You're probably familiar with the phrase "don't put all your eggs in one basket". Did you know that this also applies to your business strategy? If you focus all your time, resources, and energy on one area, you risk losing everything if the context changes.
This concept of diversification is an important consideration for small and medium enterprises (SMEs) to expand their business internationally. Having a diversification strategy will benefit your business' long-term stability and growth.
This article highlights important considerations for businesses interested in expanding their operations into international markets. The global expansion journey may vary based on the ease of market transition, business processes and scope of adaptive resources. This short guide will help your company determine the right personalized path to expand your business abroad, find the value in opening up to new markets, and prepare you to successfully grow your business globally.
Diversifying International Markets
As a company interested in entering new markets, your first step is to evaluate whether it is possible to do so. We strongly recommend that you review other articles on our site to find valuable information to help you decide whether you are ready to go global with your business.
Going global with your business takes time, resources and motivation to be successful. The following global expansion paths are ranked in order of ease of implementation. Discover the path that's right for you!
Existing product or service arrangements
This can be defined as making minor adjustments to an existing product or service related to market conditions such as climate, laws and regulations, and cultural conformity. Check out Google Market Finder, a free tool that helps business owners reach potential customers abroad. This is the simplest way to diversify because the tools needed to make the following adjustments are readily available to most businesses:
• Before making the switch, research competitors in the industry doing business abroad to see what works and what doesn't.
• Meet country product or service regulations for labeling, packaging and ingredients.
• Depending on the destination country, product packaging and shipping methods may vary to accommodate different climates.
• Translate the information into the national language of the country.
• Currency, language, shipping and returns etc. if you are using e-commerce. Build a platform tailored to specific markets in terms of
• Consider how you will reach international consumers through marketing and advertising tactics.
Tip: Google Market Finder can help you identify promising target markets, assist with planning operations to match your desired markets, and provide you with considerations as you develop your international marketing strategy.
Product Band Expansion
Adding features to an existing product or service under an existing brand name in order to increase diversity for changing international consumer tastes is the way to reach different market segments. The following are examples of how to diversify your product line:
• Creating new products or services in your current market category: introducing new flavors, shapes and colours.
• Appealing to a new demographic: changing the look of packaging and labeling using different advertising messages and channels to reach the desired demographic.
• Changing the product price point to represent everything from bargain to luxury: adjusting packaging and labeling to fit each price point, using different advertising messages and channels to target consumers in the price range. This can be an important aspect of successfully diversifying your product line to suit unique cultural perceptions.
• Meeting unmet needs: Listen to current and international consumers to see what they want more from your product or service or similar, notice how consumer needs evolve and change over time and adjust accordingly.
This strategy is usually successful when a business is a well-established and internationally recognized brand in its current market. This means using your existing brand name to expand into a new product category. Brand extension can be done by developing a new product or service that complements your existing products and services. Here are some important considerations when implementing this strategy:
• The extension should stay true to your business's brand identity to maintain trust and avoid confusion with customers.
• The decision to expand your brand should be heavily researched to ensure the long-term success of the addition.
• If your business is financially stable, a brand extension can also be done by purchasing an already established business in the area you are considering expanding.
Adjacent Market Expansion
Adjacent market expansion; It is another form of diversification that refers to the expansion of a business into uncharted territory. Let's say you are a Dubai-based business. You can also expand to markets in neighboring countries (Qatar, Oman, Bahrain…). Going to market means using your business' core competencies to create a new source of value. Success in using this strategy requires a business with a well-known reputation, established skills, market accessibility, and a strategically viable expansion opportunity for your business.
By definition: Strategic fit refers to the extent to which an organization matches its resources and capabilities with opportunities in the external environment. Ask yourself, 'Does it have the potential to create value? Do I have market accessibility?'
Benefits of Diversification
• Reduces risk due to the spread of your investments in more than one area; If one market fails, success in others will lessen the impact of the failure.
• It helps you to reach bigger market potential due to low competition in foreign markets.
• Increases the overall market share of your business.
As you diversify your business, the potential impact of obstacles to success can be minimized or avoided if you are aware of the challenges and how to deal with them. The key is to approach a challenge as an opportunity to learn and grow your business.
Competitor - Adding new products and services to your inventory can disrupt sales of previous ones. This phenomenon occurs when the new product or service receives demand from the existing product and reduces overall sales. This can be a positive strategy if used effectively; gain market share from competitors.
Perception – If you expand your business into a completely unrelated market, your brand name may be perceived as less credible because you are dedicating your resources to multiple industries. To avoid this, extensive research should be done to make sure your business extension matches your brand identity and is meaningful to customers.
Reputation - Whether your business is implementing a product line expansion, brand extension, or expanding into an adjacent market, there is a possibility that a new product or service will damage your reputation. Market research should be conducted prior to launch to predict how consumers will react.
Failure - New product or service, cultural tastes and preferences, laws and regulations, economic climate, etc. may fail in international markets due to lack of understanding or lack of competitive advantage in your chosen market. In some cases, events occur unexpectedly and may result in adverse market conditions.
Questions for the study:
1. How much time, resources and effort are you prepared to focus on diversifying your business?
2. How many years has your business been operating?
3. Do you have expansion capacity? Specifically, human capital, operations, motivation, etc.
4. Interested in expanding your current target market?
5. Have you noticed that your customers want more from your product or service (for example, 'You should do this', 'I wish they had this', 'It would be better if there was this')? Do you intend to act according to these suggestions? If so, when?
6. Interested in offering more variety in your products or services?
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