Looking for New Global Markets? Bigger Isn’t Always Better.
As your company develops a market expansion strategy, what’s the best way to evaluate different global opportunities and determine which makes the most sense for your business? It can be tempting to simply focus on the largest markets, but that approach doesn’t account for several important factors. In this piece, the author shares a three-part framework to help any company develop a targeted expansion strategy. Specifically, for each potential market, businesses should determine the Market Availability (the size of the market), Real-Time Analytics (current traction in that market), and Customer Addressability (ease of entry into that market based on your current product offerings). By balancing each of these three considerations and carefully considering each market opportunity one at a time, you can make an informed decision and move forward into these new markets with confidence.
When I joined HubSpot in 2015, we already had customers in more than 100 countries all around the world. Nevertheless, our international expansion plans were far from complete. To determine which countries would require longer-term investments, and which had the potential to offer us faster near-term growth, we developed a three-part framework that can help any company to develop a more targeted expansion strategy:
Source: Nataly Kelly
This framework, which we call the MARACA model, consists of three metrics that companies should consider when evaluating a potential market:
To implement this framework, we assigned each potential market a score for each of the three components, on a scale of one to ten. Think of it like Olympic scoring: a 10-10-10 score would mean a perfect market, but, as in Olympic games, a perfect score is exceedingly rare.
So what does this look like in practice? Consider a fictional U.S.-based B2B company that’s developing an international expansion strategy.
To start, they would evaluate their home market as a baseline. It’s likely that the U.S. would be one of their largest possible markets due to the sheer number of businesses across the country that could be potential customers, so it gets a 10 out of 10 for market availability (MA). The company currently performs best in the U.S., so it would also score a 10 out of 10 for real-time analytics (RA). And the business is optimized for American customers — they sell in USD, address customers in American English, and have good evidence that they truly understand their local customer’s needs — so they would achieve a 10 out of 10 in customer addressability (CA) as well. Overall, the U.S. market would get a perfect score of 10-10-10, meaning that it has opportunity, traction, and good product-market fit.
Next, the company would consider various potential markets to target for expansion. Let’s say that two of their top contenders are Finland and Sweden. How would the MARACA framework be applied to compare the two opportunities?
Finland and Sweden are fairly similar markets as far as size goes. If our fictional company wants to sell to small- and medium-sized businesses, both countries would score similarly in terms of market availability (MA), because they both have a similar number of target companies (especially when compared to much larger European economies, such as France or Germany).
Next, as a U.S.-based company with limited global traction, both markets would receive similarly low real-time analytics (RA) scores, so that metric would also be unlikely to provide much guidance.
Finally, as far as customer addressability (CA), the two markets might again seem similar. Both countries have strong economies, high ease of doing business, and similar levels of English proficiency. However, Finland would get a higher CA score for one simple reason: the company already accepts their currency (the Euro), while it is not set up to accept the Swedish Krona. Although many Swedish businesses pay bills in other currencies, this limitation would likely impact the company’s ability to sell into the market quickly and easily.
Another factor that can affect a market’s CA score is the country’s level of technology adoption. Finland, which is ranked by the European Commission as the most digitally advanced nation in Europe, is often targeted by tech companies for this reason. Its strong culture of early technology adoption — stemming from a high cost of living, small population, and lack of local competitors — makes it easier to penetrate for many of these companies. These types of factors can be subtle and difficult to quantify, but they are extremely important to consider.
The main value of the MARACA model is that it forces you to look closely at how you would perform in each market, one at a time, at the micro level. Instead of thinking in generalities across entire regions or group of countries, it helps you to understand your company’s weaknesses and opportunities in each local market. Ultimately, this analysis gives you what you need to better control your international growth; you can reduce investment in low-potential markets and focus on investing in countries that are likely to offer faster traction.
In addition to helping you choose the best markets for expansion, this framework can provide a direction for product development efforts. While MA is relatively static for a given market, you have significant control over CA, which can in turn boost your RA. If the MARACA model identifies a poor product fit in an otherwise strong market, you can change your product positioning, pricing, or packaging — or even create an entirely new product. This might involve localizing your offerings, opening an in-country office, or acquiring local partners.
Of course, the lower your CA score for a given market, the more work you’ll need to do — so it’s important to consider whether the MA and RA scores are high enough to justify the cost. In some cases, it may be possible to achieve the same or even higher revenue with a fraction of the investment by simply focusing on the low-hanging fruit available in markets that are smaller, but easier to penetrate.
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There is no one-size-fits-all solution when it comes to international growth. The nuances of your business and the industry you’re in, as well as your company’s strategic direction, will help to shape your expansion into new markets. Moreover, those factors change over time. Your international business — as well as the strategic model that informs it — should both be dynamic.
Over the course of my time at HubSpot, our international expansion has evolved as we’ve acquired more data, learned more about our customers, and deepened our understanding of each local market. Whether you’re just starting to branch out of your home market or you’re already a ways down the path of international expansion, this framework can help you think through your options, compare the requirements for succeeding in different parts of the world, and ultimately, make data-driven, strategic decisions that enable you to move forward with confidence.
Looking for New Global Markets? Bigger Isn’t Always Better.
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