Expanding Your Geographic Market
The Big Picture
Now more than ever, successfully leading a business requires cultivating a global mindset. With the growth of e-commerce, increased ease of international travel and adaptation of technology to facilitate the transfer of capital, goods and services, many businesses have already made the transition to expand their geographic footprint. This can provide opportunities for increased revenue and exposure, scaling your business exponentially and solidifying your share in the marketplace.
If you are considering entering a new geographic market, and struggling to pick the right one, Gravitas Coach Jean Guy LeBlanc has some advice. “Choosing your geographic market is a broad decision that involves other components of your organization’s strategic plan,” LeBlanc shares. “You need to look at the big picture, and how all the pieces of your strategy fit together.”
“You know your current sandbox – what you offer, where and through what distribution channels. If you’re profitable, moving to another market can seem like the next logical step. But it’s always a risk. Maybe you grow, but maybe it’s not profitable. Worse, it could start affecting the profitability of your current business. If you lose focus or change your operations to fit the new market, you can become less competitive in your current ones.”
LeBlanc advises, “You need to determine which geographic markets are not only a strategically beneficial move, but which also fit with your current strategy. Will it enhance what you’re currently doing or hurt it? Your strengths in your current market should lend themselves to your new market, as you look at the operational and practical aspects of the strategy.”
“This process means clarifying your current strategy,” LeBlanc says, “You need to flesh out your Big Hairy Audacious Goal (BHAG™), Core Customer and Brand Promise before translating them to a new market.”
Elements of Decision Making
Elements you need to be thinking about:
What is your long-term goal (BHAG™)? – “This will inform your choice of geographic markets. If your goal for the next 10 years is to achieve 10 times or 20 times your current revenue, that will narrow the locations you research. For example, you may look at Brazil rather than Argentina, or California rather than Oregon.”
Where is Your Core Customer? – “Who is your best customer? Who can you serve the best? Who pays full price, is loyal, refers others and pays on time? Look within your current customer base to identify these more profitable customers. Then, do the research to identify what new geographic markets these people and/or companies are in to find a concentration of your core customer.”
What is your current Brand Promise to your existing geographic market? – “How is your offering to your current market unique? What unique characteristics are highly valued by your core customer?”
What does the Competitive Landscape look like? – “Who are the competitors in the new geographic market? How differentiated are they? How many of those different competitors are targeting your core customers? Is there a niche for you there? Is your core customer well served, or can you be the unique provider they are looking for?”
What are the Practical Concerns of moving to this new market? – “If you need to produce your products and services within your new market, for reasons of cost or speed, take a look at suppliers. What distribution channels are you currently using? Can you contract with the same or similar ones in the new market? You don’t want your operations for each market to be too different, so that, in the end, you’re in essence managing two different companies. There’s no synergy or added profitability in that. And it gets risky if you’re no longer focused.”
The Strategic Journey
LeBlanc recommends Porter’s Five Forces, the work of Harvard Business School professor Michael Porter, to dive deeper into analyzing a geographic market’s potential fit and profitability. The framework has companies look at the threats of: Buyer Power, Supplier Power, Competitive Rivalry, Substitutes, and New Entrants. “In the context of what we offer versus what other companies offer in that market, we can use these five forces to evaluate the risks of operating in the new market,” LeBlanc says, “and then choose the new geographic market that is the best fit.”
It’s also critical to be aware of the trends in any geographic market. What’s happening on the political, legal, social, economic, and environmental fronts? What threats are likely to increase, which will stay the same, which could decrease? Is this market likely to become more or less attractive over time?
If you are a mid-market company looking to expand to other geographic locations, whether your current market is saturated or you are looking to add more credibility to your brand, LeBlanc notes that the process can be a part of the solution. “Maybe, as you review your strategy, you realize that there are untapped opportunities in your current market. Maybe you do expand and create a greater presence both locally and globally, signaling your value and strengthening your brand. Either way, it’s helpful to understand your own strategy. What we do know is that expanding geographically is not the solution to mediocre performance at home. Often, we need to bolster our position there first.”
As a broad rule of thumb, LeBlanc offers this advice: “The more similar the new market is to your current market, the more strategically aligned it’s likely to be. If it has similar types of customers, suppliers etc. then that’s a good indicator of its fit.”