When a company has completed the process of market research and has confirmed that, given its resources, it is capable of successfully entering a specific international market, it is time to develop a strategy for market entry.
A wide range of options exists for companies to approach the market, and to develop and maintain a long-term and successful presence there.
Because so many options exist, it is critical to select the right market-entry strategy. Probably the first question to answer is whether to work directly with customers or to use some form of distribution, whereby a company’s products or services are managed or impacted in one way or another by a third party. There are pros and cons to both options.
Direct sales enable a product or service provider to minimize prices to end-users and to control the relationship directly. Conversely, leveraging a company as a partner along the supply chain prior to its arrival at the ultimate customer may facilitate more reach into a market but can also increase end-user prices and complicate communications with customers.
Feeling overwhelmed? Start by asking a few questions
When developing a market-entry and maintenance strategy, a variety of other factors must be considered:
What method best suits your company’s product or service? What is the layout of existing distribution networks, and what forces drive them? What is the competition doing, and what can be improved? What does the market research indicate are the drivers of customer buying behaviour? What investment needs to be allocated, in both the short and long term? How will the strategy need to be modified as you (the exporter) progress through the market- development cycle?
Most importantly, what are the critical success factors that could determine the difference between success and failure in a target export market?
All of these and more must be carefully considered as one develops an international market-entry strategy. Before getting started, get familiar with the crucial elements you’ll need to address in a successful strategy.
Your 9 step market entry checklist
The following checklist can help identify the steps required for successful market entry:
- Successful market entry begins with domestic-market establishment and ultimately ends with investment in the new market.
- Selecting the correct market-entry strategy is a critical decision, and can mean the difference between success and failure.
- Selling directly to customers or through distribution is governed by the population of potential customers and by the value of the product or service being offered.
- When selling through distribution, understanding all available channel options, and how to manage them, is critical to the success of the market-expansion initiative.
- Competition comes not only from other providers of similar products and services but also from “non-competing” product lines that can occupy the attention of channel partners.
- Clear communications between suppliers and channel partners make it possible to adjust to changing market conditions.
- Selling is not convincing customers to do what you want; it is helping customers make astute purchasing decisions.
- Strong relationships are important to doing business between all cultures, and contact must be maintained through both personal visits and ongoing remote and electronic communications.
- Successful market entrants must possess management commitment, financial resources, staff and capacity to handle increased demand, language capability and availability to travel.
Preparation and understanding are crucial to successfully entering a new international market. Developing and implementing the correct market-entry strategy at the outset can often make the difference between success and failure. Key components of a successful market entry include identifying and selecting the appropriate distribution channel options and ensuring clear communication with the business partners that are vital for success.