Expanding your business to international markets is a complex and challenging process. With 195 countries and 900 global cities to pick from, selecting the right market might be overwhelming. This article provides a structure and a five-step approach for generating a prioritised list of target markets to support your international business expansion strategy.
Target Market Identification and Understanding
Choosing the right market can mean the difference between success and failure in your global expansion plans. Target market expansion is the strategic process of finding and pursuing new market segments or customers to increase the reach and influence of a product or service. Businesses that expand beyond their current customer might enter untapped markets, diversify their revenue streams, and accelerate their growth trajectory.
Here are some elements to consider when identifying your target market for internal expansion.
STEP 1: Create An Initial Target List
First, compile a list of countries to evaluate based on variables that are important to your business. Consider what you will need to have in place to assist you in achieving your objectives. List your must-haves and important nice-to-haves. For example, a stable economy may be a must-have, and cultural similarities may be a nice-to-have. Once you've specified your needs, list countries and rank them according to your criteria.
For example, considering a B2B SaaS (Software-as-a-Service) based in the UK intending to expand into Canada, the prioritised list of target considerations might appear as follows:
- Presence of customers: Diverse range of industries with a significant number of tech-savvy businesses, particularly in cities like Toronto, Vancouver, and Montreal.
- Ease of doing business and setup: Canada is known for its business-friendly environment and supportive regulatory framework, making it relatively straightforward to establish and operate a business.
- Stable economy: Generally stable economic conditions provide opportunities for business growth and investment.
STEP 2: Identify The City Attractiveness if a Local Physical Presence is Required
After identifying the country as the target market, the next step is to assess the attractiveness of various cities within the country to establish your base of operations. When evaluating the attractiveness of cities, it's essential to consider a combination of city attributes of general economic performance and risk, along with industry-specific factors such as addressable market size and competition.
Economic Factors
- Local GDP growth rate
- Employment opportunities and job growth
- Cost of living and affordability
- Business-friendly regulations and taxation policies specific to the city
Cultural Factors
- Language is spoken predominantly
- Cultural diversity and inclusivity
- Lifestyle preferences and customer behaviours unique to the city
- Local traditions and customs that shape the city's identity
Institutional Factors
- Local government stability and effectiveness
- Regulatory environment specific to the city, including zoning laws and permits
- Quality of public services such as education, healthcare, and utilities
- Accessibility to legal and financial services
Technology and Infrastructure Considerations
- Transportation infrastructure (roads, public transit, airports)
- Digital infrastructure (broadband connectivity, availability of tech hubs)
- Availability of skilled workforce with relevant technical expertise
- Innovation ecosystem and support for technology-driven industries within the city
STEP 3: Calculate Market Opportunity
The next stage of your analysis is to determine your Total Addressable Market (TAM). The most challenging part of this process is gathering enough data to do the computations and come to an accurate estimate. Here are some options for sources of information you can utilise to figure out your TAM:
- Industry market report in each country.
- Government reports on target companies in your specified size range or sector at the national or regional levels.
- LinkedIn searches for potential companies or businesses in a specified target segment.
- Reports on keyword traffic and visits to your site
- Conduct market research on the budgets and spending habits of the target decision-makers who will purchase your product.
- Pricing data to understand how much you can sell your product for. This can be gathered through discussions with contacts, partners, and customers to gauge pricing expectations.
It's important to note that many businesses make the mistake of stopping their analysis once they've calculated their TAM. However, it's crucial to take it a step further and narrow down your TAM by focusing on segments that you can best address - this is known as your Serviceable Available Market (SAM). Additionally, it's essential to be realistic about the percentage of that market you can capture.
STEP 4: Understand the Competition
The final step in understanding the countries you're considering is to investigate the competitive landscape. This involves looking at the entire ecosystem, including your competitors, the presence of current or potential partners, the existence of identical products and services, the type and availability of marketing and distribution channels, and, of course, your customer base's preferences and behaviours in that market.
You'll want to look at the following:
- Identify direct and indirect competitors offering similar products or services.
- Analyse their strengths, weaknesses, market positioning, and customer base.
- Assess their pricing strategies, product features, and marketing tactics.
- Explore potential partnerships with local businesses, distributors, or suppliers.
- Evaluate the benefits and risks associated with collaboration with other entities in the market.
- Determine if identical or substitute products or services are already available in the market.
- Assess the uniqueness of your offerings and how they differentiate from existing alternatives.
- Determine which channels are commonly used by competitors and how they reach their target audience.
- Understand the preferences, needs, and behaviours of your target customer base in the market.
STEP 5: Assess Your Ability to Execute
At this stage, you might feel a bit overwhelmed with all the research, but one critical step is still missing in your international strategy.
Even if a country seems like a perfect fit on paper, it won't matter much if you can't execute your plans effectively. This is a common issue, especially when entering complex markets like the US. So, it's essential to consider what similarities or differences with your existing business might make it challenging to execute well.
It's crucial to ask yourself the following questions:
- Are we confident that our product fits well with the needs and preferences of the market, or will we need to adapt our product to better serve local customers?
- Can we find and hire the right people with the necessary skills and cultural understanding to succeed in the new market?
- Do we have strong leadership in place who can take ownership of the expansion and effectively navigate challenges?
- Do we have the financial resources to handle additional costs such as taxes, labour, and compliance requirements in the new market?
- Are we prepared for the time commitment required from existing team members to support the international expansion efforts?
It's time to put your strategy to the test with our comprehensive Market Readiness Assessment. Perform a thorough market expansion audit to gauge the entry of new markets. Evaluate potential, competition, and regulatory aspects. Analyse resource requirements, identify growth opportunities and strategise for successful expansion.
gigCMO's Fractional CMO Service will provide you with robust international expansion strategies to maximise your business's full potential. By leveraging a playbook-driven, internationally proven marketing leadership, you'll gain assurance of high-level marketing expertise and strategic guidance that could lead to your expansion success. This includes marketing investment across key channels to drive customer acquisition and maximise ROI.
With gigCMO's Fractional CMO Service, you'll not only be armed with the knowledge but enhance your capabilities, identify areas for improvement, and develop actionable plans to address any gaps. Whether it's enhancing product-market fit or optimising resource allocation, we'll equip you with the insights and strategies needed to navigate the complexities of global expansion confidently. Contact us to learn more about Fractional CMO Service.
