In this article, we discussed the meaning of the Market entry strategies international expansion, the type, and examples, the purpose and factors.
Definition
A market entry strategy is a plan for introducing a product or service to a new market. For international expansion, this means introducing a product or service to a new country.
Market entry strategies provide businesses with a roadmap to enter into international markets. Since there are many methods companies can use to sell their goods globally, they will choose the best approach based on their goals and target market.
The purpose of a market entry strategy
To successfully enter a new market
To achieve sustainable growth
To increase the visibility and distribution of a product or service
What factors to consider when selecting a market entry strategy
Product: The product’s value, shipping requirements, and handling procedures
Company: The company’s resources, objectives, and budget
Market: The market’s culture, political and economic environment, and legal and regulatory requirements
Competition: The company’s market rivals
Consumer needs: The needs of the consumers in the new market
There are several market entry strategies for international expansion, and its includes:
Exporting
A traditional strategy that involves marketing products made in one country to another
Direct exporting: Selling products directly to customers in the target country
Indirect exporting: Using agents or distributors to sell products in the target country
Licensing
Allows another company to use, sell, or distribute a company’s products or services
Franchising
Allows a third party to operate a business under a company’s brand name
Franchisees pay a fee and receive a cut of the revenue, along with the company’s marketing materials
Joint ventures
Involves two or more companies working together to achieve a common goal
Joint ventures can provide access to local market knowledge and shared resources
Greenfield investments
Involves building operations from scratch in a new market.
There are several types of market entry strategies for international expansion.
Direct exporting
A company sells its products directly in the target market without using a third party.
Indirect exporting
A company uses an agent, such as an international distributor, to sell its products in the target market.
Licensing
A company grants a third party the right to use its products or services in a specific market.
Franchising
A company grants a third party the right to operate an entire business under its brand. The franchisee pays the company a fixed sum and a cut of the revenue.
Joint ventures
Two or more companies work together to achieve a common goal. Joint ventures can provide access to local market knowledge and shared resources.
Acquisitions
A company acquires another company with established operations in the target market.
The purpose of a market entry strategy for international expansion is to increase a company’s visibility and distribution of its products or services in a new market.
Benefits
Cost savings
Companies can expand into markets with more affordable resources, which can lower consumer prices.
Innovation
Companies can interact with diverse cultures to understand local needs and preferences, which can lead to innovative solutions.
Global image
Companies can enhance their reputation, perceived value, and credibility by establishing a presence in multiple countries.
Diversification
Companies can spread risk by relying on multiple markets instead of just one.
Access to resources
Companies can access critical resources that are not available in their domestic markets.
Strategies
Licensing: A company can grant a local company the right to use its intellectual property in exchange for royalties.
Exporting: A company can send goods to an international market.
Waterfall strategy: A company can invest more heavily in markets that are strategically important.
Sprinkler strategy: A company can enter multiple markets simultaneously.
Research
Market entry research can help companies understand a new market.
Market entry research can help companies identify success factors, potential challenges, and hidden opportunities.
The Factors of Market Entry Strategies for International Expansion
Market factors
Market size and growth potential: How big is the market and how much is it expected to grow
Competitive landscape: Who are the other businesses in the market and what are they offering
Regulatory environment: What are the laws and regulations that apply to the market
Cultural differences: How do the cultural norms of the market compare to those of the business’s home country
Business factors
Resources and capabilities: What resources and capabilities does the business have to support international expansion
Risk tolerance: How much risk is the business willing to take on
Objectives: What are the business’s goals for international expansion
External factors
Logistics: How will the business transport its products to the market
Taxes and duties: What taxes and duties will the business have to pay to sell its products in the market.
Conclusion
Market entry strategies provide businesses with a roadmap to enter into international markets. Since there are many methods companies can use to sell their goods globally, they will choose the best approach based on their goals and target market.