share is high in other markets.

Distribution channel power – There will be distribution channel power if market share is high in other markets.

Supplier power – There will be supplier power if market share is high in other markets.

Subsidy threat – Subsidy threat is high if market share is low in other markets.

Customer power – Customer power is high if market share is low in other markets.

Buyer preference – There will be different preference if market share is low in other markets.

Location factor – The target country must be considered when choosing entry strategies.

Marketing Strategies – Marketing strategies are essential and various. Let’s see some marketing strategies for international marketing:

International Organization – Different organizations must be set as a coversion between country sales and international operations organization.

Regional Marketing Organization – This is an effective structure to provide management. The organization can control the marketing and operation in different countries.

Standardized Marketing Organization – This is the company adopting minimum to no changes for different marketing. Low cost will be achieved by using this organization.

The Global Organization – This organization involves all marketing, management and operation in different countries under one organization.

Functional Marketing Organization – This is the company functions in one country that is marketing, management and operation being controlled in one person.

Segmenting Customers – Segmenting customers is one of the marketing strategies. There are several segmentation ways that can be used.

Segmentation by Interest – The company can segment customers by products, industries, by markets, by season and several other ways.

Segmentation by Demographic Profiles – If there is a need to know the average income of customers in different countries. This can be achieved through demographic profiles.

Segmentation by Geographical Location – The country of customers can be segmented if there is a need to know the country differences.

Segmentation by Buying Behavior – Different products and services will be purchased by customers in different countries. The company must understand the behavior of customers.

International diversification – Company can expand into foreign market so that its financial position in other countries will be the company’s.

International Strategy in Service Business – Service business are different from manufacturing business because of its product not needed to be installed in order to deliver services. The international service strategy involves several approaches.

Competitive Advantage Factors – Company needs to understand the competitive advantage factors different from local competitors.

Positioning – The company must position itself in order to gain a competitive advantage strategy in international service business.

Product Pricing Strategy – The company needs to understand the economical and psychological factors in each country.

Budgets for Marketing – Budget planning for international service business is low in comparison with local competitors. There will be few competitors also because of the advantages of service business.

Business Strategy of International Services – Company must understand the business strategy to use based on the industry factors in international service business.

Different Global Market Analysis – The company needs to understand aspects such as climate and weather, income and spending, and others.

Global Trends – The company must understand the international trends that will affect the values and attitudes of customers in different countries.

The Global Experience Strategy – Use passion, knowledge and experience of employees in achieving the international strategy success.

Product/Service Evaluation – Evaluation of products and services is essential in order to serve customers in different markets.

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