3 steps to a bulletproof market expansion strategy

Market expansion opens up exciting opportunities, but it’s also a strategic challenge. To succeed, you need a solid plan that cuts down on risks and drives business growth.

A bulletproofstrategy helps you enter new regions with confidence and efficiency. There are three key steps that can help you set the stage for long-term success.

Here’s how to do it. 

🚀Actionable guide to market expansion: This guide to market expansion gives you a comprehensive overview of everything you need to do to grow your business internationally. From prioritizing and selecting your markets, to evaluating new opportunities and potential risks, we’ve got you covered.

What is market expansion?

Market expansion is about growing your business by taking your existing product or service into a new area, usually outside the regions where you’re already operating. 

For example, if you’ve been selling your product only in the US, expanding to Europe would be a market expansion. It’s about reaching new customers in different places with what you already do best.

Why should you consider market expansion?

Many people think that the only reason companies expand into new markets is to globalize, capturing more market share and growing revenue.

Depending on your business, you might have multiple goals you want to accomplish with your market expansion plan, and the benefits go beyond financial growth. More specifically, you can:

• Capture market share 
• Expand sales presence 
• Diversify investments 
• Acquire top talent 
• Reduce of costs 
• Grow through mergers and acquisitions
• Add an employee in-country near a customer or client 

In a nutshell, you should consider market expansion to unlock new growth opportunities, increase revenue, and reduce dependency on your current market. Think of it as diversifying risks to avoid putting all your eggs into a single basket.

You can tap into new customer bases and stay ahead of competitors, so if one market slows down, your business can still thrive elsewhere. Plus, international expansion opens doors for innovation and brand recognition on a global scale.

🧠 It’s good to know: Globalization partners and CFO Research showed that the reasons behind international expansion vary. While the top-cited reason amongst 166 senior executives was capturing market share, the desire to expand sales, diversify investments, and acquire top talent were also cited.

Factors you need to consider for market expansion

Before you decide to explore new business opportunities, you need to research your target audience, analyze supply and demand, and understand which market segments you should go after first. Check the table below to see the exact factors that will impact your growth potential.

Now let’s have a closer look at the main three steps for a successful market expansion.

Step 1: Prioritize and select regions for market expansion

Figure out supply and demand

The obvious place to start your market selection process is your existing data. What are the early signals of interest you’re seeing from different markets? Look at your website traffic and the country-level data to answer: 

• Where are you seeing traction? 
• Where are people signing up? 
• Where are they trialing but maybe not converting? 
• What is your average order value in those countries? 
• Do customers in some countries have a higher lifetime value? 

Use these key performance indicators (KPIs) to get a general sense of where you should be taking a deeper dive and measuring the broader opportunity.

💡Pro tip: When looking at KPIs, pay less attention to top of funnel metrics like traffic volume, and look more closely at metrics that directly impact revenue such as closed-won leads. Analyze performance of your distribution channels to identify where you should double-down when it comes to marketing.

You also need to know what you’re up against. Analyze your competitors to see how they are positioning their products and find gaps your business can fill. This is how you’ll be able to build a competitive advantage and adjust your value proposition for the foreign market.

Organizing focus groups and working with cultural consultants are both great ways to validate your idea of market expansion.

Measure the opportunity

To plan your market expansion strategy, you need to estimate how many customers could buy your product in each country.

According to Nataly Kelly, calculating your total addressable market (TAM) can be quite tricky:

“Calculating market size is a tough exercise, even if just for a company’s home market. For digital companies, which go global from their earliest days, figuring out true market size can be pretty blurry. That’s mostly because there are many different ways to do it.”

Kelly continued to share that the golden rule of creating a successful market expansion strategy is: one market = one country.

Example for evaluating the market expansion opportunity

Kelly shared a great example to help you understand the best way to evaluate the market expansion opportunity.

Let’s assume you’re selling a software product that costs $1000 for an annual subscription. Now, let’s assume 1,000,000 potential customers could buy your product in your chosen markets. 

A simplified way to calculate the opportunity would be to multiply $1000 by your potential customers. You’d have a market size of $1 billion, but it wouldn’t account for economic differences. 

Now, let’s say that 30% of these customers are in a developed country and 70% are in a developing market. To keep the profit margin good, you’ll have to sell your product at a 50% discount. 

This gives you a more accurate market size of $650 million. But bigger doesn’t always mean better. You need to factor in the difficulty of entering the market as well. 

❗Important note: The above example provides a simplified, napkin math calculation that estimates the size of your potential market. To successfully expand to new markets, you’ll need a much more thorough financial plan.

Assess the difficulty of entering a new market

So far, we broke down the top considerations for market expansion. Now it’s time to take a closer look to assess how difficult it would be to enter the markets in question.

Define your Unique Value Proposition (UVP)

The reason why customers choose your brand over others will vary depending on the market. Your product must offer a clear, competitive advantage, and you need to think about the local needs. That’s also when the globalization vs. localization debate is likely to come up.

Do you have what it takes to solve their specific challenges? If not, is it worth adjusting or further building your product to match the needs and preferences of new customers? What would the return on investment look like?

💡Pro tip:Don’t fall into the trap of thinking success is guaranteed in new markets just because you’re doing well in your local region. You need to take into account cultural differences and unique consumer habits. This is exactly why localization matters.

Understand what’s the ease of business

How easily can your business operate in the new market? Some countries rank higher on the Ease of Doing Business Index (EODB), which indicates favorable conditions for businesses to enter and thrive in the new market.

For example, in highly regulated markets like Germany, you may need extra layers of compliance related to cybersecurity and privacy.

However, Germany’s Ease of Doing Business (EODB) score was 80 in 2019, reflecting a generally favorable business environment compared to other countries. It is considered business-friendly, especially in areas like infrastructure, legal protection for contracts, and tech.

Make sure to research the Ease of Doing Business score for each potential market, and factor this into your decision. You can also hire local legal experts to ensure full compliance before launch.

Evaluate economic stability

The broader economic environment of a target country can significantly impact your success. Evaluate the country’s economic stability, growth potential, and currency fluctuation to determine long-term sustainability.

This is important for defining your pricing strategy. You need to take into account local economic conditions to ensure good profitability.

Let’s say you’re exploring emerging markets like Brazil or India. Market expansion to these countries, where currency fluctuation is more common, requires a flexible pricing model. It might be a good idea to price your product in local currency and then offer freemium or installment plans. This depends, of course, on the nature of your product.

💡Pro tip: Set up a contingency plan for currency volatility. For example, you might want to adjust your prices on a quarterly level, or use hedging strategies to minimize currency risks.

Step 2: Develop a market entry strategy

Once you’ve prioritized and selected your target markets, you need to plan how you’ll enter these markets successfully. This step covers three main things:

• Deciding on the best approach to enter a new region
• Deciding on the best way to tailor your offer to target audience (localization)
• Defining your infrastructure

Let’s have a closer look at each of these.

Decide how you’ll enter the new market

When figuring out market expansion, you’ll face an important choice: do you want to go in alone, or would you rather form a partnership such as local distributors or resellers?

Another option is to look into franchising, licensing, or joint ventures. If you’re selling physical products or offer face-to-face service (e.g., beauty services), franchising and joint ventures might provide a low-risk entry with lower upfront costs.

On the other hand, for digital-first products, the barrier to entry is lower. You won’t need to think about fulfilment and drop-shipping because everything happens online. Regardless of that, you’ll need to take into account local laws and regulations, especially in terms of taxes and customer policies. 

📚 Further reading: Curious about expanding your online business to international markets? Read our ultimate guide to cross-border ecommerce to discover what it takes to set up a store, how much it costs, and why localization matters for business growth.

Define your infrastructure

Market expansions require a lot of pre-planning. You need to make sure you’ll have what you need for a smooth operational setup. This includes logistics, supply chain, distribution, and local customer support. 

If you’re selling physical products, you need to make sure you have reliable shipping partners and affordable local warehousing options. For SaaS businesses, it’s necessary to have local customer support available to handle inquiries in the regional language and time zone.

Localize your offer and messaging

You might think that making your product and website available in the language of your target audience is enough, but it’s really not.

Translation and localization have overlapping areas, but they’re not quite the same. Everything from product packaging and your offer to messaging and user experience– has to be adapted for cultural relevance and language. 

If you’re not sure where to start, read our article on localization strategy.

As a part of your marketing translation efforts, you’ll need to choose the right marketing channels. Research which digital and traditional channels are most effective in the region. Take into account local search engines, social media platforms, and influencers.

📚 Further reading: As you plan your market expansion, you have to gradually work on improving your brand visibility. Remember–you’re competing against brands that have earned the trust of your target audience long before you joined the game. Check out this guide to international SEO and learn how you can ensure high visibility in local search engines.

Know who’s doing what

Next thing you need to do is assemble a strong team that will lead your GTM efforts. If you clearly define roles, you’ll be in a position to make faster decisions. Additionally, clear responsibilities help you avoid duplicate efforts. No area will get neglected, and you’ll make sure there’s a good balance between marketing campaigns and sales enablement.

For a successful market expansion, it’s smart to partner with local talent. They can help you get a deeper understanding of the region’s cultural norms, consumer behaviors, and preferences. Moreover, local partners or employees can help you adjust your messaging to align with local languages, idioms, and tones. They are often a key to high-quality localization.

Another benefit reflects in their established networks. Local working professionals often have pre-existing relationships with suppliers, distributors, or even government authorities. This is how you can ensure faster market entry.

📚 Further reading: Learn how to build a strong localization team from 10+ experts and expand to new markets with confidence.

Step 3: Scale and optimize your operations

Business-wise, it’s smart to start with a pilot market launch to test and refine your approach before rolling it out on a larger scale. Here’s how you can optimize your operations for long-term success.

Before scaling, revise your company goals

At the very beginning of this article, we discussed how capturing market share is not necessarily the only goal of market expansion. To build upon that, here’s what else you may be going after:

• To accelerate the company’s growth rate 
• To prevent competitors capturing market share 
• To capitalize on existing market demand signals 
• To reduce costs by setting up in cheaper markets

It’s very important that, before you decide to scale your market expansion efforts, you take a realistic look at the achieved goals. 

You might track revenue growth, customer acquisition rate, and market penetration in the new region. Or monitor competitive positioning by analyzing market share trends and your customer churn rate.

Additionally, you can capitalize on demand signals. For example, have you noticed increases in website traffic? What about product inquiries or sales conversions from the new market?

Finally, you should also analyze operational expenses, labor costs, and profitability margins in the new market compared to previous ones.

📝 Key takeaway: Scaling too quickly can be risky. Always test each market expansion before doubling down on additional regions. That’s how you’ll ensure profitability without the risk of spreading your investments too thin.

Expand your operations with right tools

Once you validate it’s safe to continue scaling your market expansion plans, it’s time to have a closer look at the efficiency of your operations. No business ever scaled successfully by holding on to manual tasks.

With AI, various types of task automations, and machine learning, you can improve your customer support, marketing, sales, and logistic operations.

Looking beyond technology, you should be prepared to renegotiate supplier contracts, consolidate shipments, or implement lean methodologies such as just-in-time inventory practices. That’s how you’ll scale sustainably. 

Maintain compliance and manage risk

Last but not least, you need to stay up to date on any changes in local regulations that could impact your operations. This might include tax laws or data privacy requirements.

Additionally, you need to be aware of potential risks like political instability, currency fluctuations, or regulatory issues. Be proactive and invest in contingency plans and local legal counsel.

🎥 Netflix’s global market expansion: Netflix faces political, legal, and regulatory challenges as they expand to new markets. Operating in over 190 countries, the company adapts to varying political climates and regulations. This includes content censorship and copyright laws. Netflix invests in local content and complies with data privacy laws. Additionally, governmental regulations and trade dynamics impact the company’s ability to distribute content globally. But despite competition, Netflix’s focus on original programming and strategic market entry has helped it become the most popular streaming platform in the world.

Market expansion gets easier when you nail your localization

There you have it: market expansion in three steps. The first step is to prioritize regions for market expansion. Then you develop a market entry strategy and gradually scale your operations.

Sounds simple, but it does take a lot of work.

However, market expansion becomes a lot smoother when you get localization right. It’s not just about translating words. It’s about truly adapting your brand to fit the culture, language, and preferences of each market. This ensures your message gets across.

The key takeaway? Companies that prioritize localization see better engagement, higher customer satisfaction, and faster growth. That’s true for both ecommerce and brick-and-mortar stores.

So, if you’re ready to make your expansion efforts truly impactful, we invite you to give Lokalise a try.

Lokalise the leading platform that helps you scale localization with ease, making it one less hurdle on your path to global success. We’re trusted by 3,000+ businesses, including Notion, Revoult, Starbucks, and more.

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