Tag: market entry barriers

market penetration strategy

Keys for Success in Building an International Market Penetration Strategy

Venturing into a new market is always a ‘tricky business’. Entering markets overseas where consumers think differently, follow different cultural norms, and speak entirely different languages could prove to be extremely complicated and a daunting task for organizations. For companies seeking to venture into and establish themselves in an already competitive and culturally different market from what they currently operate in, an effective market penetration strategy is a must-have. There are several examples of even some of the top international brands who have failed to garner customer support and establish themselves in new markets despite having a strong brand name and displaying business excellence in key markets of the world. The absence of a strong market penetration strategy is one of the prime reasons for the lack of success.

Having a penetration pricing strategy could prove useful in the case of new market entry. But beyond this, there are several factors that businesses must take into consideration for reaching out to a multilingual and diverse audience. Smart brands do their homework and analyze new ways to engage local customers and undertake promotions that resonate with the audience. Here are some factors to take into account while pursuing a market penetration strategy on an international scale.

An untapped market won’t always be the right one for expansion; there are a lot of variables around brand economics, timing, and more that must be considered. Request a free proposal to know how to identify the right markets to invest in and choose an effective market penetration strategy to successfully establish your business in a new market.

International market penetration strategy

market penetration strategyFocus on demographics

It’s always a good idea to deep-dive into the demographics of a market before formulating a market penetration strategy. Businesses must gain a clear idea of how the market breaks down in terms of age, ethnicity, gender, income, and several broader census categories. Once this is done, brands must hone in on individual regions. Although population across a region are often believed to be homogenous, mostly this is not the case. Varying levels of conformity and diversity can be seen in different regions. Gaining a clear understanding of these diversities can helps brands create a successful market penetration strategy. This will also help brands craft native brand experiences that are personalized and speak specifically to a particular market or region. Consequently, helping to ensure that those messages resonate with the local customers.

Identify target customers

When a brand plans to expand its business into a new region or country, this does not mean that the entire population of that country is their target audience. Once the business gains a clear idea on the demographics of the new market, they easily identify their target customers a build their market penetration strategy accordingly. If the target market size is not estimated, then it would eventually skew the other predictions of the company, making it more difficult for their market penetration strategy to become successful.

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Cost-benefit projections

The feasibility of the market penetration strategy to enter a new market should be estimated. Does the decision make sense financially? Will it net more revenue than the costs incurred? These are some of the key questions that businesses must have answers to before going ahead with the implementation of their market penetration strategy.

Localization

Localizing content and strategies are paramount to resonate and be accepted among local audiences in a new territory. Localization entails layering appropriate cultural nuances on top of content translation. Websites and mobile apps should be revamped to suit the taste of local audiences and are easy to use and understand for them. Any touchpoint of interaction between customers and the brand must be natural and meaningful to the target audience.

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Market penetration strategy

Market Penetration Strategy for a European luxury beauty and personal care brand

The US is currently one of the largest markets for beauty and personal care products. In addition, this industry is now growing at a steadier and faster pace in the US when compared to other countries in the world. The lucrative opportunities in the US beauty and personal care sector is prompting several foreign players, especially European companies, to venture into the market. Furthermore, there is an increasing demand for luxury and premium products among American consumers. With ample market opportunities and a robust growth trajectory fueled by the premium segment, the US is now an attractive growth priority for premium beauty brands to expand its global footprint. By leveraging a strong market penetration strategy, businesses can gain a comprehensive understanding of the pros and cons of a new market and become fully equipped to establish their business in a foreign country.

You are just one step away from successfully establishing your business in a new market. Request a free proposal to know how our market penetration strategy for business can help you achieve this.

Business challenge

The client, a European luxury beauty brand retailer, wanted to expand their business into the United States. Although the market for luxury beauty products in the United States looked promising, the client wanted to understand in detail the key challenges and opportunities that the market has to offer before making a move towards market entry.

As the company’s core business is into luxury retail, it is a no-brainer that it would be challenging to appeal to all the customer segments equally. So, with Infiniti’s market penetration strategy, they wanted to understand the demographic conditions in the US and group different customers based on the most profitable segments. Through this, they wanted to gain a better understanding of which customer groups to target for their product marketing strategy and identify the best channels to do so. The European luxury beauty brand retailer also sought to gain an idea of the best distribution models and investment capacity in the US using our market penetration strategy solutions.

An effective market penetration strategy is all you need to win over your target audience. Get in touch with us our experts to know how we can help you formulate an ideal market penetration strategy for your business.

Key challenges in the US luxury beauty market 

market penetration strategy

Highly competitive market – The luxury personal care and beauty market in the US is more consolidated when compared to that of Europe. Unlike the European luxury segment, in the United States, the top 10 companies collectively own a greater share of the premium market segment. This relative consolidation leads to fierce competition and has a major influence over the coveted share of finite shelf space at key retailers.

Distribution channel mix – Due to significant competition and product proliferation, distribution channels play a critical role in both the market entry strategy and growth potential of beauty brands entering the US market. The fundamental difference in the distribution channels here is that US markets demand a localized distribution strategy, which is critical for the growth of European brands in the US marketplace.

Changing consumer preferences – Consumers’ increasing preference for plant-based, organic, and natural beauty products have spurred investment and innovation as companies to capture market share in this growing category. Natural products appeal to modern consumers, both from ethical considerations (concern for environment and sustainability) as well as health concerns (fear of harmful ingredients).

Solutions offered

With over 15 years of experience in serving various industries across the globe, the experts at Infiniti Research helped the client to devise an efficient market penetration strategy to enter the US luxury beauty and personal care market.

  • A thorough market entry research was undertaken to help the client understand the demographic segmentation and demand patterns in the market and plan their market penetration strategy accordingly.
  • As a part of the market penetration study, Infiniti helped the client formulate a comparative market analysis was provided to the client to help them understand the strategies of their key competitors in the US. They were also able to gain insights on the core difference between consumer groups and demand patterns in the European and US markets. This helped them identify the best promotional activities that are more likely to work with their target audience in the US.
  • During the course of the market penetration strategy study offered to the client, we identified the different modes of distribution that can be chosen by the client to quickly leverage local resources, networks, and market knowledge with minimal investment.

Results obtained

Based on our market penetration strategy and insights, the client gained a detailed understanding of the market demographics and competitive scenario in the US luxury beauty and personal care market. They also developed a detailed understanding of the attractiveness of market opportunities for their product and service offerings. The European luxury beauty and personal care retailer was also able to devise a market penetration plan to establish a foothold in the US. Also, with the help of our market penetration strategy analysis, they were able to better understand the current and future market potential, make effective targeted promotions to attract customers, and thereby successfully plan their market entry into the US.

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Market entry barriers

Market Entry Barriers to the Chinese Pharma Industry

Although expansion into emerging markets is vital for pharma companies to ensure continued growth, both cultural and economic market entry barriers can pose problems. China is one of the most lucrative markets for pharma companies across the globe. China’s growing middle class and an ageing population mean new opportunities for companies to widen their portfolio in this area. However, entrants into the Chinese market encounter several challenges while expanding their operations effectively in the country. For Western companies seeking a foothold in the pharma industry in China, our experts have identified some of the key market entry barriers in the Chinese pharma market and ways to overcome them.

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Chinese market entry barriers

market entry barriersIdentifying untapped market potential

The scale of the country could prove to be one of the key market entry barriers for pharma companies planning to enter the Chinese market. So far, the main focus for pharma companies has been on Tier 1 and Tier 2 cities, those with a population of over 2 million. Physicians in large hospitals in these cities have been targeted by foreign companies as a part of their market entry strategy to venture into these markets. Pharma companies must also identify ways to leverage the potential of China’s rapidly growing Tier 3 and Tier 4 cities. Mergers or joint ventures with established Chinese firms who have built up knowledge and a profile in these areas is one of the best ways to pursue this.

Overlapping demographics

China’s overlapping demographics with each of them requiring a tailored approach poses a severe challenge for pharma companies. Furthermore, inadequate knowledge of geographical and cultural differences in Chinese markets could also prove to be significant market entry barriers for companies in the pharma sector. Even two cities such as Shenzhen and Guangzhou which are in close proximity, speak different languages and represent very different social clusters. Marketing in these two cities or even the case of Tier 1 and Tier 4 cities in the country would necessarily require two separate approaches.

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Planned price restrictions

The Chinese government has recently indicated that they intend to review their current drug pricing scheme, which could increase the market entry barriers for foreign companies. They are planning to dramatically increase the number of drugs covered under the essential drugs list. China’s pharma industry is heavily weighted towards producing generics which are better placed to compete under such criteria, posing major market entry barriers for foreign companies wishing to profit from more expensive branded drugs. Foreign pharma companies can increase their profit margins by targeting consumers directly.

Supply chain

Once the drugs have made its way through the registration process, it will need to be distributed, and the fragmentation of the supply chain makes this a much more complicated process in China. Often, there are several layers of distributors to get through before reaching the customer in Chinese markets, which raises the distribution costs and also diminishes supply chain visibility, making it difficult to monitor the product once it has left the factory, contributing to further market entry barriers.

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