Conceptualization of Market Expansion Strategies in Developing Economies

Academy of Marketing Science Review, 2008 by V, Vasant, Joshi, Sharad L

Vasant V. Bang is an Associate Professor of Marketing at KIIT School of Management, 6, Ideal Colony, Paud Raod, Kothrud, Pune 411038, India, tel. 0091-20-25469591, vvbang@rediffmail.com. Sharad L. Joshi is the Director at Vishwakarma Institute of Management, Kondhwa (BK), Pune 411048, India, tel. 0091-20-26932800, sharadjoshi@vimpune.ac.in. The paper is based on the doctoral research work of first author at Birla Institute of Technology and Science (BITS) Pilani, India. The second author is the doctoral research guide. The authors would like to sincerely thank Dr. James Gentry, editor-in-chief of AMSR and the three anonymous reviewers for their valuable comments, suggestions, and editing work.

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.

Kim and Mauborgne (2005) conceptualize a "blue ocean" strategy framework for creation of demand in an untapped market. They visualize it as an alternative strategy to market share growth. However, not every one agrees that market expansion and market share growth are mutually exclusive strategies (e.g., Walker Jr. et al. 2006). Some of the strategies suggested in this framework do not lead to market expansion in the same sense as we define it in this paper. A "blue ocean" strategy framework provides tools and techniques for dealing with competition at different levels. But it does not pay enough attention to the exogenous factors affecting market demand such as the purchasing and consumption abilities of potential customers.

Prahalad (2005) with other scholars like Hammond (2002) and Lieberthal (2005) has developed a "bottom of the pyramid (BOP) marketing framework" as a means of expanding low income markets. In the context of developing countries, a BOP framework is more relevant than a "blue ocean strategy" framework. Although a "BOP" framework is useful for development of a general framework for market expansion, conceptually expansions of markets do not necessarily mean expansion of "bottom of the pyramid" markets. A "BOP" framework puts strong emphasis on the creation of consumption capacity among the poor. However, like a "blue ocean strategy" framework, it does not adequately address a very important consumer behavior related issue of how to bring an unwilling customer into the market. "BOP" framework also ignores the competitive dimension in the formulation of strategy.

Much before the writings on "blue ocean strategy" and "bottom of the pyramid marketing," Kotler (1973) wrote about demand creation activities. He had identified specific situations in which a company needs to undertake demand creation efforts. Although he wrote about marketing tasks in each such situation, these tasks do not constitute a holistic framework, especially in the context of developing countries. Moreover he did not write specifically about demand for a product as against demand for a brand.

The objective of this paper is to conceptualize a market expansion strategy in such a way that a generic framework can be developed which should be useful for the expansion of markets of any type, including the bottom of the pyramid markets in developing countries.

Methodology

We develop a framework without making any assumption as to whether market expansion is a strategic alternative to market share or not. We look into the fundamental issues such as: what is a market and what is market expansion. We synthesize some significant contributions to the market expansion-related strategy literature with relevant concepts and theories from literature in other areas. On the basis of the survey of the literature, we first clarify the domain of the market expansion construct and market expansion strategy. Then we identify the antecedent conditions that drive market expansion. We also identify the moderating conditions under which the effect of antecedents is enhanced or ameliorated. On the basis of the identified antecedents and moderators, we develop a process-based framework for implementation and measurement of market expansion strategy. We also present a series of research propositions in the spirit of propositional inventories such as those developed by scholars like Kohli and Jaworski (1990).