In a market where rising costs and inflationary pressures are common, sustained revenue growth is the only way for companies to stay in business. One of the levers that comes in handy for CEOs is to take their product to new geographies and over a period of time expand the customer base. We term it as the easiest route because delivering value to the customer forms the core of the business and more the customers the better it is. While delivering the value proposition to customers is a basic attribute, we don't see many regional brands expand beyond their territories, forget geographies. Some companies which have taken the leap of faith and ventured into other regions have eventually fizzled out or are restricted to being fringe players in the new market.
Why do companies dread expanding to newer markets? It is more than just the fear of competition - it is the fear of the unknown. Will the customers accept their products? Will the trade support them? What should be their product, marketing and route-to-market strategies? Most of these questions can be addressed through proper market research. However, one question that gives CEOs sleepless nights is, "What if we don't succeed?"
So, what happens when CEOs faced with these questions still decide to enter new markets? Most of them play safe and eventually replicate the strategies that made them the regional market leaders. The prevailing thought is that strategies that made them regional superstars will work in other markets or geographies too. This is where most companies, despite the best intentions, often fail.
There is a reason why the phrase (and Marshall Goldman's book) "What got you here won't get you there" is so popular. It applies to companies trying to expand as well. What should companies do to get themselves from where they are to where they want to be?
The answer is - they should play to win. Research and experience tells us there are three things successful companies that have played to win in new markets have in common.
Successful companies accept changes to their strategies while entering new markets. One of the first things companies usually change is their product portfolio strategy. Most companies that have a specific product range tend to play defensive by launching their best selling products from their home markets in the market they are trying to enter. The product might be a market leader in the home market, but unless it beats to the pulse of the new customer, companies are shooting blanks. It makes sense for companies to adapt their product strategies to the flavour of the new market. Some companies which have done this successfully include McDonald's, which sells Maharaja Mac at its outlets, and Havmor Ice Cream brand which has launched Chowpatty Kulfi.
Another change that successful companies often make while entering new markets is to fine-tune their go-to-market strategy. Companies entering a new market should tweak their channel offerings to cater to the needs of the new market and differentiate themselves from the crowd. There are multiple examples of companies that have changed different parts of their existing strategies to cater to the new market. Wagh Bakri Tea Company is a case in point. They have successfully launched lounges in New Delhi and Mumbai which are popular with customers. It's a good example of differentiated route-to-market strategy.
The ability of the team to execute new market launches is one of the most crucial elements for successfully entering new markets. This function is usually taken for granted. For entering new markets, high-performing companies deploy a mix of home-grown high performers and external talent. This combination of internal talent and external expertise creates a balance between new market knowledge and the company's heritage. These winning teams also have a greater degree of flexibility to enable faster decision-making and execution
Consider the example of Vi-John shaving cream. From selling products in Sadar Bazaar in New Delhi, India, to being a leader in men's grooming segment, Vi-John has come a long way. In order to lead its aggressive growth strategy, Vi-John group put together a team of internal and external executives to win in the new market.
Not all strategies or plan will work in the favour of the company. Hence the agility of a company in finding gaps in their plans and execution, and taking decisions to plug them quickly can make or break their entry in a new market. But how can they take decisions that are immediate and impactful? What kind of data should they collect and how can they monitor the data when it is a new market?
Today, most companies have started investing heavily in systems and processes that monitor trade and consumer level data. Companies have also started taking advantage of the advent of digital technologies, launch analytics and monitoring mechanisms. These provide insights into launch performance against the plan and enable the team in taking quick and meaningful decisions. They also create a launch cell or a war room environment to fast track-decisions and facilitate faster execution.
Great regional companies sometimes falter with respect to entering new markets because the dynamics can sometimes be similar to starting the company all over again. The moment companies think about entering new geographies as an extension of existing markets and replicate existing models, they are setting themselves up for failure. But, if companies give their new customers the treatment that exceeds their expectations, if they truly provide them with solutions to their problems, that is when they will succeed. That is when a company is playing to win.
Anand Darbhe and Vivek Chopra are Principal, Accenture Strategy, Accenture in India