A Guide to Market Entry Strategy: Why it Matters
Is your business ready to take on a new market? Most companies recognize the importance of market entry strategy and have at least a basic strategy for entering new markets.
But what exactly is market entry strategy? And why does it matter to ensure your business’ success?
What is Market Entry Strategy
Market entry strategy is a systematic approach to deciding how and where your company will enter new markets, and how to successfully launch products or services.
Your company’s market entry strategy will help you consider factors such as your company’s strengths and weaknesses and the competitive environment you’ll be entering.
Some companies do perfectly well on niche markets, so deciding to enter a new market means that your business is ready to take on another challenge. It can be a daunting process when you consider the costs, risks, barriers, and competition.
That said, there are huge returns for your business if you decide to enter a new market. Brand awareness, business stability, and sales growth all have the potential to skyrocket provided that you do it well.
Want to Talk to us About Market Entry Strategy?
How to Enter a New Market
Entering a new market requires special considerations. There are factors you need to account for to be able to set up a successful market entry strategy, and not one strategy will work for all markets on both local and international fields.
It’s a complicated process, so to help you get started, these are the things to keep in mind that will help you spell out what your business needs.
Define your goals
Why do you want to gain when you enter a new market?
This question may be basic but it will set a clear path to what you want to do from day one.
You probably created goals for your existing business venture, but a new market requires new goals too. Defining your goal is a simple yet critical part of establishing the foundations of your business.
Plot out what you want to accomplish at a given time. It’s crucial that you know what success means to your business and what are the hindrances you will potentially discover.
Avoid setting unrealistic goals that are vague at the same time. When crafting your business goals, it’s best to specify what you want to achieve and point out the steps that you will do to achieve it.
Understand your target market
Defining who your target market is and understanding their needs that you want to fulfill is key to what kind of value you need to bring in.
First, check your current market. What are the things you did that worked best? This will give you an insight into what your next market’s characteristics are. Things that didn’t work should also be measured to make sure that the new market you want to enter won’t experience the same service.
Second, study your competition. Find out what kind of market your competitors are targeting that seems to do well. In today’s technology, there are several competitor research tools that can also help you pull out numbers and check where your competition lacks that you can leverage.
Third, narrow down your market. You can do segmentation on the kind of demographics you want to target. Do a deep dive into various marketing trends that will work well for certain demographics.
Select market entry strategy
Once you’re done setting goals and listing down your target market’s needs, the next step is to select which market entry strategy works best.
These are some of the market entry strategy examples that you can dive into.
We’ll talk more about these markets you can in the next half of this article.
Plot your business plan
After selecting the market entry strategy you want to take on, it’s high time to plot a business plan for your new market.
A properly crafted business plan helps you envision your company’s worth and if the idea of entering a new market is even worth pursuing.
This is also critical when you are planning to partner up with other companies, as they will need to study your business plan and the future of your company.
What your business plan should comprise:
Here’s a template to guide you on creating your perfect business plan.
Market Entry Strategy That You Can Use
When a business is looking to enter a new market, it often needs to develop a strategy to enter that market.
Various markets and industries have different approaches in regard to how to enter them. To give you an idea, here’s a collection of market entry strategy template you can peek at.
The market entry strategy can be broken into two parts: the entry plan and the post-entry plan.
The entry plan is how the company will enter the market, and the post-entry plan is what the company will do after it enters the market.
Here’s a list of the main market entry strategy frameworks that you can consider.
Exporting or Trading
Exporting refers to a global market-entry strategy. Trading or exporting simply means that you are selling your products and services to a location outside of your current market—an international market to say the least.
This is a quick way to participate in global trade. There are fewer costs involved as long as you get a reliable export partner who can do the job for you.
In addition, there are export management companies (EMC) you can pay to make things easier for you. EMC will help you with the necessary documents and take on the responsibility of looking for buyers.
The risks of exporting may involve a distributor finding a cheaper supplier. They may also start producing your products locally and take off the market from your hands. These risks make businesses opt out of exporting and switch to another market entry strategy.
Franchising is partnering up with individuals or groups that you share a common goal with
To put it simply, this is how franchising works:
- Have an established business and be a franchisor.
- Allow business owners to use your brand and build their own business out of it.
- Business owners also called franchisees will pay you for the branding or give you a cut from their profits.
Franchising makes it easier for you to break into new markets that are out of your reach.
There are a lot of benefits in doing franchising as it helps you capture new territories and push the responsibility to somebody else.
But there are factors to keep in mind too. As a franchisor, you are required to make sure that the distribution system and marketing efforts are performing well under your watch.
You and your franchisee are bound by a contract where both of you should perform your responsibilities.
There are risks to consider when putting your brand in someone else’s hands, so it’s crucial that you filter out your franchisees well.
Licensing is an arrangement between you and another company where you give them the rights to use your products or services.
As a licensor, you will allow them to distribute your patents, trademarks, or any other intellectual rights and in exchange, you will get a percentage from the revenue or a fixed fee depending on your agreement.
To make this strategy more effective, it’s best to look for firms that have a relatively bigger market that you want to enter.
Licensing is one of the most attractive ways to enter a new market as it doesn’t involve manufacturing and sales. You can quickly expand to new territories and collect extra income with little capital investment.
But, some risks may involve the loss of control over your assets or a ruined reputation when you partner up with incompetent companies.
Plus, licensees can be considered as competition for your business too. Make sure that you set up a limit on the scope of the license you sign and ensure that your business is not at a disadvantage.
Partnership or Joint Venture
Entering new markets means you have little to no grasp of what to expect. A partnership with another company, especially in foreign markets, maybe the best solution.
To put it simply, both you and your partner will share ownership and control of the business.
If you’re trying to enter a territory with a different culture, language, and government regulations compared to your existing one, a foreign market entry strategy and partnership may be necessary to bridge these gaps.
Additionally, some territories may require that the business is partially owned by a local company. So this is one thing to keep in mind especially if you’re planning to enter some Asian markets.
There are pros and cons of partnering up with a company, here are some of them.
Partnership or Joint Venture
Cons of partnership
All these taken into consideration, the key factor here is deciding who you want to partner with that can truly help you reach your goals and not slow you do
What’s next for you?
When thinking about a market entry strategy, there are two key questions that business owners need to answer. One is “What is my business trying to achieve?” and the other is “How can we accomplish this?” The answers to these questions form the basis of a quality market entry strategy.
A good strategy integrates all the elements you need for success. It will tell you how to enter the market, the products you’ll offer, how to get the products to market, and where your sales force will come from.
We hope this article echoes the importance of creating a market entry strategy that we aim to provide! If you’re looking for a bespoke market entry strategy that resolves your business needs, you may avail of our services by reaching out to us here.