Here's How to Make Your Expansion Into New Markets a Success

Having lived through the successes -- and the failures -- of helping companies enter new markets, we've learned that a rigorous and disciplined approach is critical.

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By Dave Sutton

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Spanish retailer Zara is one of the world's most successful clothing and accessory brands, and one whose track record of market expansion is enviable. Its flexible, innovative, high-speed business model has traveled from Spain to 77 markets around the world, including China. When Zara had ambitions to expand into the emerging (and challenging) markets of India and China, it planned strategic, yet very different, entries into each market.

Related: Growing Your Business Internationally? Reinvest Every Dollar to See Results.

Oscar Perez Marcote, managing director of Zara (parent company, Inditex), makes calculated decisions on how to move forward with expansion based on extensive research and testing with the brand's target audience. Since 1988, Zara has successfully entered new international markets with a clear strategy and a team aligned to execute with ruthless consistency. Walk through the streets of most capital cities around the world and you will find a Zara. Gaze through the street window and Zara's success appears effortless. But, market expansion is anything but easy. As Marcote and his team at Zara can attest, even when informed by extensive market research and armed with a clear strategy, new market entries are never a guaranteed success.

Consider the story of Mahindra & Mahindra, India's largest manufacturer of utility vehicles.

Mahindra made a big push to enter the U.S. market in 2006 to sell compact diesel pickups imported from India. However, its plan collapsed in 2010 amid the industry's sales downturn. At launch, the leadership team at Mahindra believed that they could "gradually creep" into the consciousness of American customers and earn a winning position as the "leading producer of very rugged, sturdy SUV and crossover vehicles." Despite offering a superior product, the brand story was confusing to American buyers and the points of difference were unclear. Not surprisingly, it failed.

Related: 4 Fundamentals for Evaluating an Overseas Expansion

Even though Mahindra & Mahindra failed with trucks, it tried again the with a reformulated strategy in 2015. This time, Mahindra led with branded agricultural utility vehicles. To date, it has achieved 70 percent year-over-year growth in a flat-growth category, according to Mahindra executives. Through a strategic partnership with a U.S.-based company, a deeper understanding of their target audience and a differentiating strategy, the company successfully staked its claim in the U.S. market. So, what was different the second time around? Executives learned from their mistakes and adopted a much more disciplined approach to market entry.

You see, whether you are a consumer brand like Zara or more of a business-to-business brand like Mahindra, entering new markets is never easy. Why? Because brands are formed in home markets where there are generally different underlying economic, demographic, cultural and regulatory factors. These factors are well understood by business leaders because they have literally grown up competing in these markets. Moving into a new foreign market is daunting. The "rules of engagement" must be completely re-learned (or unlearned in some markets where the rules of law are not well established).

Your brand story may not translate at all into a new culture. Beyond the obvious language differences, customer communication preferences may be wildly different. Familiar marketing strategies that worked so well in home markets now appear ineffective and vastly underperform expectations. The regulatory frameworks and distribution systems so well understood in the home market become minefields that must be navigated with care in order to execute your strategy and scale the business.

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From our research and our hands-on work assisting brands with new market expansion, we've identified three critical success factors for commercial success:

Story: The most remarkable brand stories don't focus on what a company does or the products or services it sells. The most effective brand story clearly answers the question "Why?" -- why you do what you do and why it should matter to the customer.

Strategy: How you deliver your story and value proposition to your customers in the right context, and at the right time -- i.e. the right "plays" or comprehensive market entry strategy.

Systems: The people, processes and technology that support the execution of your story and strategy. Having the right systems in place will support your distribution and sales network while ensuring that you effectively and seamlessly deliver your products and services.

Related: 4 Solutions to Take Your Retail Business Global

Unfortunately, many companies fail in their attempts to enter and expand into new markets because they lack effective development of one (or all) of these critical building blocks and therefore must abort market entry plans. Too often this is because they do not have the right partners with the relevant skills and experience required to help guide them through the complexities of these new markets. The mistakes are common and the outcomes are predictable when brands try to aggressively grow beyond their home markets -- or "grow elsewhere."

To mitigate some of these risks, we have developed a five-step process to help correctly position a brand in a new market to drive sales and bottom line growth:

1. Conduct an assessment of your company's strategic and operational readiness to enter the new market based on the specific market requirements for your products and services in the new market (U.S., India, Europe, etc.). This requires rigorous market research and development of key competitive insights to guide your market entry plan.

2. Perform in-depth market research and market intelligence analysis for your brand, products and services specific to the new market to inform requirements for optimization and translation of your story. The local market needs to understand the brand story and core values of the brand.

3. Develop a customized market entry strategy and product road map for the new market to include current and future products and services. This is far more than just setting up your presence on Amazon! Yes, Amazon is a great platform, but ecommerce channels can fail to educate and serve customers (which a new brand or company needs to do in order to be successful in a new market).

Related: Why Many Founders Should Think Global From the Start

4. Develop and execute the brand marketing and product marketing plan for the specific products and services for the new market by market prioritization and segmentation.

5. Create, measure and drive specific revenue goals and targets by establishing and managing the right sales channels, business relationships and lead generation initiatives with a plan for continuous optimization.

Having lived through the successes -- and the failures -- of helping companies enter new markets, we've learned that a rigorous and disciplined approach is critical. Cracking into new markets and connecting with customers requires a transformational approach to crafting the overall customer experience and, more importantly, to telling your brand story in a relevant and engaging way -- with relentless consistency at every customer touchpoint. A compelling brand story engages and delights consumers and makes them feel like the hero of your story. It makes them want to learn more, want to engage and want to make your story their own.

Dave Sutton

President and CEO of TopRight

Marketing scientist Dave Sutton, MBA, is the CEO at TopRight, a strategic marketing firm that serves Global 2000 companies. An authority on transformational marketing, Sutton is the author of the new book Marketing, Interrupted: Sometimes the Only Way to Succeed Is to Go a Little Crazy.

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