How to Quickly Enter into a New Geographic Market
Whether it’s expanding into a new state, province, or country it often makes sense to consider acquisition as a viable option instead of the traditional market penetration strategy based on sales & marketing.
For example, consider an American manufacturer of a broad range of alarm clocks that wishes to expand into the European Union. It has three basic options:
- Find a European distributor to handle the territory.
- Build its own European sales & marketing organization.
- Acquire an established distributor in the United Kingdom.
When it comes to the first option of handing over the work to a third party the results are frequently disappointing. Third parties rarely have the passion and commitment required to effectively launch a new brand or line. Their sales staff also tend to promote whatever they know to be an easy commission producer and avoid investing the time necessary to introduce new products to their accounts.
With the second option there are the endless problems involved with setting up an organization an ocean away. They include recruiting, hiring, training, and managing staff. Then there are the challenges of finding a location to lease for office and warehouse space. Moreover cultural and language barriers can be lethal. When all of this has to be done over a huge distance and with a possible 8 hour time difference, you can appreciate why this is usually the least attractive option.
At this point the third option of acquiring an established European distributor of alarm clocks based in a language friendly jurisdiction such as the UK is starting to look pretty good. Once acquired everyone will understand that the parent company’s product line gets top priority. Yes, there are details to be worked out but they can usually be worked out faster than those that come with the first two growth strategies.
Growth by acquisitions is not the answer for every situation but deserves a careful analysis as a serious option.