Brilliant Manoeuvre
The bridgehead principle is crucial for expanding business, as it provides a notional and physical anchor point in the new territory. Whether the intention is to expand the range of products in an existing market, or to extend the market of an existing range of products, it is always more prudent to proceed in phases, from the known to the less known.
Example
This prudent approach to expansion has served Toronto-Dominion Bank extremely well as it has taken a phased and controlled approach to expansion in the US from its strong base of operations in Canada. Toronto-Dominion Bank (TD) established a US bridgehead in the US Northeast by acquiring Bancnorth Group of Maine in 2004. It then added Hudson United Bank with operations in New Jersey and Philadelphia in 2005. TD Ameritrade, the result of a previous expansion of TD into US based discount brokerage operations, was integrated into TD Bank. TD acquired Commerce Bank with branches all along the eastern seaboard in 2008, further expanding out of the initial bridgehead in the Northeast. In 2010, TD Bank acquired a series of banks headquartered in South Carolina and Florida. By 2011, TD Bank had become one the 10 largest banks in the US, with over 1,200 branches from New England down to Florida. Throughout the period, Toronto-Dominion never overextended itself and was able to marshal resources in phases for further thrusts into the US market. Moreover, the knowledge and experience that was gained in each phase of the expansion campaign became useful intelligence for the next phase.
Tip
Are you intending a major push by acquiring a competitor in the new market? If so, do you have the resources and staying power to fight off the inevitable competitive counterattacks and initial lack of knowledge and experience in this market? Do you have the resources to invest in continual upgrades in your products and marketing in these markets or will you prematurely run out of resources, having shot your load in the initial takeover campaign?