The expression “play in adjacent markets” is frequently used in business strategy discussions, investor presentations, and growth planning sessions. It often arises when companies are seeking expansion opportunities without straying too far from their core business. Although the phrase sounds technical, it is essentially about controlled growth.
You might hear it when a company has saturated its primary market and leadership begins discussing expansion into new markets. Instead of entering a completely unrelated industry, someone may suggest that the company should play in adjacent markets.
In this article, we will break down the meaning of the business expression “play in adjacent markets,” so you know all there is to know about it.
What Does “Play in Adjacent Markets” Mean
“Play in adjacent markets” means to expand into markets that are closely related to a company’s existing products, services, or customer base. These markets are not identical to the core market, but they are similar enough that the company can leverage its existing strengths. In other words, it refers to growing into nearby market opportunities rather than making a drastic shift into unfamiliar territory.
For example, a company that manufactures office printers might expand into document management software. The software market is different, but it is closely connected to the company’s existing customers and expertise.
Another example could be a bakery that decides to sell specialty coffee as well. While the bakery market is not the same as the speciality market, they are sufficiently related to allow the bakery to “play” in a market adjacent to it.
What Are Adjacent Markets
Adjacent markets are markets that share a meaningful overlap with a company’s current operations. The overlap may involve customers, technology, distribution channels, brand positioning, or operational capabilities. These markets are called “adjacent” because the company does not need to start from scratch to tap into them.
Here are some examples of markets that could be seen as adjacent:
- A fitness equipment company is entering the market for fitness tracking apps
- A coffee shop expanding into packaged coffee beans for retail sale
- A software company offering consulting services related to its core product
- A bottling company is getting into the sale of beverage products
In each case, the company builds on what it already knows. Since the company already has some knowledge, technology, customer base, or something important in common with the adjacent market, it will be able to penetrate the market more quickly and, thereby, achieve profitability sooner.
How the Phrase Is Commonly Used
The expression is often used in strategic planning conversations and growth discussions. It suggests expansion with a degree of familiarity and reduced risk. Here is how the phrase is commonly used:
- When explaining growth strategies to investors
- When describing product line extensions
- When evaluating acquisition targets
- When planning geographic expansion into similar customer bases
For example, during an earnings call, an executive may state that the company plans to play in adjacent markets to drive sustainable growth, meaning it will expand into related areas rather than unrelated industries.
“Play in Adjacent Markets” in a Business
In business strategy terms, the phrase reflects a balance between growth and risk management. Entering entirely new markets can require new expertise, infrastructure, and customer acquisition strategies. Adjacent markets allow a company to use existing resources and capabilities.
The advantage of entering an adjacent market rather than a new one is that the company can leverage existing skills, assets, know-how, or infrastructure. As a result, the adjacent market will not be entirely new to it.
For example, getting into an adjacent market can be based on:
- Leveraging brand recognition
- Using established distribution networks
- Repurposing existing technology
- Serving a similar customer demographic
- Using know-how that could benefit both markets
For example, a company that sells accounting software to small businesses may expand into payroll services. The customers are similar, and the underlying expertise overlaps. Another example is a luxury automobile dealership that gets into high-end vehicle repair and body shop business.
Common Misunderstandings About the Phrase
One misunderstanding is assuming adjacent markets are risk-free. While they may be less risky than unrelated markets, they still require research, investment, and execution. As the name already suggests, the adjacent market is another market, although close to the company’s current markets. No matter the proximity of the market, it’s important to enter into the adjacent market with diligence and a well-defined strategy.
Another misconception is the belief that adjacency is always obvious. In reality, what qualifies as adjacent depends on the company’s specific capabilities and position. Each company’s skills, capabilities, and know-how differ, and so will the adjacent market they can tap into.
Here are also a few additional common areas of confusion when looking to play into adjacent markets:
- Overestimating how transferable current skills are
- Assuming customer loyalty automatically extends to new offerings
- Underestimating competition in the new market
For example, a company may assume that success in selling hardware automatically translates to success in selling subscription-based software, even though the business models differ significantly.
How to Use the Phrase Effectively
When referring to “playing into adjacent markets” or similar phrases, clarity is important. Companies benefit from clearly identifying why a market is considered adjacent and how existing strengths will provide an advantage when they enter that market (or decide to “play” in it).
Here are some practical considerations to ensure that you are using the phrase “play in adjacent markets” properly:
- Identifying shared customers or use cases
- Evaluating operational overlap
- Assessing whether existing capabilities reduce entry barriers
- Testing the new market with pilot programs
For example, a retailer expanding into online sales may begin by offering its best-selling in-store products through a digital platform before building a broader online catalogue. This will allow the company to test its approach, execution, profitability, and other factors before investing more time, resources, and capital in the adjacent market.
Related Expressions
Play in adjacent markets is often used alongside other strategic phrases, such as:
- Market diversification typically refers to entering new markets, sometimes unrelated.
- Vertical integration involves expanding along the supply chain rather than into related product areas.
- Core market refers to the company’s primary focus.
For example, acquiring a supplier would be vertical integration, while launching a complementary product line would be playing in an adjacent market.
Another example is a company purchasing a competitor to further expand into its core market, while a supplier launching new, related products is entering adjacent markets.
Frequently Asked Questions
Are adjacent markets the same as new markets? No. Adjacent markets are new markets that are closely related to the company’s existing business, making expansion more manageable. For example, a grocery retail business gets into offering home-cooked meals for delivery.
Is playing in adjacent markets less risky than full diversification? It is often less risky because the company can rely on existing knowledge and resources, but risk still exists. Even though the company already has some level of knowledge, skills, or capabilities to tap into the adjacent market, it will face new competitors, new customer demands, new operational requirements, etc.
Does playing in adjacent markets require new capabilities? Sometimes. Even adjacent markets may require additional expertise, partnerships, or operational adjustments. For example, a pet store entering the production of pet food will need to develop new capabilities for recipe development, production, canning, etc.
Takeaways
To “play in adjacent markets” refers to expanding into related markets that align with a company’s existing strengths and customer base. It is a growth strategy that seeks opportunity without abandoning familiarity.
When executed thoughtfully, this approach allows companies to build on what they already do well while carefully extending their reach into new, yet connected, areas of business.
We regularly write articles about interesting business expressions and phrases. Be sure to read our articles on the meaning of “business as usual,” “to sever ties,” or “to move the needle.”
