Expanding into a new market can be an effective way to leverage your core business for growth. But it takes a disciplined process to accurately assess the potential of each growth opportunity, because a bad bet can bog down your business.

Investing the appropriate level of resources in market analysis, selection, and entry method can create a foundation for success in the chosen market. We suggest following five steps to properly assess the opportunities and risks of a new market.

1. Define the Market

Clearly defining your market may seem like a simple step, but before you identify who you want to sell your product to, it is difficult to understand their needs. You'll want to consider the demographics, location, and common interests or needs of your target customers.

2. Perform Market Analysis

Expanding into new markets involves a great deal of market research in addition to target customers. You'll want to develop an in-depth understanding of market growth rates, forecasted demand, competitors, and potential barriers to entry. This is particularly important if you are looking to enter a relatively undefined market.

3. Assess Internal Capabilities

Much of your decision on how to enter a new market (build, buy, or partner) is driven by an internal capabilities assessment. During this stage, you should ask yourself questions like: How much of our core competencies can we leverage? Do we have sales channels/infrastructure/relationships in place? What time-to-market considerations exist?

4. Prioritize and Select Markets

Once you've completed the market analysis and internal skills assessment, it is time to prioritize potential markets for expansion. Markets should be prioritized based on the strategic fit and your ability to serve them. Answer questions like: Are there gaps in this marketplace that we can fill (and do so better than our competitors)? What value do we deliver to this market and how much are they willing to pay for it?

5. Develop Market Entry Options

Once you've selected an attractive market, you'll want to determine the appropriate level of organic investment vs. expanding through a series of acquisitions (or some combination of the two). If you have complementary infrastructure or sales channels in place, you might want to consider an organic approach to growth. The key steps here are to develop the business plan, case for investment, and implementation work plan, including owners, timelines, tasks, and key milestones to enter.

If you are entering an entirely new market, with limited core assets to leverage, you should consider a joint venture/partnership or acquisition. These options require target identification, prioritization, due diligence, deal negotiation and close. Prior findings can be leveraged to identify the appropriate mix of market entry options that is linked to the business's core competencies, assets, and overall strategy.

This list of key steps in creating your market entry strategy is high level, but it shows that to make the best decision for your business, you need to do your homework and consider all of your options around cost, risk and predictability. Success of any market entry strategy is driven partially by factors outside of your control--but investment in these upfront steps should help you to mitigate the risk.

How do you assess new markets? Send us your thoughts at karlandbill@avondalestrategicpartners.com.

Lindsay Comstock contributed to this article.