Are costs that are associated with learning the idiosyncrasies of using a new product or service.

Many companies have used activity-based costing (ABC) in onetime profitability studies to help them decide which products or customers to cut or keep. But ABC can be much more than a superior accounting technique that shows how much money individual products are really making or losing. When ABC is woven into critical management systems, it can serve as a powerful tool for continuously rethinking and dramatically improving not only products and services but also processes and market strategies.

A version of this article appeared in the July–August 1995 issue of Harvard Business Review.

Most companies focus their international expansion efforts on markets with evident existing demand for their products or services. But through a series of more than 100 interviews with executives and multinational organizations, the authors found that it is also possible (and potentially quite profitable) to expand into global markets without clear signs of demand. The authors outline three strategies that have helped firms around the world successfully launch into such markets: Start with a small initial investment, find creative ways to introduce local customers to an entirely new product category, and pivot the business to meet local needs. While entering a new region without existing demand is risky, a bit of patience and creativity can help companies preempt competition and find — or create — substantial long-term demand.

When it comes to choosing new markets to enter, the safe bet is to focus on regions with visible, existing demand for your products or services. Hyundai, for example, only entered China when the Chinese auto industry was already growing about 20% per year. Amazon waited to venture into India until the country’s e-commerce sector was growing at 35% per year. And Uber launched a motorbike taxi service in Indonesia after the success of local rivals Gojek and Grab demonstrated the popularity of similar services in the region.