Expansion Defendability Test
A six-question diagnostic to predict whether expansion into new territory is economically defensible given current defensive capacity.
A six-question diagnostic to predict whether expansion into new territory is economically defensible given current defensive capacity. Prevents expansion that looks attractive individually but makes overall territory unsustainable.
When to Use Expansion Defendability Test
Use in Phase 2 of territorial strategy (Month 2-3) when evaluating expansion opportunities. Required before any geographic expansion, new product category entry, or customer segment targeting.
How to Apply
Resource Density Assessment
Determine if new territory has resource density comparable to current territory. High density = small territory, intensive defense. Low density = large territory, extensive defense. Red flag: mixing density strategies (Walmart's suburban expansion using rural defense).
Questions to Ask
- Will new territory have resource density comparable to current territory?
- Are you trying to apply a strategy optimized for different density?
Boundary Addition Calculation
Count new boundary segments created by expansion. Adjacent expansion (contiguous territory) = +1 boundary per expansion. Leap expansion (non-contiguous) = +3-5 boundaries per expansion (surrounded by competitors).
Outputs
- New boundary segment count
Intrusion Pressure Forecast
Forecast intrusions per year in new territory using three methods: Analogous Territory Benchmark (adjust existing territory data), Competitor Analysis (count rivals and their aggression), Customer Intelligence (interview potential customers on vendor approach frequency). Use most conservative estimate.
Questions to Ask
- What is competitive density in new territory?
- Are customers more fickle?
- Are there more distribution options?
Outputs
- Forecasted intrusion rate
Defense Cost Projection
Calculate: New boundary segments × Intrusion rate × Cost per intrusion = Additional defense cost. Don't forget retaliation costs in existing territories if expansion triggers competitive response.
Outputs
- Additional defense cost
Territory Value Projection
Forecast revenue, gross profit, and strategic value (data, learning, platform effects) for new territory.
Outputs
- New territory value
Sustainability Check
Calculate new territory DI% = Additional defense cost / New territory value. Also calculate combined DI% = (Current + New defense cost) / (Current + New value). Score 0-6: 5-6 high defendability (proceed), 3-4 moderate (expand only with increased capacity), 0-2 low (reject or use satellite strategy).
Outputs
- New territory DI%
- Combined DI%
- Defendability score 0-6