Market entry strategy is a planned distribution and delivery method of goods or services to a new target market. In the import and export of services, it refers to the creation, establishment, and management of contracts in a foreign country.

Factors affecting viability of entry

Many companies can successfully operate in a

niche market A niche market is the subset of the market on which a product is appealed to a small group of consumers. The market niche defines the product features aimed at satisfying specific market needs, as well as the price range, production quality and the ...

without ever expanding into new markets. On the other hand, some businesses can only achieve increased sales,

brand awareness Brand awareness is the extent to which customers are able to recall or recognize a brand under different conditions. Brand awareness is one of the two key components of brand knowledge, as defined by the associative network memory model. It plays ...

and business stability if they enter a new market. Developing a market-entry strategy involves thorough analysis of potential competitors and possible customers. Relevant factors that must be considered when deciding the viability of entry into a particular market include trade barriers, localized knowledge, price localization,

competition Competition is a rivalry where two or more parties strive for a common goal which cannot be shared: where one's gain is the other's loss (an example of which is a zero-sum game). Competition can arise between entities such as organisms, indi ...

, and export subsidies.

Timing of market entry

Lymbersky has said that "What countries to enter and when mainly depends on the financial resources of a company, the product life-cycle and the product itself." The different strategies available are:

Waterfall model The waterfall model is a breakdown of developmental activities into linear sequential phases, meaning that each phase is passed down onto each other, where each phase depends on the deliverables of the previous one and corresponds to a speciali ...

, Wave strategy, and Sprinkler strategy.

Strategies

Some of the most common market entry strategies are: directly by setup of an entity in the market, directly exporting products, indirectly exporting using a

reseller A reseller is a company or individual ( merchant) that purchases goods or services with the intention of selling them rather than consuming or using them. Individual resellers are often referred to as middle men. This is usually done for profit ( ...

distributor A distributor is an electric and mechanical device used in the ignition system of older spark-ignition engines. The distributor's main function is to route electricity from the ignition coil to each spark plug at the correct time. Design ...

, or sales outsourcing, and producing products in the target market.Corporate documents, Chapter 7: Market Entry strategies
/ref> Others include: *

Licensing A license (American English) or licence ( Commonwealth English) is an official permission or permit to do, use, or own something (as well as the document of that permission or permit). A license is granted by a party (licensor) to another par ...

* Greenfield project *

Franchising Franchising is based on a marketing concept which can be adopted by an organization as a strategy for business expansion. Where implemented, a franchisor licenses some or all of its know-how, procedures, intellectual property, use of its busines ...

Business alliance A business alliance is an agreement between businesses, usually motivated by cost reduction and improved service for the customer. Alliances are often bounded by a single agreement with equitable risk and opportunity share for all parties involve ...

* Exporting-(Direct/Ind) * Turnkey project *

Joint ventures A joint venture (JV) is a business entity created by two or more parties, generally characterized by shared ownership, shared returns and risks, and shared governance. Companies typically pursue joint ventures for one of four reasons: to acces ...

Outsourcing Outsourcing is a business practice in which companies use external providers to carry out business processes that would otherwise be handled internally. Outsourcing sometimes involves transferring employees and assets from one firm to another ...

Market entry and trade risks

Some of the

risk In simple terms, risk is the possibility of something bad happening. Risk involves uncertainty about the effects/implications of an activity with respect to something that humans value (such as health, well-being, wealth, property or the environ ...

s incurred when entering a new market and start domestic or international trade include: *Weather risk * Systematic risk, different from

systemic risk In finance, systemic risk is the risk of collapse of an entire financial system or entire market, as opposed to the risk associated with any one individual entity, group or component of a system, that can be contained therein without harming the ...

, the systematic risk is the risk inherent to the entire market or an entire market segment * Sovereign risk *

Foreign exchange risk Foreign exchange risk (also known as FX risk, exchange rate risk or currency risk) is a financial risk that exists when a financial transaction is denominated in a currency other than the domestic currency of the company. The exchange risk arise ...

Liquidity risk Liquidity risk is a financial risk that for a certain period of time a given financial asset, security or commodity cannot be traded quickly enough in the market without impacting the market price. Types Market liquidity – An asset cannot be ...

* Cultural risk While some companies prefer to develop their own their market entry plans, other outsource to specialised companies. The knowledge of the local or target market by those specialized companies can mitigate trade risk. Other market entry strategies include: *Production at home **Indirect exporting (export merchant) **Direct exporting (foreign customer, agent, distributor, representative office, foreign branch, foreign subsidiary) *Production abroad **without direct investment (management contract, franchising, licensing, contract manufacturing) **with direct investment (partly owned subsidiary, acquisition of a foreign company, set up a new company, equity joint venture)

Sources

*Reviving Traditions in Research on International Market Entry, Po Li (Auteur), T. Li, JAI Press, 2003 *On durable goods markets with entry and adverse selection, Janssen, M. Roy, CANADIAN JOURNAL OF ECONOMICS, 2004, VOL 37; NUMBER 3, pages 552-589 ISBN ISSN 0008-4085

References

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