Businesses may look to enter new international markets for various reasons, ranging from added source of revenue, knowledge and technology sharing, and utilizing unused capacity to achieve economies of scale. Entering a new market may signal prosperity of business, but it’s not always an easy task. Companies should have a solid market entry strategy in place to succeed in foreign markets. Many questions arise when trying to enter a new market such as organizational capability, market dynamics, consumer segments, rules and regulations, and product compatibility.
Here are some ways to perfect the market entry strategy to explore new avenues:
Step 1: Market Selection
The first and foremost thing to devise a winning market entry strategy is to identify which market to enter. It may seem like a simple task but most companies fail after entering the new market as they are unable to understand all the market variables working against them. A general market research can give out generic information such as market size, growth rate, and competitor analysis but demographic, economic, business, and consumer-related environment also need to be considered for developing an effective market entry strategy.
Here are some criteria to judge the lucrativeness of the market:
- Market Factors: It includes the economic and political stability of the market, market growth rate, and openness of the market
- Demographic Factors: Population size and growth, GDP, age and income factors, and level of urbanization
- Market Access: Infrastructure development, availability of partners, internet penetration, and market landscape
- Business Environment: Ease of doing business index, availability of human resources, rules, regulations, and compliance
Step 2: Companies’ Readiness for Market Entry
The most important thing to analyze is whether the company is ready to enter into a new market or not. It depends on whether the company has the necessary resources to enter into the new market. The company should also assess their readiness around three core areas as given:
- Internal Company Assessment: Brand Value, Merchandising, Supply Chain, Operations
- Strategic Assessment: Reward Expectation, Desired entry timeline, Risk tolerance level
- Resource Assessment: Availability of capital, human resource, expansion experience
Step 3: Mode of Entry
The new market presents itself with a host of new challenges, and it is important to select the right market entry strategy. The company has to choose between gaining control over the market and the level of risk.
Step 4: Standardization Vs Adaptation
It is important for a company to decide whether to alter the product as per the requirement of the home market. Some companies standardize the product and alter only in the form of marketing communication with the core product remaining the same. Whereas on the other hand, companies like McDonald’s change their menu to suit the need of the target region.
Every organization needs to go through these steps before entering a new market. A detailed market entry strategy can contribute to the success of the product in the new market.