A market entry strategy is a comprehensive plan that helps you enter the market. In other words, it’s a plan for starting up your company in a particular place or with a specific product. There are many components to a good market entry strategy, and some of them overlap with each other. These may include but aren’t limited to devising an innovative idea, target marketing, gaining financial backing, and establishing business relationships. Some companies use acquisitions as their primary method when entering new markets.
Different methods can be used to enter into a market that includes greenfield expansion, acquisition integration, and purchasing assets.
Open a new branch
Greenfield Expansion is when you open a new branch in an area that is already occupied. This usually occurs when there are no competitors or few of them, which makes it easy for your business to flourish without coming into direct competition with others.
Acquisition Integration is when you buy out one or more companies currently occupying the market and then absorb those companies into yours. This method provides an excellent opportunity for expansion because you’ll already have assets (i.e., facilities, clients) as well as an established market presence. Purchasing Assets is when you go after one or more businesses, take over their operations and either close them down or change their focus to match your own company better.
Target of your business
Once you’ve decided what method you want to use, the next step is to determine what area or countries your business will be targeting. You can do this by using a location-based strategy that’s focused on the factors that are most important for your business, such as low labor costs, high consumer spending with higher disposable income and lower real estate prices.
For example, if having reduced transportation expenses is more important for your company then reduced labor costs (or vice-versa) you might choose to enter into markets in Asia rather than Europe even though the cost of living is higher there. By looking at each country individually and deciding which ones fit best with your financial goals and market entry strategy is how you’ll be able to make the best decision about which markets you should enter.
Look at other factors
Additionally, it’s essential to look at other factors, such as your potential market laws. If you want to sell certain items or offer specific services, you may need special licenses or negotiate with local companies. Once you’ve picked an area and decided how exactly your business will enter that target market; you can begin planning your strategies for starting up a company there.
In addition to choosing a country, deciding where precisely in each country is best suited for your company is also very important when making an entry strategy. It doesn’t make sense to open a branch in a land far away from your home base because you won’t be able to maintain reasonable control over what’s going on there, and it will be challenging to keep up with changing conditions.
For example: If your company is headquartered in the United States, but you want to set up a branch in China, wouldn’t it make more sense to open up an addition closer to home? Perhaps somewhere near Hong Kong, where many companies already have their units? Once again, the issue of location comes into play, and it’s something that needs to be given serious thought when making an entry strategy.
Many businesses choose not to enter new markets because the potential rewards outweigh the risks involved. However, by choosing to go into a mature market already occupied by many other businesses, the threat of failure is significantly lowered.
Compete in the business
A market entry strategy is a plan for entering a new market in order to compete in the business. It will allow you to describe how you are going to start this new venture and make it profitable. The main part of any business plan is the marketing section, which includes an analysis of the competitors’ product or service, your place in the industry, the target markets, the products/services they offer, pricing strategy and communication methods with customers.
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An effective market entry strategy has these objectives:
- Entry into a viable market that can support your company’s efforts over time.
- A unique position within that market with competitive advantage.
- A sound understanding of the customers within that market.
- An effective plan for reaching customers.
- An understanding of how to achieve success in the long term.
Some small businesses will enter a market with an existing major player while others will create what is called a “blue ocean” strategy. That means entering an industry with no competition or creating new customer needs where there are currently none. A few examples of successful blue ocean strategies include Starbucks’ entry into the coffee shop business, FedEx’s creation of the overnight package delivery industry, and Apple Computer’s development of user-friendly home computers. The key success factor in these situations is that they were able to break into an emerging industry with low competition.
- When deciding what area to enter, you need to factor in the personal preferences of your staff as well as costs.
- Having good local connections increases the success probabilities of being able to establish a business there. This can be achieved by having salespeople or subsidiaries located locally or offering to purchase something already established there.
- When it comes time for action, location truly matters. If you’re operating out of Europe but want to expand into Asia, then picking somewhere relatively close by would be far more efficient than going all the way across the world if England isn’t even on your target list.
- You can choose a market specifically to your company’s strengths/weaknesses; for example, if you have a lot of experience with a particular industry and don’t want to branch out from that, then entering into countries with similar legal environments would be beneficial.
- Knowing the laws is just as important as knowing the area because there might be illegal things or special permits required, which you shouldn’t overlook. If operating under unfair conditions isn’t possible, then it may not even be worth the risk of trying in those regions.
Proper channels of communication
There must be proper communication channels between what’s happening at the home base and the people operating in foreign areas for businesses to function correctly. When you’re spread out across different countries, it can be difficult (or impossible) to communicate with everyone involved due to time zones, language barriers, etc., allowing for misunderstandings or even someone taking advantage of the situation by doing something dishonest behind your back without you knowing about it.
One more thing you should consider when making decisions about the market entry is your company’s capabilities compared to others in the area, for example, if you start in a country where there are many well-established competitors then it may make more sense for you to try somewhere else.
What is a case of a market entry?
These market entrance techniques include exporting, licensing, franchising, teaming up, joint ventures, turnkey projects, and greenfield investments. An organization can expand by shipping products to markets abroad. This is known as exporting.
Advantages and Disadvantages of Market Entry Strategy
Market entry strategy refers to a company’s method of entering a new market. The selection of an appropriate market entry strategy is crucial to the success of any company entering a new market. This article explores the advantages and disadvantages of various market entry strategies.
Exporting is the easiest and most common method of entering a new market. It allows companies to reach new markets quickly and at low cost. However, it can be challenging to maintain a competitive edge due to increasing competition and tariffs.
Licensing is a market entry strategy that allows a company to grant the right to use its intellectual property to another company. It is advantageous because it enables companies to generate revenue without investing in a new market. However, licensing may lead to the loss of control over the quality of the product.
Joint venture involves partnering with a local company to enter a new market. It offers the advantage of local expertise, knowledge, and established relationships with suppliers and customers. However, joint venture partners may have different goals and objectives, leading to conflicts and disagreements.
Direct investment involves establishing a wholly-owned subsidiary in a new market. It offers the advantage of complete control over the business operations. However, it is a high-risk strategy as it requires significant investment, and failure could result in substantial losses.