Expanding into new markets can be difficult to navigate without appropriate research and planning. This is especially true when entering international markets, which can have different laws, procedures and cultural expectations. However, if you want to grow your business and boost your revenue, it is something you will have to consider.
Market entry strategies are a planning method to help companies navigate expansion to new markets, making sure they reach new customers in the right way. This is your guide to market entry strategy. We will cover everything you need to know to create an effective strategy, the different types of strategies to consider and how our expansion experts can help move your business forwards.
Why move to a new market?
Never put a limit on your business and its potential to grow. Expanding into a new market will let you reach new customers. This can grow your revenue and allow you to operate globally. The most compelling reason to move to a new market is that it reduces risk to your income and operations. If you sell or provide services to more than one market, you are more likely to provide a reliable stream of revenue. This is because if one market suffers, you have others to rely on that will keep performing, particularly in international trade as cultural and political landscapes change.
Domestic and international markets
A domestic market will be easier to navigate as a business owner. It is geographically closer to your base of operations and will be part of the same culture you already work in. This similarity to your existing market will make expanding less complicated than entering a new market overseas.
An international market comes with additional considerations when expanding. You will need to understand different cultural customs, economic differences and differences in administrative procedures. It is also essential to research local laws that your business will have to comply with as failing to do this can lead to fines and the shutting down of your operations. Look at the political landscape and foreign exchange to help decide if your expansion will be affordable and ultimately profitable.
This will be a more complex process, but nothing worthwhile comes easy in business. Simply put, growth lies in international expansion and can be incredibly rewarding for your business.
How will a market entry strategy help?
Global market entry strategies help find the best approach for expansion based on your business goals and target market. It will maximise your chance of success by considering your current competition and consumer needs. Eventually, you can use your strategy outline to create an export marketing plan and take you closer to getting set up.
Your market entry strategy will outline your business goals, provide an overview of the target market, and specify what you will sell and your expected sales, with actionable steps on how to achieve them.
How do you create a winning market entry strategy?
First, you need to figure out your priorities. Ask yourself which countries will respond best to your products or services. Consider how you intend to provide these, by yourself, through buying products or working with overseas manufacturers. Finally, decide how much control you want over your new market and whether you are willing to work with a partner or want to make the new venture independently.
Next, research your market inside and out. Make sure it is viable for your business, check the local restrictions to make sure you can operate and examine the cultural landscape. This will affect how you can market and distribute your products and help determine if there is a substantial enough consumer base.
Try to set very clear goals, the more specific the better. Firm up your timelines and revenue expectations. Be realistic about your budget and set actionable tasks that will help you step forward.
Then, consider the market entry methods that will work for you. We will explore in more depth the different types of entry methods in the next section.
Figure out your finances and whether you need an investment or loan. Check that you have the required insurance to cover your business when you do expand into a new market.
And most importantly, write all of this down. Produce a document that you can refer back to during this new venture. It is far too complicated a task to try and keep everything in your head.
What are the different types of market entry strategies?
This is when you export to a new market directly, handling all aspects of the process independently. You will need to arrange transport, handle payments, and operations and create infrastructure. As you can imagine, this will require more resources and time to do successfully. You will have complete control over sales and marketing, and it maximises profits as you do not have to pay any 3rd parties to manage this for you. This is a great option if you offer luxury products or have previously sold goods in a global market.
Indirect exporting is a sensible option if your business is just beginning to distribute internationally. You can work with buying agents, distributors or management and training companies that are experienced in exportation. This does mean lower profits as you will need to pay your intermediary, but it lowers the risk associated with making the move independently.
Piggybacking is when you partner with another, non-competing company to sell your products. You are essentially asking another business to add your product to their overseas inventory and they will work to market it internationally. This gives you immediate access to a new market for a fee to the company you choose to work with. This is a clever move if you have business contacts that are already providing to the market you want to move into.
Licensing transfers the right to use and sell your product to another company. They can pay you a licensing fee or arrange another method to compensate you for the rights to your product. If the company planning to license your product has a large market in the relevant area, this is a good option for in-demand products in your portfolio.
As a franchisee, you buy the right to manage a branch of a larger, chain retail company. This is particularly popular in North America and allows you to work with an established brand. You can use this method to earn a profit while having a management plan in place already, that has been proven to work.
A joint venture minimises the risk to your company. You will join your business with another, creating a larger company with the potential to earn more revenue. In order to be successful, you need to establish processes to ensure responsibility is balanced between both business owners.
Countertrade is a common form of indirect international marketing. It is essentially a barter system between you and another business operating in a different market. You can trade goods of similar value or purpose to expand the reach of both businesses.
Outsourcing means hiring another company to manage certain business operations for your company. You can form an agreement that allows the other company to handle product sales and marketing on your behalf. This can save on employee costs to produce a higher level of profit.
Buying a company
Buying an existing company in the country you intend to expand to can lend you more credibility as you will operate as a local business. This allows you to sell without having to manage logistical operations like the shipment of goods. This costs more than other strategies but can have a high return on investment.
A turnkey project is specific to companies that plan, develop and construct new buildings for their clients. This allows clients to enter a building that is fully operational as soon as they get the key. It is then the company’s job to maintain a high quality of service and manage payments on behalf of their client.
This is one of the more complex strategies for entering foreign markets. To make a greenfield investment, you will need to buy the land and resources necessary to build an international facility. You will also need to hire staff to ensure it runs smoothly. This is beneficial for large, established organisations that can better weather the associated risks and costs. It also helps ensure you will comply with the local regulations in a new market.
Producing products in the target market
Whilst this method means navigating legal issues, costs and associated risks, it saves on the cost of transport and shipment. It is also easier logistically to produce products in the market.
How Seamless Proposition can help
Seamless Proposition is part of a globally recognised and trusted brand. We can help with commercial businesses and non-profit organisations that are looking to expand internationally. We can provide market research, planning and strategy development to make a complex process easier to handle. We aim to be a partner to your business every step of the way. Contact us today to find out more about how we can work together to propel you into a new market.