Understanding Market Entry Strategies
Market entry strategies is an umbrella term for methods and techniques companies use to achieve set goals. There are three key strategic areas with the following goals: 1) Innovation and achieving market leadership 2) A successor strategy, which aims to overtake the market leader with more affordable analogs of the original product 3) Taking over the market by reorienting consumers. Choosing the right strategy from the outset makes it easier to plan the budget, advertising campaigns, and decisions about logistics.The Significance of Market Entry Strategies
A robust plan is vital for a successful entry to the international market, as a clear understanding of the stages involved in marketing products and services is one of the most effective control mechanisms. Developing a detailed strategy provides an overview of each entry stage for products of a particular type, and also provides control over the course of events by allowing timely adjustments to be made. In order to develop a robust strategy, you need to provide clear answers to two fundamental questions: for what purpose does your company need to enter the international market, and what specific audience do you want to target?The Reasons Behind Venturing into Foreign Markets
A company’s strategy to enter the international market is not a cheap process, and there are many stages, which is why you need to start by determining the key aims and targets the specific company will work towards achieving. Apart from the obvious aims all businesses share of turning a profit and expanding their client base, entering the international market can also make it easier to carry out transactions with foreign partners, reduce risk, and can also offer tax exemptions and immigration opportunities. Determining the primary and secondary aims to achieve as a result of entering the international market is necessary to create an effective strategy.
Exploring the Targeted Markets for Expansion
The first step in creating a market entry strategy is choosing a market for the company to orientate itself towards when targeting the global audience. Companies where the concept of globalization is a cornerstone require the least consideration of what’s specific to the local market. Take the company Apple as an example, where a new product launch takes place at the same time all over the world. Other companies need to consider the local culture, this is most necessary when entering a market with an entertainment product. Here’s what you need to do before creating an international strategy: Paint a portrait of the target audience with key features Determine the size of the market and its key regulatory factors, taking into account both the laws that govern a country, and its national traditions Determine the typical features of local competition Clarify the nuances of local logistics.Expanding Abroad: 13 Market Entry Strategies for International Success
The main strategies for entering international markets:1. Exporting
Export is the most obvious marketing model, which involves the direct selling of manufactured products to customers abroad. Direct export is one of the most cost-intensive strategies for entering the international market. Its advantages boil down to being able to control every stage of product marketing. This is also the cause of the drawbacks in this strategy: the need for specialists in foreign law, foreign offices, etc.2. Piggybacking
Piggybacking is a form of indirect export, where a “rider” company can piggyback on a “carrier” company that already has an export channel in the international market, and the “rider” can enter into a contract to have their company’s products included in the “carrier” company’s overseas inventory. Established logistic and legal channels are used in this strategy, and the companies involved share the profit in accordance with the contract. One example of piggybacking would be an agreement between a company selling sewing machines with producers of fabric, needles, and motor oil: the export of the primary and secondary products is carried out through a common channel, while their retail networks in the domestic market differ.3. Countertrade
Countertrade is what may more commonly be referred to as barter. This strategy involves the exchange of products between two companies. Applying this method of entry into the international market can be effective in cases where the state of one of the participating companies implements harsh import quotas.4. Licensing
Licensing transfers the right to do business in a foreign country. The scale of licensing depends on the business type: licensing can be local, where it’s only applied in a specific region, or federal, i.e., geared towards doing business on a countrywide scale in the foreign state. In most cases, the licensing strategy is used by small- or medium-sized businesses. The licensing system also allows local analogs of well-known companies to be launched, i.e., it’s convenient for companies that have chosen the successor strategy based on their key aims.5. Joint Ventures
In this strategy, companies form a strategic alliance to enter the international market together and pool resources. These types of alliances allow for the creation of a larger and more stable framework, which is of no small importance when entering the global market. A classic example of this strategy would be Japan’s Sony and Sweden’s Ericsson.6. Company Ownership
The purchase of an existing company in the country of the market you wish to enter. This allows you to use the old brand’s reputation, which simplifies integration into the economic system. But this strategy is only convenient in cases where you’re orientated towards markets in a specific country and don’t intend on expanding into a number of foreign countries at the same time.7. Franchising
Franchising is the most popular form of international expansion for recognizable brands. In this case, a semi-independent business owner (the franchisee) in a foreign country obtains a license to use a famous brand, and the brand-owner (franchiser) doesn’t need to be directly involved in running a particular branch.