Market Entry Strategy

 

What are Market Entry Strategies?

Market entry strategies are the methods and channels that a company uses to enter a new market. There are many different ways to enter a market, and the most appropriate method depends on the company's resources, objectives, and the market itself. The goal of a market entry strategy is to enter a new market successfully and achieve sustainable growth.

Market entry strategies can be either domestic or international.

Domestic market entry strategy is when a company expands within its home country. The main goal of this type of expansion is to grow the company's local market share.

An international market entry strategy is when a company expands outside of its home country. When expanding internationally, companies need to be aware of the different cultural, political, and economic environments in each country. They also need to consider the legal and regulatory requirements of each country. For example, some countries may require that products be registered before they can be sold. Other countries may have restrictions on foreign ownership of businesses.

A company's market entry strategy should be designed to minimize risks and maximize opportunities. The most important factor is typically the level of competition. If there are already many companies selling similar products in the market, it can be difficult to gain market share. In this case, a company may need to differentiate its product or offer a lower price. If the market is not yet saturated, a company may have more flexibility in its market entry strategy.

 

It is also important to consider the company's resources and objectives when designing a market entry strategy. A company that has limited financial resources may need to choose a less expensive market entry strategy such as direct selling or licensing. A company that is looking to quickly gain market share may need to choose a more aggressive strategy such as joint ventures or acquisitions. 

Some of these different strategies will be explored in more detail in the following section.

 

Exporting

One of the most common market entry strategies is exporting. Exporting is when a company or organization ships goods into the international market. The main advantage of exporting is that it is a relatively low-cost way to enter a new market. It also allows companies to keep their existing manufacturing and distribution operations. Exporting can be either direct or indirect.                              Direct exporting is when a company sells products or services to customers in another country through its own sales force or distribution channels.                                                                                                  Indirect exporting is when a company sells products or services to customers in another country through an intermediary such as a distributor, agent, or trading company.                                                              A disadvantage of exporting is that it can be difficult to control the quality of products or services when they are sold in another country. It can also be difficult to build a brand identity in a new market when products are sold indirectly. A final disadvantage worth noting is that exporting can be logistically complex and time-consuming.

 

Licensing

Licensing is when a company grants another company the right to use its intellectual property such as patents, trademarks, or copyrights. This typically means a company is giving another company the rights to produce and sell its products and services. Licensing is common in high-tech industries where products are often protected by patents. An important advantage of licensing is that companies do not have to invest in manufacturing or marketing operations in the new market. They also do not have to bear the risks associated with these operations. A disadvantage of licensing is that companies may not be able to control how their products are distributed or marketed in another country. This can be a particular problem if the licensee is located in a country with different legal or regulatory requirements.

Another disadvantage is the risk of intellectual property theft. For example, a company may grant a license to manufacture its products in another country but the licensee may reverse engineer the products and start selling them in competition with the original company. It is very important that companies do their due diligence before entering into a licensing agreement and create robust contractual safeguards to protect their intellectual property.

 

Franchising

Franchising is when a company grants another company the right to use its brand name and business model. The franchisee typically must pay ongoing royalties and an initial fee to the franchisor. Franchising is a market entry strategy best fit for organizations that have a low need for adaptation, such as the food industry or organizations with a unique concept. This method is commonly used by fast-food chains such as McDonald's and Subway. It is an optimal method for companies that have widely known brands or proven business models.                                                                              Similar to licensing, franchising provides the advantage of allowing companies to expand their operations quickly and with relatively little risk. This is because the franchisor provides the franchisee with an established brand name, business model, and support infrastructure while not having to make a significant investment in the new market. A disadvantage of franchising is that companies may not have complete control over how their brand is used in another country. For example, the franchisee may not provide the same level of customer service or product quality as the franchisor.

 

Partnering

Partnering is when two or more companies form a strategic alliance to enter a new market. The partner may be located in the target market or may have expertise or resources that the other partners lack. For example, a company may form a joint venture with a local partner to build a manufacturing plant in another country. Additionally, the partner may be from the same industry or complementary industry. For example, an airline may partner with a hotel chain to offer vacation packages.                                  Partnering helps to spread the risk and costs associated with entering a new market between partners. It also helps companies to gain a foothold in the market quickly by leveraging the resources and expertise of the partner. A disadvantage of partnering is that it can be difficult to find a partner that is compatible and has the same objectives. Additionally, partners may have different ideas about how the venture should be managed which can lead to conflict. Finally, if the venture is successful, the partners may have difficulty agreeing on how to divvy up the profits. Thus, strong contracts and well-thought-out agreements are crucial aspects of ensuring a successful and smooth partnership.

 

Joint Ventures

Joint ventures are quite similar to partnerships with a few key differences. A joint venture is when two or more companies create a new company to enter a new market. The joint venture is a separate legal entity from the parent companies and is jointly owned by the partners. An example would be if two car companies created a joint venture to build a manufacturing plant in the United States.                        Joint ventures have many of the same advantages and disadvantages as partnerships such as the spreading of costs and risks, the sharing of resources and expertise between organizations, and the potential for conflict between partners.

 

Turnkey Projects

A turnkey project is when a company builds a plant, facility, or complete business and then sells it to another company. The buyer then takes over the business and begins it. An example would be if a company built a power plant in China and then sold it to a local utility company.

Nangia & CO LLP is use to plan, distribute and deliver goods to international markets. Our professional team Provides you the best strategy of Market.

Overall, a well-planned and executed market entry strategy is critical to successfully enter a new market and grow a company's business.