What is a Market Entry Strategy?

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First, what is market entry? Simply put, it is the process of offering your product or service in a new market - whether it be international, domestic, demographic, segmented, etc.. There are many factors that are associated with entering a new market such as the population, access to your offerings, and the overall business environment. Beyond that, these activities are influenced by social, technological, economic, and political pressures.

So with all of that going on, how can you plan for a successful market entry?

Broadly defined, market entry strategy is how you determine your ideal positioning and distribution within a new market, while also taking into account your capabilities. In other words, how you communicate with, and deliver that communication to your audience. The process of developing a strong strategy will help you successfully enter a market, versus undergoing a costly learning experience.

Typically market entry is in reference to international market entry strategy, but it can be broken down into a general growth strategy conceptually as well.

Your market entry strategy will define your goals, target market, offerings, resources, distribution, and implementation plan. It’s also important to realize that whether international or not, there is no template strategy. What works in one market won’t work the same in another.

A few quick examples of market entry strategy frameworks are; partnering market entry strategy - where you find a local company in your target market and create a partnership with a trusted source within the community, or market re entry strategy - where you restart operations in a previously exited market. We’ll dive into more specifics of multiple frameworks next, though.

One easy way to understand the practical application of market entry strategy is by using a market entry plan pdf, market entry strategy pdf, or market entry strategy ppt that you can download from different higher education resources.

Market Entry Strategy Framework

There are many market entry strategy examples, such as: exporting, licensing, franchising, partnering, joint ventures, turnkey, and greenfield opportunities - and the list doesn’t stop there. So, with so many options how do you choose the best strategy for you and your business?

Well, the first step in creating a successful market entry strategy typically involves establishing a framework. Your framework will allow you to assess which growth opportunities are viable, given your strengths, weaknesses, and threats. In order to fully assess the market opportunity at hand, it’s best to develop your market entry strategy framework by using tools such as a market entry analysis, or a market entry case study. These tools work hand in hand to help you to decipher which entry methods will work best for your specific needs.

A market entry analysis looks at if you should enter a market by analyzing the company’s capabilities, the market breakdown, the financial and operational position, and the timeline and method to execute entry.

A market entry case study is an interview that allows you to ask candidates to evaluate whether a company should enter a market. You can use this case template to further understand and solve the problems being presented on a case-by-case basis.

This article regarding market entry strategy mckinsey offers showcases the primary elements to a successful strategy. To summarize, the main focus areas are: size of market opportunity, capabilities, competitive factors, barriers to entry, and cost factors. They also offer six predictors of success: size and efficiency of entry, market relatedness, complementary assets, order of entry, industry life-cycle, and degree of innovation. What this means is that in order to drive success in any new market, cost and capabilities go hand in hand. Make sure to check out that article for all of the details!

Developing an international market entry strategy framework is the exact same, conceptually. Being able to look at a market, analyze the entry opportunities, develop a framework for entry, and execute a strategy will determine your level of success, either nationally or internationally.

Creating a Market Entry Strategy Template

Now that you have used a market entry analysis to better understand the opportunities that are the most viable, it’s time to discuss building a marketing entry strategy template. This template won’t be something that you use from market to market, but instead a roadmap for developing the tools you need to successfully launch in new markets.

As discussed earlier, the market entry strategy framework Mckinsey presents gives great insight into the predicting factors and key elements of a successful strategy. We can use this information as a lense to our template.

Market entry strategy for small businesses will be significantly different from enterprises who are looking to develop international strategies. This is for many factors, but can also be broken down simply into financial and operational capabilities. As such, market entry for international development will look vastly different, given the opportunities and capabilities. Export market entry strategy examples are just one type of variance between National and International market entry.

Joint Venture Market Entry Strategy

One strategy that is viable for either National or International cases is a joint venture market entry strategy. This is a more popular strategy for emerging markets, and bootstrapped companies. This way, your company can utilize the developed resources of a partner organization. Such joint venture entry mode advantages and disadvantages include: access to new markets through established distribution networks and increased capacity, versus communication and risk distribution amongst partners. A joint venture entry mode example can be found in the recent news, with Volkswagen repositioning their business model in China: Customer-focused, independent, fast: Volkswagen Group realigns structure in China.

While this is considered among the foreign market entry strategies, it can also be applied to National market entry opportunities that have proven to be viable, once again given the financial and operational capabilities your company has to offer.

Direct investment market entry strategy is another option for foreign entry, and involves directly allocating and purchasing resources and facilities in the location you’re targeting to enter. This can be done through acquisition or developing a new enterprise. However, this strategy requires a high amount of capabilities, both financially and operationally.

Licensing market entry strategy is an example of a foreign strategy that can be adapted to using Nationally. Licensing involves allowing companies in your target market to utilize your resources such as technology, patents, and other intellectual properties. Licensing market entry strategy examples are typically found in technology and manufacturing companies.

Franchising Market Entry Strategy

So, what are the four market entry strategies? What are the 5 international market entry strategies? Well, we’ve only covered three briefly so far, exporting market entry strategy, direct Investment, and licensing, but there are more. The strategies we haven’t covered are franchising market entry strategy, partnering, turnkey, and greenfield opportunities. Licensing and franchising entry mode are often categorized together, because franchising is another form of a license agreement.

Typically, this strategy requires large capital and operational capabilities, in order to support the requirements of one or more franchisees. Typically, these agreements involve fees and royalties that are paid to you, the franchiser, to use company products and branding. There are some differences between this and licensing, which separates it from licensing.

Some of the disadvantages of franchising strategies are directly related to your company's abilities to maintain brand standards across franchise divisions.

Importance Of Market Entry Strategy

So, let’s review! The importance of market entry strategy is that it provides you and your company the best opportunity for the most viable and successful entry, by precisely planning and maintaining the process. How you enter a market is just as important as when, and different modes of entry dictate the success of your campaigns. Adjustments must always be made, but by providing a framework, and discovering the resources required, you can successfully enter a market either Nationally or Internationally.

We’ve also covered the parameters for successful strategies, and the different market entry strategies advantages and disadvantages - from speed of entry, risks associated, and costs of activities. Understanding all of the advantages and disadvantages speak to the opportunities and threats analysis for every strategy.

Each of these strategies are only viable given the capabilities of your company. Should you lack the operations or financial resources to successfully follow through on these, then market entry is likely going to be impossible. In order to overcome these lack of capability bottlenecks, significant growth in one or both of these areas is typically required first.

If you need help with market entry strategy, Argona Partners is here for you!

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