Two years, $5.4 billion dollars. That’s all it took for Target’s expansion into Canada to be considered a colossal failure and quickly secure its place as a future case study for global expansion lessons.
Big or small, expanding out of your home market creates large opportunities for your business. However, these opportunities also carry a significant amount of risk, making it crucial for businesses to “measure twice, cut once” before taking their first global steps.
The Canada India Acceleration Program (CIAP) pushes maturing start-ups to truly leverage as much market research and preparation as possible to ensure successful expansion – here are tips to consider for your business:
From financial resources to supply chain logistics, there are a number of reasons businesses fail to expand successfully. The old adage rings true here that in international business, “one size does not fit all”. Each new market brings about a host of changes necessary to ensure your product/service will be appealing to customers.
The How + Why of It All: create a business case for how and why you want to expand your business. It’s crucial to lay out all of the details to confirm you haven’t missed anything important, and so that you can fully answer both questions regarding your impending expansion. Remember, timing is everything, ensure you have considered all possibilities before making a decision to expand globally to avoid making a hasty choice that will leave you vulnerable and affect your current success.
Utilizing an Ansoff Matrix provides a good starting point to understand the risks of growing a business. Ask yourself, are you:
- Focused on increasing sales of a current product in an existing market? Market Penetration
- Focused on introducing new products to an existing market? Product Development
- Focused on taking an existing product into a new market? Market Development
- Focused on entering a new market with brand new products? Product Diversification
Market Penetration and Product Development, within an existing market, can provide a more risk adverse approach to growing a company without the uncertainty of expanding into unknown territory. For businesses still finding their feet, this is a highly recommended tactic prior to venturing globally.
Product Market Fit
For those businesses who have found success and now have an appetite for Market Development and Product Diversification, here are a few product related questions to consider.
1) Aesthetic and Product changes: Do you need to revise the visual look or offering of your product for a new market?
- Colours have different meanings in different countries and markets – does your current product risk offending or putting off your target audience in a new market?
- Cuts and styles of products vary from market to market – whether it be for cultural, religious, or popular reasons, ensure proper market research and corresponding changes to your product/service is done to not miss the mark. You only get one first impression!
- Product packaging may also need to change/update as you enter a new market, taking regulations, colouring, and materials into consideration.
- Everyone deals with challenges when expanding to a new market, just look at Starbucks first venture into Australia.
2) Language: Does your new market share the same language and verbal nuances as your current one?
- Think product names, packaging, slang, and any other areas where your product or service could be misinterpreted in a new market.
- Primary research can be very useful in this regard. Think of hosting focus groups in your new market prior to expansion to test its potential adoption rate.
- If customers don’t understand your product/service offering, how can they build trust in your business?
- Remember, this can be difficult – many large organizations have made mistakes (now humorous anecdotes, but are blunders that resulted in revenue loss) that serve as a reminder to always do your homework.
As one of the largest drivers for globalization and global business, technology can serve as an excellent way to test, communicate with, and sell to a new market.
1) Different markets use different technology
- Just as products/services need to be tailored for each market, so does your technology platform strategy. Be sure to know which social media/channels of digital communication is popular before putting your resources into one that will fall flat outside of your home market.
- While Facebook and Instagram may be excellent tools for communication and advertising, perhaps a different platform is used in your future market. If you consider how China has banned many of the communication channels used by North American businesses, you know that a Facebook campaign wouldn’t garner anything except lost time and budget. In order to be successful in China, you will need to become familiar with the popular platforms in this market and how they are used.
2) Test a new market with technology
- There is no doubt that e-commerce has played a big part in levelling the playing field in global markets. By leveraging e-commerce, you can test new markets and customer segments before committing fully to your next expansion.
- Here are 5 good ways to test market demand for your product. If you are creating a new product or entering a new market, these could help you perfect your Product Market Fit!
If Target taught us anything, when it comes to successfully growing your business, the devil is in the details. You might have an excellent product; however, this may not matter if you fail to plan your expansion correctly.
1) Policies and Procedures
- This may not be the most glamorous side of running a business, but if you are not well-equipped to operate in a new market, in accordance to its laws and culture, then you are headed for failure. The one size fits all approach will not yield sustainable results. Think about developing policies and documentation that will help your team understand what needs to be done and their role in successfully expanding to a new market.
2) Supply Partners
- Remember, not all suppliers will provide the same quality. While you may have a great relationship with an existing supplier, inevitably, you will have to forge new partnerships to fulfil orders in new markets. Choosing the right partner to trust can make or break your business.
- You can use this tool to assess supply chain quality in world markets.
In a world of technology, we tend to forget about the value of people in an organization. Even if you aren’t planning on opening a physical location in a new market, having the right skillsets on your team will make or break your expansion efforts.
- Hiring people who have specific market knowledge, speak the local language, and understand the culture of a new market can quickly help you to find success when expanding your product/service. This eliminates a lot of trial and error and costs associated with learning the workings of a new market.
- If you don’t have someone on your team with knowledge of your future market, it would be wise to hire a consultant who does.
Congratulations on your success-to-date. If now is the right time to consider expanding your business, then our major takeaway is to properly prepare yourself for what’s ahead. Growing a business is an exciting, yet nerve-racking process. Understanding what product/service alterations are necessary, your operating logistics, and most importantly how to effectively engage with your consumers in a new market will maximize your opportunity for success.
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