Sales Geographical spread is linked to the 'width' of your presence. Sales managers define the target customers and business potential to get the sanction for expanding the presence to the new geographies. This is not a simple sales presence expansion. As you decide to expand your geographical presence in terms of distribution, you also have to expand your supply chain, delivery, and after-sales servicing capabilities to those geographic locations (this will be discussed in the supply chain management).
The other factor of decision for geographical expansion is on if we should build our presence through our own staff OR offices OR we should use franchises/3rd party distributors/resellers (we discuss this in more detail in sales channel management). There are multitude of considerations driving this decision.
Sales Geographical Expansion decision is linked to the following considerations:
- Taking First/Initial mover advantage.
- Restricting the first/initial mover advantage for the competition.
- Size of business existing as of now.
- Potential level of business.
- Cross location services to the customers. Money-transfers is a good example.
- Availability of skills and cost of expansion.
- Speed of expansion. For example, if you have a 3rd party distributor who can have a win-win contract with you and give you an instant reach to X number of location, you may go for it.
- Strategic direction: For example- shareholder may want to position an organization not only as 'domestic (US) focused' company, but establish a 'truly global' brand.
- Spreading of risk: More the number and diversity of markets OR locations, greater is the risk normalization.
Success Drivers for Sales Geographical Expansion
Sales Infrastructure and technology:
This includes two parts-IT and Facilities. This includes the ability for IT to provide the network, system access, telephony and ability for the facility services to provide all the administration support.
Sales Process Standardization and consistency:
More robust, standard and consistent are the processes of a company, faster it is to a geographical expansion. Wal-mart, Mcdolnalds etc. are great examples, where 'new location/Outlet' kits are a highly portable processes, which can be implemented with mind-numbing speed.
Ability to localize:
This should not be taken as an antonym of the earlier point. Companies have to have ability to localize the products, processes, promotion style and languages to ensure that their expansion is fruitful. Typically this localization does not have to be seen as a new overload. Smart companies have it as part of their 'new location' kits.
Expansion mind-set with the staff:
There has to be a culture in the company to move to new locations, OR expansion mind-set. Typically, whenever you open a new location, some of your existing and experienced staff has to change base and also be sensitive to new culture and practices.
Supply chain, servicing and support capabilities:
This cannot be emphasized enough, and needs a very strong linkage with operations world. Whenever a decision to expand is taken, it is taken with the joint participation at-least across Operations, IT and Sales.
Take-off of new location:
Every new location is an investment, and earlier it starts having its business and begins adding to the top-line (at least because in the initial period it may be eating away on the bottom line due to high expenses and low sales).
Measuring a location as a P&L unit
This success driver does not apply everywhere, but it’s a good method to start building a healthy pressure on location manager for operating like a P&L unit. We will discuss this more in detail in financial management.
Measures/Facts linked to geographical expansion
- Number of locations
- Number of days
KPIs linked to the geographical expansion
- Average turnaround time to open a new location/Outlet
- Average turnaround time for a new location to start generating revenue
- Average turnaround time for a new location to start generating profit.
- Number of locations opened within a given period of time.
- Number of locations generating revenue within certain period of time after being opened
- Number of locations generating profit within a certain period of time after being opened.
- Average turn-around time to achieve activities to open an office/Presence
- Cost of opening a new location at total OR activity level.
- Average revenue of a location after a certain period of time post opening.
- Average profitability of a location after a certain period of time post opening.
Dimensions on which you can analyze geographical expansion for sales:
- Business unit
- Sales Channel
- Type of office (own office, exclusive 3rd party office, non-exclusive 3rd party office)
- Time period
- Type of activity linked to opening an office (lease contract, fitments, IT infrastructure, hiring of staff…)
Typical SWOT linked to geographical Sales expansion
Following are the possible SWOT components for geographical expansion. The list is divided into two parts- Strengths and Weaknesses (internal) and Threats and Opportunities (External). Each item in the list, if is in good shape, can be interpreted as a strength OR an opportunity and if it is in bad shape, it should be interpreted as a weakness OR a threat.
Strengths and Weakness
- IT and facilities infrastructure
- Consistency and standardization of the processes.
- Ability to localize
- Accuracy and reliability of our estimates of business potential.
- Competitive intelligence on competition for their geographical expansion plans.
- Speed of expansion in-terms of starting and office and making it productive.
- Launch promotion and events
Opportunities and threats:
- Using 3rd party distributors.
- Speed of expansion with competition.
- First mover advantage with the competition.
Key decisions linked to Sales expansion through geographies
- The sequence of expansion. Which locations to open first?
- The speed of expansion. Speed has its own cost.
- How much to spend on launch and office infrastructure?
- When to start measuring a location as a profit and loss entity.