Should Klarna prioritize expanding to new markets or deepening penetration in existing ones?

Introduction

The key trade-off we're examining is whether Klarna should prioritize expanding to new markets or deepening penetration in existing ones. This decision is critical for Klarna's growth strategy and resource allocation. I'll analyze this trade-off by considering market dynamics, user behavior, technical feasibility, and business impact. My response will cover clarifying questions, trade-off analysis, metrics identification, experiment design, and a final recommendation.

Step 1

Clarifying Questions (3 minutes)

• Context: I'm thinking about Klarna's current market position. Could you share which markets Klarna is currently operating in and their relative performance?

Why it matters: Helps understand the baseline for expansion vs. deepening strategies Expected answer: Operating in 20+ countries, with strong presence in Northern Europe and growing in the US Impact on approach: Would influence which markets to consider for expansion or deepening

• Business Context: Based on Klarna's business model, I assume revenue is primarily from merchant fees. Is this correct, and are there any other significant revenue streams?

Why it matters: Aligns strategy with revenue drivers Expected answer: Primarily merchant fees, with some revenue from premium consumer services Impact on approach: Would focus on strategies that increase merchant adoption and transaction volume

• User Impact: Considering user behavior, how does Klarna's adoption rate differ between new and existing markets?

Why it matters: Indicates potential for growth in new vs. existing markets Expected answer: Slower initial adoption in new markets, but faster growth once established Impact on approach: Might suggest a balanced strategy of careful expansion while deepening existing markets

• Technical: What are the main technical challenges in expanding to new markets versus scaling in existing ones?

Why it matters: Assesses feasibility and resource requirements for each option Expected answer: New markets require localization and compliance work; existing markets need performance optimization Impact on approach: Could influence timeline and resource allocation for each strategy

• Resource: How does our current team capacity and structure align with expansion vs. deepening strategies?

Why it matters: Determines if we have the right resources for either approach Expected answer: Strong localization team for expansion, data science team for optimization in existing markets Impact on approach: Might leverage existing team strengths or identify areas needing investment