At Access/Information, we have worked with numerous companies that are considering expanding into new market areas. Expanding into new geographic markets or new downstream industries can help diversify your offerings and lead to company growth. However, if the market is not properly vetted to identify a significant need, it can also lead to loss of revenue and failure of your investment.
When considering a market expansion business development strategy, it is important to first examine your own company. Understand what you currently specialize in, what your key customers value most in your products and services, and if you have the resources in place to expand your business.
We run into a lot of customers who have expanded into a new geographic territory, because a staff member was moving there, or a family friend lives in the area. Before any geographic expansion takes place, due diligence needs to be done on the economic conditions and the competitive landscape in that area. Consider the following questions and conduct research to adequately answer them:
- What is the viability of the market?
- Is there a need for the services that I can provide here?
- Do I have the resources and strategic plan in place to effectively compete?
Some of the same considerations go into choosing to expand your service offerings to a different customer segment. A lot of companies look to expand into other industries, when the industry in which they are dependent upon experiences market volatility or an increase in competitive pressures. They may want to expand into an industry that is similar to theirs (such as moving from serving medical device companies, to serving pharmaceutical companies.)
However, in some instances, the competitive pressures are the same in similar industries and both represent high barriers to entry, which can ultimately lead to investment failure. It is important to understand the competitive landscape in a new industry.
A McKinsey study found that companies who successfully expanded into new activities, understood whether growth beyond their core services in a region or industry was either an opportunity or a risk. They also identified opportunities in which they could leverage existing capabilities and skills.
All of these questions and considerations can only be answered through market research and an inward analysis of your company’s numbers and capabilities. If you do not have the resources to conduct market research on your own, contact us.