4 Classic Market Expansion Frameworks

Framework for market expansion?

Frameworks for market expansion aid organisations in planning about the development of their companies and products. They aid in the discovery of the most effective method to market, sell, produce, and provide services to customers by influencing overall decision-making at a company.

Here are four market growth frameworks that you may leverage to your advantage:

1. The Ansoff Matrix (also known as the Ansoff Diagram)

It was created in 1957 by a mathematician named Ansoff and is used to expand mathematical expressions in many different ways. It is used to dismantle the relationship between a product and its target market, as well as the riskiness of such a combination.

Each quadrant has new and current goods on the x-axis and new and existing marketplaces on the y-axis, with the grid separated into four sections. It has four growth strategies, which are as follows:

1. Diversification: The process of bringing a new product to a new market is referred to as diversification.
2. Product Development: The process of bringing a new product to market in an already established market.
3. Market Development: When a well-established product is introduced into a new market, this is referred to as “market development.”
4. Market Penetration: It is the process of promoting an existing product into a new market that is known as Market Penetration.

Each of these techniques has a different level of risk, with diversification posing the most danger and market penetration being the lowest.

Knowing which of those methods you’ll use can assist you in determining where to direct your resources in order to achieve success. Is it required for you to devote more time and resources to product development and innovative thinking? Is it absolutely required to do market research? Is it required to accomplish both at the same time?

2. BCG’s Growth Share Matrix

The BCG Growth Share Matrix was developed in 1968 by the founder of the Boston Consulting Group. Like the Ansoff Matrix, it is a four-quadrant grid, but it focuses on the relationship between growth rate and market share to aid organisations in estimating the potential profitability of different expansion chances.

A high and a low market share are shown on the x-axis, and a high and a low growth rate are represented on the y-axis, respectively. The following are the four most likely market segments to exist:

1. Cash cow: The term cash cow refers to a market with a moderate growth rate but a significant market share. This is your bread and butter market segment, where you can rely on a steady stream of cash to support you.
2. Dog: A market with a slow growth rate and a small part of the overall market. These are the markets you should stay away from since there is minimal long-term promise and you have no past experience in them..
3. Question mark: When there is a rapid increase in market growth but a relatively small increase in market share. Even if you aren’t sure whether your product or service will be successful in these markets, there is potential, therefore it is worthwhile to look into it more.
4. Star: A market with a quick rate of growth and a significant market share is referred to as a star. They are generally little and insignificant, despite their high level of potential.

By identifying and categorising market sectors, firms may better choose where they should spend, retain, and dispose of their resources in order to maximise their growth.

3. Porter’s Five Forces of Influence

Several years later, in 1980, Michael E Porter (Harvard Business School professor) published Porter’s Five Forces. It focuses on the external factors at play in a market and how they influence the likelihood of a company’s success in entering that market.

The following are the five forces at work:

1. Existing competitors: What is the current competitive situation like? Who are the other players in the market? How do their pricing, target demographic, brand, and product compare to yours? What is the difference between them and you? When it comes to switching from your competitor’s solution to yours, how easy is it for customers?
2. Threat of new entrants: Newcomers represent a danger in the following ways: What are the chances that this is a growing market that will attract new, innovative businesses? What exactly is the entry barrier? Is it easy for clients to switch from your solution to one offered by a competitor?
3. Threat of substitute products: Are there any non-competitive alternatives to your solution? What is the relationship between the value supplied by substitutes and the value offered by your solution? Compare the costs of alternatives to the prices of your solution. What is the difference? What is the level of tendency that customers have toward substitutes? What is their level of resistance to change?
4. Bargaining power of buyers: How many different competitors do buyers have to choose from? Is it possible to find out what sort of information they have access to? What is the difference in pricing between the different options available? What level of price sensitivity do your consumers have?
5. Bargaining power of suppliers: When it comes to manufacturing your solution, which suppliers do you rely on, both in terms of physical products and in terms of human labour? How replaceable are providers on a one-to-one basis? When it comes to prospective suppliers, how strong is the competition?

Using this framework, you can estimate the competitiveness of a market and whether or not it is beneficial for you to enter that market. These pressures should be kept to a bare minimum in order to increase your chances of developing a major market presence and garnering a considerable portion of the market in general.

4. MARACA’s organisational framework

To determine whether or not HubSpot should have grown into international markets, the company used the MARACA Framework. 

A total of three aspects are addressed in this document:

1. How big is the market in terms of MA (market availability)? What is the level of congestion? In what way is it uncomplicated to get in to the facility?
2. RA (real-time analytics) is a term that refers to the analysis of data that is occurring in real time. Do you know where you stand in the present market?
3. When it comes to CA (customer addressability), is there a good match between the product and the market. In this market, do you believe your product or service meets a demand?

The MARACA Framework, which incorporates the lenses of opportunity, traction, and fit, supports you in doing a cost-benefit analysis to assess if it is beneficial to expand into a certain new market.

Prospective markets are awarded a score ranging from 0 to 10 for each category, with the higher the total number of scores suggesting a better fit.

Key Takeaways

When you are approaching a development plateau and are confused about what to do next, these market expansion frameworks may be of assistance. Using these frameworks at inflection points when development starts to flatten or tilt in the incorrect direction might help you choose the most effective strategy to reroute your course.

You are not required to choose between these four frameworks when analysing growth potential, which is a plus. You may mix models to get a more comprehensive picture of potential markets since each one looks at them from a different angle.