market-expansion

Market Expansion As A Platform Growth Strategy

The market expansion consists in providing a product or service to a broader portion of an existing market or perhaps expanding that market. Or yet, market expansions can be about creating a whole new market. At each step, as a result, a company scales together with the market covered.

The mother of the modern market expansion

One of the most successful market expansion of modern business history was achieved by Apple. As the company moved from niche PC maker; it jumped to new markets, until it created a whole new market with its iPhone (what is known as a blue ocean, or at least it used to be so).

apple-market-expansion

As Apple created new products, those new products also comprised new technologies, and they were coupled with a different distribution model.

Platforms dominate distribution platforms

When Apple jumped from computers to the iPod, it started to understand that to create a whole new market, a product alone wasn’t enough.

It needed a new way to distribute it and a new platform for enabling a different level of content consumption for consumers.

From there, the iPod, iTunes, and a new distribution model (single songs could be consumed in place of buying entire CDs), a whole new distribution platform was born.

TDM: Technology + Distribution + Monetization

Netflix started as a DVD-rental company. That was the most viable way to start a business that could compete with existing players like Blockbuster. Netflix could have tried to play it bigger.

Netflix had known for years that being a competitive player in the DVD-rental space, was “just the beginning of something else:”

In a Wired article, entitled “The Netflix Effect” from 2002, Reed Hastings, still current Netflix’s CEO, highlighted:

The dream 20 years from now, is to have a global entertainment distribution company that provides a unique channel for film producers and studios.

Thus, Reed Hastings was well aware of the potential of building a platform, yet it knew it took time to achieve the viability of that business model. Netflix could have burned all its capital to enter that market early on.

Yet the first time “streaming” was announced on a Netflix financial statement was in the 2007 annual report, presented in 2008, and by 2009 annual report streaming would be mentioned 88 times (FourWeekMBA analysis). That is when things started to pick up!

netflix-market-expansion
Netflix jumped from a smaller, limited market, to a much larger market, with much less physical constraints. As Netflix jumped from DVD-rental to streaming, it also slowly abated the fulfillment costs related to the delivery of the DVDs. As of 2007, when Netflix revenues were still fully coming from DVD-renting those were over 10% of its revenues (FourWeekMBA Analysis).

And suddenly Netflix jumped from a limited market to an unlimited, digital market, without physical constraints, besides servers’ costs, of course. In 2019 server expenses increased by $18 million as more streaming was served on the platform (FourWeekMBA Analysis). And yet, this model was way more scalable.

uber-market-expansion

Other examples that we’re looking at currently, are all around us. Another interesting one is Uber and how – as the company scales – it explores new ways it can achieve its mission, and yet be careful not to take this step too fast, as a false step might certain business death.

Technological platforms mature with the birth of an economic ecosystem around them. Conversely, “business platforms” require technological, distribution, and monetization changes, that combined provide a new way of doing business, and the basis for new business models to emerge.

Logical only in hindsight

While it all makes sense to look at market expansion in this way, it’s important to understand that this is logical only in hindsight. In reality, as companies go through those periods of market changes, they need to adjust.

For instance, as Netflix survived two eras of changed content distribution formats, the survival is all but granted.

And in the next era, where augmented reality might become the next available consumer-platform, the whole TDM framework might change again!

Key takeaways

  • Market expansion can happen in several formats. It can start by gaining more market shares in an existing market. Or perhaps by expanding the existing market.
  • Or it can happen by taking advantage of a whole new market. As those new markets become available the whole TDM framework (technology, distribution, monetization) makes available new “business platforms” which enable new business models.

FourWeekMBA Business Toolbox

Business Engineering

business-engineering-manifesto

Tech Business Model Template

business-model-template
A tech business model is made of four main components: value model (value propositions, missionvision), technological model (R&D management), distribution model (sales and marketing organizational structure), and financial model (revenue modeling, cost structure, profitability and cash generation/management). Those elements coming together can serve as the basis to build a solid tech business model.

Web3 Business Model Template

vbde-framework
A Blockchain Business Model according to the FourWeekMBA framework is made of four main components: Value Model (Core Philosophy, Core Values and Value Propositions for the key stakeholders), Blockchain Model (Protocol Rules, Network Shape and Applications Layer/Ecosystem), Distribution Model (the key channels amplifying the protocol and its communities), and the Economic Model (the dynamics/incentives through which protocol players make money). Those elements coming together can serve as the basis to build and analyze a solid Blockchain Business Model.

Asymmetric Business Models

asymmetric-business-models
In an asymmetric business model, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus have a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility.

Business Competition

business-competition
In a business world driven by technology and digitalization, competition is much more fluid, as innovation becomes a bottom-up approach that can come from anywhere. Thus, making it much harder to define the boundaries of existing markets. Therefore, a proper business competition analysis looks at customer, technology, distribution, and financial model overlaps. While at the same time looking at future potential intersections among industries that in the short-term seem unrelated.

Technological Modeling

technological-modeling
Technological modeling is a discipline to provide the basis for companies to sustain innovation, thus developing incremental products. While also looking at breakthrough innovative products that can pave the way for long-term success. In a sort of Barbell Strategy, technological modeling suggests having a two-sided approach, on the one hand, to keep sustaining continuous innovation as a core part of the business model. On the other hand, it places bets on future developments that have the potential to break through and take a leap forward.

Transitional Business Models

transitional-business-models
A transitional business model is used by companies to enter a market (usually a niche) to gain initial traction and prove the idea is sound. The transitional business model helps the company secure the needed capital while having a reality check. It helps shape the long-term vision and a scalable business model.

Minimum Viable Audience

minimum-viable-audience
The minimum viable audience (MVA) represents the smallest possible audience that can sustain your business as you get it started from a microniche (the smallest subset of a market). The main aspect of the MVA is to zoom into existing markets to find those people which needs are unmet by existing players.

Business Scaling

business-scaling
Business scaling is the process of transformation of a business as the product is validated by wider and wider market segments. Business scaling is about creating traction for a product that fits a small market segment. As the product is validated it becomes critical to build a viable business model. And as the product is offered at wider and wider market segments, it’s important to align product, business model, and organizational design, to enable wider and wider scale.

Market Expansion Theory

market-expansion
The market expansion consists in providing a product or service to a broader portion of an existing market or perhaps expanding that market. Or yet, market expansions can be about creating a whole new market. At each step, as a result, a company scales together with the market covered.

Speed-Reversibility

decision-making-matrix

Asymmetric Betting

asymmetric-bets

Growth Matrix

growth-strategies
In the FourWeekMBA growth matrix, you can apply growth for existing customers by tackling the same problems (gain mode). Or by tackling existing problems, for new customers (expand mode). Or by tackling new problems for existing customers (extend mode). Or perhaps by tackling whole new problems for new customers (reinvent mode).

Revenue Streams Matrix

revenue-streams-model-matrix
In the FourWeekMBA Revenue Streams Matrix, revenue streams are classified according to the kind of interactions the business has with its key customers. The first dimension is the “Frequency” of interaction with the key customer. As the second dimension, there is the “Ownership” of the interaction with the key customer.

Revenue Modeling

revenue-model-patterns
Revenue model patterns are a way for companies to monetize their business models. A revenue model pattern is a crucial building block of a business model because it informs how the company will generate short-term financial resources to invest back into the business. Thus, the way a company makes money will also influence its overall business model.

Pricing Strategies

pricing-strategies
A pricing strategy or model helps companies find the pricing formula in fit with their business models. Thus aligning the customer needs with the product type while trying to enable profitability for the company. A good pricing strategy aligns the customer with the company’s long term financial sustainability to build a solid business model.

Your handcrafted selection:

Scroll to Top
FourWeekMBA