Are you interested in breaking into a new market with your business’s products or services? Knowing how to do this while reaching your target audiences is crucial to your success. Market entry strategies can help you map out the specifics.
A market entry strategy details all the specific details of your plan to enter a new market in a way that boosts your sales and profits. It outlines your unique business goals, an overview of your target market, exactly what you plan to sell in the new market, your expected sales, and how you will achieve these figures.
The typical market entry plan can take between 6 and 18 months to implement on average. But it’s well worth your time to develop. Having a plan in place will give you and your team a firm direction for your export project and guide you towards long-term success.
Entering a New Market
There are many different ways in which a business can enter a foreign market. No single market entry strategy will work for all international markets, especially if you operate an online business. Direct exporting may be an appropriate strategy for some companies. While others may need to set up joint ventures or license their manufacturing.
There are many factors that will influence your choice, including marketing and transportation expenses, tariff rates, and the type and degree of adaptation your products and services require. These factors will likely increase your costs. But your potential increase in sales may offset these expenses if you follow your market entry strategy correctly.
Here are the most commonly adopted types of market entry strategies and how they may benefit your business.
The 8 Most Effective Market Entry Strategies Revealed
1. Direct Exporting
In simple terms, direct exporting refers to selling directly to the market you have selected using your business’s own resources. Many businesses partner with distributors and agents to represent them in new markets once they have developed a sales program.
Your own agents and distributors will work with you to represent your company’s interests and identity. They’ll become ambassadors for your brand. This is why it is crucial to partner with distributors and agents who display the same passion and skill that you would look for when hiring a key member of staff.
Franchising allows for effective and rapid market expansion, especially for well-established businesses and brands. Additionally, it’s suitable for businesses that have repeatable business models, such as consumer products or food outlets, that are easily transferable into new markets.
There are two key considerations to remember when considering this market entry strategy.
First, your business model needs to be unique or enjoy strong brand recognition that you can wield internationally for best results. Second, your franchisees may eventually end up becoming your biggest competitors!
Licensing is a more complex method of market entry in which a business transfers the rights to use a service or product to another company. This strategy can be helpful if the buyer of the license has a significant share of the market that you are aiming to enter. You can sell licenses for marketing or for production, depending on your needs.
Partnering is necessary for most businesses that are entering foreign markets. In certain regions of the world, it may be absolutely essential. There are many ways in which partnering can take place. Basic co-marketing agreements to complex strategic manufacturing alliances are just a few options.
This is an especially useful strategy in markets in which business and social culture differ from your own region. Your regional partners may bring essential local market knowledge, contacts, and even customers to the table. This will help you expand successfully into your new target market.
5. Joint Ventures
This is a specific form of partnership that brings two businesses together to create a third, independently managed entity. The two companies in question team up to work together in a specific market or location, and create a third company to achieve this. Any risks or profits encountered in a joint venture are normally shared equally.
Piggy-backing is one of the lesser-known market entry strategies that could bring big benefits to your enterprise. It’s especially beneficial to SME’s looking for effective ways to grow.
If you have an especially interesting or innovative product that you customize, you can approach larger domestic firms that already have a presence in foreign markets. They can assess whether your product could be included in their international market inventory, and purchase it directly from you.
This hedges your risk and your expenses. You are essentially selling domestically while the larger firm markets your product for you in new foreign markets.
7. Turnkey Projects
These projects are specific to businesses that provide services such as engineering, construction, architecture, or digital services. A turnkey project refers to a product that is built from the ground up and delivered to a client ready for use or implementation.
This is a great way to enter new markets, as clients such as governmental departments often receive financing from international finance agencies. This reduces your risk of not being paid, and grants you access to some truly high-profile clients.
8. Buying a Local Business
In certain markets, buying an existing local brand or business may be the best way to break in. The company you consider buying should have a significant market share, be one of your direct competitors, or be your only option for market entry due to government laws and regulations.
This is definitely a costly option, and it’s crucial to do your due diligence to assess whether purchasing another firm in a foreign market will bring you the benefits you’re looking for. On the other hand, this strategy will provide you with instant access to the local market. As well as local market knowledge, an existing customer base, and the same rights as enjoyed by other local firms.
The market entry strategy you choose for your business will be based on a range of factors, including your products or services, the markets you aim to enter, and how many resources are at your disposal.
Be sure to write down all the details of your market entry strategies. You can use this document to secure financing and build a framework for your marketing plan in due course.
It’s also important to regularly revisit and update your market entry strategy to monitor your progress and hone your approach. Doing this gives you the best chance of success.