Conceptualization of Market Expansion Strategies in Developing Economies

Wednesday, June 11, 2008

Of late, the issue of market expansion has attracted the attention of academia as well as industry. Market expansion as a strategic growth option is particularly relevant in developing countries like India because of very low product penetration and consumption levels. The McKinsey Quarterly in its global survey of business executives reports that 84 percent of executives consider growing number of consumers in emerging markets as an important trend but a lesser number of executives (63 percent) view these consumers as a future source of profits and a still lesser number (41 percent) of executives say that their companies have pursued this opportunity (Freeman, Woodwork, and Stephenson 2007). Real challenge lies in converting non-customers of an industry into customers. However, traditionally, strategy researchers and practitioners have focused their attention on the problem of dealing with competition and how to get and keep market share (Hamel and Prahalad 2002; Kim and Mauborgne 2005).

Some commentators argue that in countries like India, small industry and informal sectors have been practicing market expansion strategy with products they could make such as local soap, biscuits, and toiletries (Nath 2006). But the work of Kim and Mauborgne (2005), Prahalad (2005), Prahalad and Hammond (2002), and Prahalad and Lieberthal (1998) brought to the fore the issue of direct involvement of manufacturers or corporations in expanding markets. Though these contributions have immense value for the development of a conceptual framework for market expansion strategy, individually none of these can be considered as a complete conceptualization in itself.

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Source: KIIT School of Management, India (link opens in a new window)