Simply put, there are four alternatives when determining what growth strategy combines new markets. Each situation is different, but we start off with this framework:
- Base, legacy focus: current markets, current products/services
- Offerings expansion only: current markets, new products/services
- Market expansion only: new markets, current products/services
- All new: New markets, new products/services
In this context, “new markets” include those that are new to the organization in addition to situations where the organization is creating a new market.
9 Growth Strategy Factors
The attractiveness of these choices can also be assessed using a number of criteria. For example:
- Size of the addressable market, e.g., in units, dollars, profits
- Anticipated growth of the market
- Customers and customer segments, their size and growth
- Consumption and/or purchase occasions, their size and growth
- Current market share and competitive position
- Competitive set and intensity
- Underlying factors driving growth
- Brand perception and strength
- Costs to enter and compete, e.g., distribution, marketing, selling
Risk Analysis with a Growth Strategy that Combines New Markets
Typically, focusing on the base, legacy business is considered less risky, at least in the near term. In order for the business to have survived and grown, it had to deliver a certain level of satisfactory performance with its current products and services delivered to its current customers. In contrast, all new products and services addressing new markets is generally considered the riskiest of these options.
In our experience, many organizations opt to focus on base or legacy business as the initial growth focus, and examine other options later, when they may perceive they are hitting diminishing returns or have overly limited upside in the base business.
Taking an Existing Product to a New Market
A commonly selected growth strategy that combines new markets involves market expansion- offering the current products and services (or minimally modified versions) to new markets (#3).
For instance, in foodservice, different market segments may need different packaging to make the products easier to store and prepare. And within retail, the warehouse club channel requires bulk package sizes, considerably different from supermarkets. Some markets sell mainly individual consumption products, e.g., convenience stores sell mainly individual consumption drink packages, while others sell mainly multipack beverages. Making these modifications allows a brand to effectively combine new markets, while leveraging some capabilities from the base or legacy operations.
Food Manufacturing Growth Strategy Combines New Markets
Recently, we developed a three-year innovation foodservice strategy for a food manufacturer. Within foodservice, there are multiple commercial and non-commercial markets with distinct needs. While QSRs (quick service restaurants) are by far the largest, there are many other sizable markets including convenience stores, supermarket foodservice, fast casual restaurants, casual dining restaurants, and more.
We ultimately recommended going deep in the legacy business segment as there was considerable upside. This foundational base business innovation work was combined with selective entry into two new markets. The new markets where the existing products and services were a better fit and could be easily adapted were prioritized ahead of other new markets. The company moved forward, and has grown significantly through innovation both in the base and in the new markets.
What growth strategy combines new markets for your organization? Start a conversation with the experts at Insight to Action, contact us.