What should be kept in mind when entering a new market?
Expanding your business to new markets allows you to reach potentially vast numbers of new customers and grow your revenue massively. However, the process can be difficult and filled with complications. Show
A market entry strategy is a way of maximizing your chances of success when moving into a new market. In this article, we’ll look at some of the reasons to consider moving to a new market, the differences between domestic and international markets, and some of the strategies you can use. Why move to a new market?First up, why should you consider moving to a new market in the first place? It’s challenging and expensive, so what are the reasons that make it worthwhile? Here are some of the main ones:
Domestic markets vs international marketsAre you planning to enter a new domestic market, or take your products overseas to sell in a foreign country? The approach for each of these will be very different. Domestic marketsTypically, this will be much easier than entering an overseas market. The culture will be the same, everything will probably be geographically closer, and things will likely be very similar to your existing markets. International marketsThis is where things become more complicated. You’ll have to factor in a number of differences compared to how you currently run your business. These include:
Things to considerBefore you enter any new market, it’s crucial to take some time to confirm whether you can afford the move. Can you afford the costs of exporting, working with intermediaries, tax, and all the other expenses involved? And what proportion of the market can you realistically expect to be able to serve? You also need to consider if the product or service will work in your intended market. Market research (both online and offline) plays an important role here — make sure there is a demand for your product that justifies the export cost. Risks of entering new marketsThere are also numerous risks involved in entering a new market, including:
Once you have carefully researched your new market and weighed up the potential risks, you may decide that it’s worth entering. If so, there are a number of different strategies you can employ, each with its own pros and cons. Get regular insightsKeep up to date with the latest insights from our research as well as all our company news in our free monthly newsletter.
Different market entry strategiesDirect exportingThis is where you export your products into the new market directly. You’ll have to handle all the aspects of the process independently, from transport to payments to operations in the new market. This method requires more resources and time compared to working with an intermediary. You’ll need to create an exporting infrastructure, train employees, and make and receive international payments among many other challenging tasks. On the plus side, this approach maximizes your profits as you don’t need to pay any third parties. You’ll also have complete control over your sales and marketing processes. Indirect exportingIndirectly exporting involves working with an intermediary. It has a number of advantages, such as:
On the other hand…
There are a number of different options when it comes to indirect exporting. Here are some of the most common ones. Indirect exporting with buying agentsBuying agents are representatives of foreign companies that want to buy your products. You’ll work through them when selling your products to your new market. They’re usually paid by commission and will try to negotiate the lowest possible price. Sometimes, buying agents are government agencies. Indirect exporting using distributorsYou can sell your product directly to distributors or wholesalers, who will then take care of distributing the product to retailers. Indirect exporting through management and trading companiesExport Management Companies (EMCs) exist to take care of all your export and sales processes in your new market. It’s worth taking some time to research and find the right EMC, as most specialize in a particular market and region. They’ll help you identify markets, find customers, handle all shipping and logistics, and much more. Indirect exporting through piggybackingPiggybacking is where you allow another, non-competing, company to sell your product. This can work extremely well if they already have an existing customer base and distribution infrastructure in your target market. You’ll get immediate access to your new market but for a fee. Producing products in the target marketAnother option is to manufacture your products in the target market. This saves you the cost of transport and the many logistical challenges involved in exporting your product abroad. However, you’ll also need to consider the many challenges involved in manufacturing your product abroad, any legal issues, costs, possible risks, and more. Depending on your situation, this could be a good option. (For more information on the most effective strategies for entering a new market, check out our top four marketing strategies article). Entering a new market can be extremely rewarding and can allow your business to move to the next level and achieve new growth. It’s important to take time to research all the possible options and ensure the export strategy you deploy is the safest and most effective for you. You’ll also need to thoroughly research the market to understand its potential and position your product for success, something we cover in our Ultimate Guide To Market Entry. What is important when entering a new market?Timing: Timing is crucial to entering a new market.
Demand, competition, and more all depend on the time you enter the market. If you are the first business to offer your products, that's vastly different than being a late entrance to the market. There are pros and cons to either scenario.
What are the 3 main options for entering a new market?Here are some main routes in.. Structured exporting. The default form of market entry. ... . Licensing and franchising. Licensing is giving legal rights to in-market parties to use your company's name and other intellectual property. ... . Direct investment. ... . Buying a business.. |