Does Your Strategy Consider Geography?

These days, it’s common to read advice about strategy that assumes that somehow advances in technology, communications, and influence – which have admittedly been sweeping in the approximately one-quarter of a century since the dawn of the public internet – have opened up the world to any entrepreneur or established business. Do I need to be worried about the trade laws in China? Should my website be available in a dozen languages? Am I keeping tabs on my competitors halfway around the globe?

In truth, for the vast majority of businesses, things are far more local than global. For these businesses, it is as, if not more important to tend to the local marketplace than to hope that success will come from afar. [See our August, 2014 article Can’t See the Trees for the Forest?] If your business is like this, you need to pay attention to geography, and to demographic information about your local area. Understanding the local scene, including where new residential and commercial building is happening, how income ranges are changing within zip codes you serve, where the light rail is being laid or highways are being built, can be critical to your future success and even your existence.

I’ll use an area I am very familiar with – the mental health counseling field – as an example here, but I believe that most of the observations I am making would apply to a business that is selling tires, delivering entertainment, or providing home repair just as well.

Look at population density for example. For almost any business category you can think of, the number of businesses of a particular nature tends to be tied to the number of potential customers. I remember a Geography class I audited many years ago noting that the number of churches that existed in any given geographical area would rise and fall based on the total number of citizens in almost exactly the same way that the number of liquor stores would change. Although, I do recall that there was about a 10:1 ratio between the number of liquor stores vs. churches (except in certain parts of the country)! Saturation was possible, so if the population was stable and there were already sufficient businesses of a certain type to meet the needs of the citizens, opening yet another was not a good strategy.

This is a particularly important point if you are already in an existing market, and are trying to create your strategy for the next year or two. If you are in a small marketplace, with perhaps only one or two competitors, you might be able to gain market share by differentiating yourself by quality or price. Demonstrating that your employees are more skilled or credentialed than competitors will help you gain customers from the consumer base who is most interested in quality, and likewise showing that your charges or rates are lower than the rest of the local competition will attract people who like a bargain or are on restricted incomes. Suppose though, that you are in a larger metropolitan area with a much bigger client base, and many other businesses that are offering essentially the same services as yours. Your strategy may need to be much different, as there is already stratification in your industry based on costs or quality. If this is the case you might want to consider location changes, bringing your offices or outlets closer to highly travelled thoroughfares or public transportation hubs. You should look at how the local population density has changed over the past few years, as there may be some geographical areas that were rural farmland only a couple of years ago, but today are filled with new housing, retail and office space, and tons of customers who would appreciate a local resource. If you competition has not seen this shift yet, being the first in the local market can gain you a lot of business! Being involved in a larger marketplace favors the development of niche-type products or services as well. Specialized counseling for LGBT youth for example, is a very viable (and useful) project if the local population is 1 million as there are likely many dozen youth who would take advantage of the services. In a county with 40,000 residents, the potential users of your services might only be a handful (and they might not want to get help locally, due to the potential for stigma)!

Geographical accessibility, along with technology considerations, also should be factored in. If your service area is marked by widespread, isolated residents as opposed to large population clusters, providing mobile services (we come to you) as opposed to a central fixed location, is a legitimate business strategy. This is particularly true for areas where the transportation assets, including well maintained roadways or public transit options, are limited or poor. Areas like this which also have good broadband access are ripe for the delivery of online services. Online services are also, perhaps unfortunately, legitimate in larger communities where personal safety is a concern. If I don’t like to venture outside of my house or my immediate neighborhood because of high incidence of crime, but I can access the internet from home or a nearby library or community center, I will be very interested in transacting business online.

Geography, as it relates to the relative locations of branches of your business, is also important, depending on the management style of your business. If yours is a centrally managed operation, where hands on supervision and lots of face time from the management team has contributed to your success, it may be unwise to consider expanding to locations that are more than an hour or two away from your headquarters, as the logistics of managing a far-flung business empire could be difficult or extremely costly. This is another area where technology can come into play, as online tools for project planning, reporting, communication and internal community sustainability can help bridge the miles!

As you plan for the future, don’t turn a blind eye to the possibilities that have been opened up to us all to become participants in the global marketplace. But if your business model is mainly local, think geography!