The majority of businesses tend to expand into new international markets by accident or default, rather than taking a strategic approach.
This can lead to various issues down the line, stalling growth rates, increasing costs and making it harder to focus on business goals. So, how do you do it right?
We spoke to Tom Kinney, senior innovation and growth specialist, about market expansion and strategies for success.
What is market expansion?
As your business grows, your current market may become too small, causing progress to stagnate. To continue growth, you may need to seek new customers in new markets.
Market expansion strategies include:
- Market penetration: Offering your current product or service to your existing markets on a wider scale
- Product development: Adapting or adding new products or services to reach wider markets or customer segments
- Market development: Introducing your existing product or service to a new demographic or market, at home or abroad
- Diversification: Introducing a new product or service into a new market - this strategy carries the most risk but has high growth potential
Types of market expansion
Take a closer look at some of the common types of market expansion.
Geographical market expansion
Geographical expansion involves offering your products or services to new geographical markets. As so many UK businesses are seeking to expand into new geographical terrains, at home and overseas, you will need to be innovative to succeed.
Sector market expansion
Sector expansion involves modifying your product or service to fit a different sector. For example, repurposing a healthcare product into one for use in the education sector. In this case, you will need to adapt your offering, value proposition, messaging and marketing to compete in the new market.
Domestic market expansion
Domestic market expansion involves offering your products or services to a new market within your home country. One of the benefits of UK domestic expansion is that there may be less competition for your offering than in Europe or the US.
However, as your business grows, your home market may become too small and you may need to look for a wider customer base overseas.
International market expansion
If your innovation business is looking to expand internationally, there may be more hurdles to look out for, as this type of expansion can be risker and more costly.
Logistics becomes more complicated, with the delivery and transportation of products across borders, particularly as new EU regulations have come into force. Time differences and longer timescales also need to be factored into production and planning.
Businesses also need to think about how they will service the foreign market and their overseas customers. Who will manage and develop the business in the overseas market? What support will you need to give those working on the ground?
Our Global Business Innovation Programme (GBIP) helps ambitious businesses to collaborate and expand in new global markets through overseas missions, networking opportunities and continued support.
Market expansion strategy benefits & challenges
Having a clear strategy in place can help you to reduce costs, minimise risks and find new business opportunities.
Common market expansion challenges
International expansion in particular takes time, effort and resources.
According to Tom, some of the most common challenges for businesses looking to expand into new markets include:
- Securing the right funding to develop the business or product
- Understanding the market - which requires market research, and more importantly, customer research
- Language barriers - although English is commonly the language of business, in certain countries this may be an issue
- Negotiating different timezones in international markets
- The costs of servicing the market can be a barrier
- Logistics and market regulations
- Product modification
- Understanding trends in your target market
- Not following up or maintaining relationships with contacts in the target market
- Supply chain issues
How to expand your business into new markets
To overcome the challenges detailed above and avoid common pitfalls, follow these steps for successful business expansion.
Step 1: Market and consumer research
Robust research should be the starting point when thinking about market expansion. This could include;
- Customer feedback
- Market size analysis
- Market trend analysis
- Market share analysis
- The creation of buyer personas
- Competitor research
- SWOT analysis of the target market
- Benchmarking against the existing market
- Risk analysis
- Growth potential analysis
- Cost-benefit ratio analysis
Step 2: Define your new target market
Next, you need to redefine your new target market. Who are the customers? What are their needs, pain points and habits? How can you serve them with your products or services?
Step 3: Business planning and strategy
Once you have processed the insights that have come out of the research stage, you can start to put together a business plan and market expansion strategy.
You will need to think about:
- Whether you need to adapt or add new products or services to your offering to meet the demands of the new market
- Whether you need to adapt your marketing strategy and messaging
- If you need to make new hires or forge new partnerships
- Which channels of distribution and promotion are right for the business
Step 4: Securing finance
Expansion and growth can’t happen without having the funds in place.
If you require external funding, you need to understand the different options available to you and, in some cases, make a pitch to investors. To do this, you will need a firm understanding of your expected expenditures and revenue projections.
We can help you to propel your growth by finding the right innovation funding & finance options and getting investment ready.
Step 5: Measuring success
Don’t forget to continually measure and assess progress in order to learn, optimise and grow. KPIs should be set out in the business plan in accordance with your business goals.
How to do market expansion right
Find more tips from innovation and growth specialist Tom...
Ask yourself why
Before embarking on a market expansion strategy, first, ask yourself WHY you are looking to expand. Whether it’s to increase sales, turnover or introduce new products to the right people - have you explored all the options at your disposal?
Have you explored the possibility of further growth in your current market? Are your existing products or services ready for the market or do they need to be adapted? Do you have partners in the target market? Particularly for smaller companies looking overseas, market expansion is difficult to do alone.
The importance of business strategy
One of the most important elements to consider when looking to expand into new markets, according to Tom, is having an overarching strategy in place. Market expansion strategy shouldn’t exist in isolation from your overall business strategy. A well researched and robust business plan can help you to innovate and grow.
Understand your customer and the value proposition
Understanding your target customer base is essential when looking at new market opportunities. You need a full picture of their requirements, pain points and existing habits to develop your messaging and marketing strategy.
Are you able to modify your offering to fit their needs and fill the gap in the market?
Draw on experience
Knowing ‘what not to do’ often comes down to experience and learning from mistakes. Younger businesses don’t have this advantage, which is why speaking to potential business partners or specialists can be a helpful tool for overcoming barriers to market expansion.
Innovate UK EDGE helps innovation businesses expand into new markets
‘I want to leave the company in a stronger position than when they started’
Tom Kinney, senior innovation and growth specialist
Innovate UK EDGE innovation and growth specialists offer knowledge, experience and bespoke support to help you develop your business growth strategy and enter new markets.
With extensive international linkages, our specialists can connect you to key partners through our business networks, events and programmes.
From understanding how to access funds to detailed market research and signposting - we can help you to expand into international business markets to continue your growth journey.