What Are Market Entry Strategies? (With Types and Tips)
By Indeed Editorial Team
Published March 29, 2022
The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.
Companies typically develop plans to help them introduce or offer their products in international markets. It's essential to choose the most appropriate strategies that match the product types, suit the target market, and align with the company's goals. Understanding the various strategies for entering the market can help you appreciate their peculiarities and choose the best one for the company. In this article, we discuss market entry strategies, list the factors that influence them, explain their importance, explore different strategies, and provide tips to help you create an optimal strategy.
What are market entry strategies?
Market entry strategies are the techniques a company uses when planning to introduce, deliver, and distribute its goods in global markets. There are multiple entry strategies, and the level of control and cost of implementation may vary depending on the strategy the company chooses. It's good practice to select the market strategy according to the type of product, its value, shipping requirements, and handling procedures. You may also consider the company's market rivals and consumer needs. When selecting an effective strategy, it's vital to align the company's budget with the product's characteristics to help maximize profit.
Factors that influence entry strategies
The three major influences that affect the choice of entry strategies into the global market are:
Marketing: Companies select the countries with the relevant target market and consider the best marketing approach to this demographic.
Sourcing: Companies also consider whether to buy the products, produce them, or work with an international manufacturer.
Control: Companies also evaluate the effects of entering the market independently or partnering with other organizations when introducing their products to the global market.
The importance of market entry strategies
Here are some reasons it's important to create an entry strategy into the international market:
Planning and maintenance processes: It's essential to create an entry strategy because introducing a product into an unfamiliar market requires precise planning and maintenance systems to handle challenges.
Organization: Clearly defining its structure allows the company to remain organized before, during, and after introducing its products to a new market.
Goals and objectives: Companies can select a strategy that helps them focus on their goals and reasons for entering the international market.
Different market entry techniques
Here are different techniques you can consider to help the company introduce its product to the international market:
This strategy involves marketing the goods produced in the places you intend to sell them. You can consider direct exporting, which involves selling the products in international markets without external third parties. This method is suitable for companies familiar with the international markets or those who sell luxury products.
Alternatively, you can use indirect exporting, which involves employing the services of agents. It's advisable to use this method if you're new to the international market. Although this technique requires paying agents, it may also lead to a good return on investment (ROI) because the agents understand the requirements to succeed in the market.
You can consider using this strategy if the company has contacts with businesses that currently market its products internationally. Piggybacking includes the company's products in the international inventory of another business. In this arrangement, the parties share the profit of each sale depending on the percentage upon which they agreed. An advantage of piggybacking is that you can reduce the risks of selling abroad by allowing the partner to handle the international markets while you focus on the domestic markets.
Countertrade is a popular method of indirect international marketing and functions like a barter system. It involves companies trading each other's products instead of offering the goods for sale. Although it's a legal market, countertrade doesn't have a special legal, regulatory instrument like other forms of international trading. As a result, you may encounter problems such as having difficulty finding products of the same value and ensuring the other parties know the value of the products. In contrast, countertrade may exempt the company from import quotas, which makes it a cost-effective strategy.
This strategy involves transferring the rights to sell or use the company's products or brand to another business. You can choose to use licensing if the company has high demand in the foreign market and the other has a larger customer base. For example, a clothing brand may sell its right to a sports company to use its products for jerseys and other merchandise.
Establishing joint ventures
You can mitigate the risks of trading in an international market by establishing a joint venture with another business that wants to trade in the global market. Joint ventures can gain more revenue than individual companies because they typically operate like large independent companies. Creating a joint venture may lead to an imbalance in individual company involvement, but the parties can work together to integrate properly and create a fair balance.
Owning an existing company
Suppose you want to trade internationally without dealing with the logistics, such as product distribution and shipment management. In that case, you can consider buying an existing business in the country where you want to trade. This strategy may help increase sales because it presents a familiar brand to the customers, ensuring loyalty. In addition, although the company ownership strategy may be cost-intensive, it offers a high potential for good ROIs.
Franchises are retail chain companies in which a group or an individual pays a company to manage one of the branches on its behalf. This strategy depends on strong brand recognition because it's essential for the people in the target demographic to become familiar with the company's offering and then want to purchase it. This strategy allows popular brands to make profits while outsourcing the primary management responsibilities.
Related: How to Become a Supply Chain Manager
Outsourcing entails employing an external organization to manage some parts of the company's business operations. As an entry strategy, a company enters a market agreement while another business handles international trading on that company's behalf. Choosing to outsource may require you to relinquish some level of control over the sale of the company's products or services. In contrast, outsourcing may help the company save costs on employee recruitment.
Using greenfield investments
Using greenfield investment strategies may be complex for the company. This strategy involves purchasing land and other resources to build an international facility and hiring staff to oversee the process. Choosing greenfield investment strategies may leave the company vulnerable to many risks. In contrast, it ensures that the company obeys all the regulations in the new market. This strategy favours large corporations with an established market rather than smaller and newer companies.
Creating turnkey projects
This strategy applies to companies that plan, construct, and develop new buildings for clients. Turnkey refers to the idea that clients turn a key to unlock and enter a fully functional facility. If the clients include foreign government agencies, you might consider using this strategy. You may require the services of an international financial agency to regulate the relationship. These financial agencies ensure that the company provides high-quality services, and the clients pay the amount that they require.
Tips for creating a good entry strategy
Here are some tips to consider when creating a strategy to help the company easily expand into a new international market:
Set clear goals
It's essential to identify the goals you want to achieve by expanding into a new market. You can create a basic framework of how you intend to achieve these goals. Some of the factors to consider when setting goals include:
The target market
The projected level of sales
Primary action items and a timeline for them
The budget and other resources
The product or service you want to introduce to the market
Research the market
It's necessary to survey the market and find relevant information to know whether the market is suitable for the intended products or services. Some of the information to consider includes:
The size of the market
The international and domestic competition
The trends and perception of similar products
The unique value you offer to the market
The certification, regulatory requirements, and trade opportunities and barriers
Create a strategy document
It's advisable to create a strategy document to write the plans and the details of the company's entry plan. This document can serve as a blueprint to remain focused, monitor developments, and ensure all parties are working toward the same objectives. You can also ask other business professionals to give you insights on what improvements to make.
Explore more articles
- What Is an Engagement Rate? (Plus How to Improve and FAQs)
- 11 Scrum Tools for Project Management (With a Definition)
- Calculating CTR: Definition, Importance, and Example
- A Guide to Rebranding Yourself (Reasons and Steps)
- 47 Creative Ways to Advertise a Business (With Examples)
- What Is a Capital Account? (With Helpful Examples and Tips)
- How to Schedule an Instagram Post (With Benefits and Tips)
- What Is Behaviour-Driven Development? (And How to Use It)
- DevOps vs. SRE: Definitions, Similarities, and Differences
- What Is Total Addressable Market? (With Benefits and FAQs)
- How Are Management and Leadership Similar? (With Tips)
- How to Create a Technical Document (With Helpful Tips)