1-WHAT ARE THE MARKET ENTRY STRATEGIES?
2-WHICH MARKET ENTRY STRATEGY SHOULD YOU CHOOSE?
Entering into a foreign market with success is not an easy task especially because of the cultural differences, different fiscal and legal requirements. No two countries are same nor two industries, that`s why different markets require different solutions.
Unfortunately, There is no one-solution that fits for all cases, but Levene Consulting can help you to identify the best possible solution by assessing your capabilities and understanding the identified market.
There are a variety of ways in which a company can enter a foreign market. Depends on your product/service and the target foreign market, there will be a number of factors that will influence your choice of strategy, including, but not limited to, tariff rates, licences, the competition, popular marketing channels and additional transportation costs.
While these factors seems an additional hassle to your operations, foreign markets offer gret rewards in return. We list down the following market entry strategies for your business.
Identifying the Right Market Entry Option:
Buying a Company
Direct exporting is the most well known market entry strategy, By simple terms, selling directly into the target market by using your own resources. Many companies, once they have established a working sales process, operations in their home lands, turn to agents and/or distributors to represent them further in that market. Agents and distributors become the face of your company and thus it is important that your choice of agents and distributors is handled in much the same way you would hire a key staff person. Another important task to accomplish is to check trade tariffs, documentation requirements and any other legal / fiscal topic that you should be aware of in your target market.
Widely used: FMCG, Food, general consumer products or raw materials
Licensing is a bit more complicated than direct exporting in which your company transfers the rights to the use of a product or service to another firm. It is a particularly useful strategy if the purchaser of the license has a relatively large market share in the market you want to enter. Licenses can be for marketing purposes only.
Licencing method is mostly used in Software industry.
Franchising is a well-known North American process for rapid market expansion. Franchising works well for firms that have a repeatable business model that can be easily transferred into new markets with a defined level of investment. Your company sells its know-how, business model, operations with available data to achieve new partners who would like to represent your brand in the new markets.
Franchising is widely in Hospitality / Food Service industy (Restaurants, outlets, hotels etc.)
In some foreign markets, Partnering is almost crucial due to fiscal requirements or due to cultural expectation. Partnering can take a variety of forms from a simple co-marketing arrangement to a sophisticated strategic alliance for manufacturing. Partnering is a particularly useful strategy in those markets where the culture, both business and social, is substantively different than your own as local partners bring local market knowledge, contacts and if chosen wisely customers.
Partnering is widely used in Asia / Middle East markets regardless of the industry.
Joint ventures are a particular form of partnership that involves the creation of a third independently managed company by having equal shares (50-50). Two companies agree to work together as equal partners in a particular market, either geographic or product, and create a third company to undertake this. Risks and profits are normally shared equally.
An example of a joint venture is Sony/Ericsson Cell Phone. Widely used in sophistached manufacturing industry.
Buying a Company - Acquisitions
Not a new method but becomes highly popular after tech start-up boom. In some markets buying an existing local company may be the most appropriate / efficient entry strategy. This may be because the company has established status, knwo-how, available customer database, substantial market share, are a direct competitor to you or due to government regulations this is the only option for your firm to enter the market. It is certainly not the affordable way by means of capital requirement and determining the value of a firm in a foreign market will require substantial due diligence and expert third parties. On the plus side this entry strategy will immediately provide you the status of being a local company and you will receive the benefits of local market knowledge, an established customer base and be treated by the local government as a local firm.
Acquisitions is widely used by big companies by buying new hight tech start-ups.
Piggybacking is probbly the least known and so-called an unique way of entering the international arena. Piggyback is a form of distribution in foreign markets in which a SME company (the “rider”), deals with a larger company (the “carrier”) which already operates in certain foreign markets and is willing to act on behalf of the rider that whishes to export to those markets.
Piggybacking widely used in the marketing field in which you advertise your product as a complimentary service by the side of another service. As an example, Car repair service (SME) offered on the website of a national car towing company.
Turnkey projects are particular to companies that provide services such as environmental consulting, architecture, construction and engineering. A turnkey project is where the facility is built from the ground up and turned over to the client ready to go – turn the key and the plant is operational.
Turn-key projects are widely requested by foreign governments in construction, engineering industry where often the project is being financed by an international financial agency such as the World Bank or European funds so the risk of not being paid is eliminated.
Greenfield investments require the greatest involvement in the foreign market. A greenfield investment is where you buy the land, build the facility and operate the business on an ongoing basis. It is one of the most costly and probably risky, however some markets may require you to undertake the cost and risk due to government regulations, transportation costs, and the ability to access technology or skilled labour.
Greenfield investments are used in Manufacturing, Logistics, Healtcare, Energy industries and may work well if there is a government incentive / funding avaialable.
After briefly covering the Market Entry Strategies, lets have a look at how to define your Market Entry Strategy for your target foreing market:
A- Market Identification "RESEARCH PART"
Market Related Information:
- What is the Market Size?
- How the market perform over +-5 years
- Who are my Customers, how is the segmentation?
- How is the Competition?
B- Route to Market "STRATEGY PART"
- What are fiscal and legal requirements?
- Which Entry Strategy should we apply?
- Trade Tariffs, currency exchange, potential partners etc
- Sales and Marketing Channels?
C- Priorisation and Resource Allocation: "ANALYSIS PART"
- What will be the expected ROI?
- Sales and Marketing application, ROI?
- Strengths, Weaknesses, Trends & Risks, Threads, Opportunities, Gaps - SWOT Analysis or Pestle Analysis
- Cultural fit, Potential Partner Analysis
D- Growth Strategies "ACTION PART"
- How to grow in the market?
- Branding, Distribution, operations, Marketing
Would you like to hear more about International expansion and creating a killer market entry strategy for your target foreign market?
Here, at Levene Consulting, with the support of our close & reputable partners in foreign countries and local service providers based in UK, we aim to be your reliable bridge into international markets and ease the decision making process for you by right data and transparent consultative approach.
Who we are? We are a boutique consulting firm based in London / UK specialised in international trade & business. To contact with us or find out how we can add value to your organisation, send an e-mail to email@example.com or visit us at www.leveneconsulting.co.uk