Entering new markets

Consider all risks when entering new markets

When considering entering new markets, companies need to make sure that their approach is properly planned.  Each will have different reasons and aspirations for wanting to enter a new market such as:

  • growing the business
  • finding new customers
  • saturation of existing markets
  • working with partners on joint ventures
  • legislative changes that have opened new markets

The “new market” might be a new geographic region within your domestic market, a new country, a different industry or a different group of customers.  So in a nutshell, entry to any market involving new customers, new competitors or new channels to market.

You need to understand the new market before you make any decisions.  Ask yourself:

  • Who are the customers?
  • When, why and where do they buy?
  • What channels are used to get products / services to customers?
  • Who are the main competitors and how do they compete?
  • What barriers have to be overcome?

You can carry out research or test the market with an existing product or some promotional materials.   You can also consider using agents who are specialists in the chosen market.  You need to understand the level of investment you need to make and the changes required to your marketing mix.

To identify suitable markets you need to look at its attractiveness to you.  Consider factors such as:

  • market size and growth rate
  • costs and risks of entry
  • likely returns on investment
  • availability of suitable partners, agents or other support
  • the fit with your existing business and marketing activities
  • barriers to entry

You also need to assess the competitiveness of the business in the new market and determine if your ability to create and sustain a competitive position is there.

There are four main market entry strategies to consider:

  1. Direct investment (wholly owned subsidiary, company acquisition)
  2. Co-operative strategies (joint venture, strategic alliance, licencing)
  3. Direct entry (direct marketing, direct sales force)
  4. Indirect entry (franchising, distributors, agents)

Most small businesses enter distant geographic markets indirectly through exporting from their home base using agents or distributors in the market.  However, direct marketing is often used to target new domestic markets.

Deciding which is the best method of market entry for you will depend on lots of elements, including:

  • company objectives and expectations
  • degree of control required
  • size and financial resources available
  • experience / involvement in similar or adjacent markets
  • knowledge of intended market
  • ability to work with different cultures
  • ability of managers
  • level and intensity of competition
  • barriers to entry (tariff and non-tariff)
  • nature of product / service
  • areas of competitive advantage
  • time commitment required

To make a success of your new market entry strategy the following must be in place:

  • commitment of your company’s management to the new venture and relationship with partners and intermediaries
  • making sure you know and understand the markets you are entering as a foundation for your market entry plan
  • having an approach based on a strong skills base (product/service and distribution channels)
  • good marketing information and communication systems for identifying new opportunities and monitoring sales staff etc
  • having a sound operations base

The above is just an overview to highlight areas you should incorporate in your planning, but if you would like to find out more or discuss your own market entry development strategy please contact me.

About Marie

I started Elite Edge at the end of 1999 and I am still as passionate about marketing today as I was then - probably more so because I consider myself very lucky to do a job that I love every day! My area of specialism is strategic planning but like most people these days, I wear many other hats too!
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