Working with companies at different stages of expansion gave me some perspective on how much we seem to overlook when making growth decisions to expand market share especially by developing new markets.

First, a bit of background on growth and expansion strategies. Are you familiar with the Ansoff Matrix? Well, without getting academic, Ansoff Matrix is a matrix that identifies four strategies of growth by evaluating the relationship between products, addressable markets and the associated risks of developing either. It’s also called the Product/Market Grid.
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The four strategies are –

· Market Penetration – which is where the company focuses on selling existing products to existing customers.

· Market development – this involves selling existing products to new customers.

· Product development – here we develop new products for existing customers.

· Diversification – involves developing new products for new markets.

Please see here for more information on the Ansoff Matrix and other related tools.

Now back to growth strategies. You’ll agree that increasing adoption and obtaining significant market share is the recipe for organic growth. The question is – how do you do it right?

There are a lot of key factors that companies should consider when venturing into new markets regardless of what stage of growth they’re at – I’ll jump right in.

1. Product-Market Fit

It’s all well and good that you’ve developed a successful product in your current market and are looking to grow your addressable market by targeting new customers (usually in new regions). You should ask however – does the new market you’ve identified have the same problem your product solves in your existing one? Is your product able to solve a specific problem or satisfy a need in the new market? Is that market ready for the solution? Yes, I know, that popular saying – If Henry Ford had asked his customers what they wanted, they would’ve said a faster horse. Agreed. Customers don’t always know what they want (or at least can’t always articulate their needs) but with proper research, you can find out if your customers actually have a need or problem to be solved. In Henry Ford’s case, people needed a faster means of transportation – shikena!

2. Cultural diversity

Breaking into new markets means you engaging a new kind of people – new clients, partners, employees, regulators and competitors. The difference in cultures can make or break your expansion or diversification efforts. Interestingly, cultures can be very distinct even across the same geographical regions. Example, some countries in Africa have labour laws that allow employees take 2-hour lunch breaks; and they take them very seriously! To a Nigerian (who is used to working from 7am till midnight), this would be rather strange; but if you’ve done your due diligence about your proposed new markets, you would have made provision for these requirements beforehand.

3. Regulatory requirements

This is especially important for financial service providers amongst others. Every region has rules that govern them and being familiar with these should be at the top of your checklist. Regulatory limitations may be show stoppers for your product there’s no point in investing time and resources only to find that you can’t operate in that market. For instance, if your USP is instant value to merchants and the region has a rule against that; your product is DOA.

It helps to engage local SMEs and look up relevant policies (usually published on regulators’ websites).

4. Local Infrastructure

This speaks for itself. A typical example is Africa; the new hotspot for tech startups and diversification in general. Bringing in a payment product will require you to evaluate the existing infrastructure your product needs to leverage on i.e. what switches are on ground? Will you need to leverage the incumbents? What level of integration will be required? Will they be open to partnering with you? Will you build from scratch? What kind of investment will that require – time, money, people?

PS: You would notice my examples default to payment industry. Familiarity, I guess.

5. Costs

I’m not talking about high level costs now. I mean real costs. When divesting to some developing countries like Nigeria for example, you have to consider costs at the most minuscule level – e.g. the cost of generating your own electricity, the cost of having additional physical security, the cost of transportation, the cost of finding skilled employees (what with a lot of our good hands shipping west), cost of living and lots more.

6. Local competition

I don’t think it’s possible to stress enough how important it is to understand the local competition. What do they do? How do they do it? How do they retain their customers? How will you convert their customers? What will you do differently? How will you make your product sticky?

Porter’s 5 Forces, Competitor Analysis Model and SWOT Analysis are great tools that can help here.

7. Your own company structure and culture

Due to cultural and environmental differences, you may not be able to run the same structures and practices as in your previous markets. For instance, if you typically run a remote shop, you may need to evaluate the productivity level of your new employees if you find yourself in markets where (for instance) people are not exactly self-starters or don’t have access to constant electricity or internet.

8. Pricing

Pricing is another very key factor. If your product is priced higher than the purchasing power of your target customer in the new market, it’s DOA. It’s important to evaluate your costs of production (taking into consideration all the peculiarities of the new market) vs selling price and your target customers’ purchasing power before making any solid plans or investments. Well, unless you’re running a charity.

9. Scalability

Remember to do your detailed forecasts whether you have a board of investors chasing you or not. It’s important to chart the course at least a few years ahead (typically 4 or 5) with educated assumptions and make informed decisions as to the viability of your plans.

10.  Local network

It helps to have a local network – partners, brokers, investors, industry experts etc – that have domain knowledge and are able and willing to share critical information (ethically!), broker relationships and deals and generally give you a soft landing. And beware of fraudulent people… I know it sounds redundant but err…

11. Other things to consider include

- Availability of local skill

- Your company’s bandwidth

- Organic growth vs partnerships and/or acquisitions

Generally, due diligence is very important in any venture; no matter how small. Better to be sceptical and wrong than to be overly optimistic and fall flat on your face. Of course, there would always be the element of surprise but at least you would have covered most of your bases.

Thanks for taking the time to read this. This is an interesting area for me and I’m available to discuss anytime. Shoot me an email at yewande@produqtedge.com with questions, comments or requests for templates of tools I mentioned.