Growth Strategy: New Business Development
FastTrac, Kauffman Foundation
A new business development strategy involves using your business’s reputation or other strengths in order to sell new products or services in new markets. This strategy is often pursued after the others have been exhausted. A word of caution—new product or service development may involve a significant learning curve and requires extensive research depending on how far removed the products or services and markets are from your current business.
Product/Service Development Opportunities
Answer these questions to help you determine if new business development is the right strategy for you:
- Why am I considering offering a new product/service to new markets? What do I hope to gain?
- Have I maximized sales of current products/services?
- Have I maximized sales of new products/services to current markets?
- Are industry-wide sales flat or declining?
- Do I need to diversify?
- What will it cost?
- How quickly can I take the new product/service to market?
“Diversification is critical if entrepreneurial companies are to dodge inevitable business downturns and thrive,” explains entrepreneur Rebecca Herwick, founder, president, and CEO of Global Products—a company which licenses and sells novelties, giftware, and other specialty products.
“When Harley-Davidson® did not renew their apparel license with us, their products constituted 30 percent of our gross sales,” says Herwick. “We were devastated but not defeated.”
Since that loss, global diversification has taken center stage. In 2000, Global Products expanded its product line and opened a distribution center in Germany for European expansion; a year later, it opened another in Canada. On the drawing board are plans for distribution outlets in Asia and possibly Latin America.
Within five years, international revenue accounted for 6 percent of Global Products’ annual revenue. Herwick notes that her company launched its diversification effort from the strength of its distribution system, which “proved to be a buttress against the many obstacles we would face—among them language barriers, a vast amount of paperwork, and a lack of historical data against which to set inventory goals.”
Herwick acknowledges that “global expansion is far from the ‘natural evolution’ I had envisioned. Breaking into and maintaining a presence in our foreign markets has been a formidable challenge.”
“My message to entrepreneurs aiming to do the same is simply that global expansion must be managed carefully and intelligently against the backdrop of Murphy’s Law, “If anything can go wrong, it probably will.”
© 2006 Ewing Marion Kauffman Foundation. All rights reserved.