Company development on a new market is a serious challenge. It is vitally important to prepare to enter a new market well and treat it as a comprehensive project. It is worth to plan it starting with building strategic objectives, through conducting market analysis, ending with the creation of a strategy and a concrete business plan.
In this article we present what a model market entry process should look like. We also point out which aspects should require special attention. And all of this is to help you to enter a new market successfully.
Strategic objectives of entering a market
The first step in preparing to enter a new market is answering a few key questions. They will be the strategic objectives of the project and will affect all subsequent stages of work and important business decisions.
- Location. What geographic area is my offer targeted to? Will it be a market in one country, several countries, or perhaps the entire region?
- Knowledge and experience. Do I know the market well because I already run a part of my business there? Do I only know the new market from the reports of my local distributors? Or is all of my knowledge just cursory knowledge based on reading business documents?
- Offer. What needs does my product meet in my current market? Who am I competing with? What substitutes for my offer are available in my current market?
- Aim of the project. What is my goal in the new market?
- General assumptions. Do I want to enter the market immediately with my entire portfolio? To what extent can I change the current marketing mix and adapt it to local conditions? Do I want to quickly become one of the leaders in the market, or do I choose longer, but more stable development? What strategy of brand building do I pick – creating a new brand or using my current brand? Do I plan to open offices in the new location, or perhaps operate through teaming up with local partners and distributors?
Scope of the market entry project
After discussing the key topics and objectives of the project, you can proceed to the phase of preparation to enter a new market. At this stage you need to carry out a comprehensive analysis of the market. It is an extensive study covering the following issues:
- the market and macroeconomic environment,
- the size, structure and growth potential of the market,
- customers and consumers,
- distribution and sales,
- production and supply,
- the competitive environment,
- opinions of industry experts,
- the opinions of experts working in the local market.
Conducting market research at the macroeconomic level and determining the value, structure and development potential of the market is aimed at building a general picture. The first two elements of the analysis are carried out in most market entry projects.
The situation is different with the following points from the above list. They can be seen as building bricks from which you can pick and choose to build a project. Depending on your needs and preferences, market analysis may include all or only a few of these stages.
But keep in mind that accurate recommendations are possible only after a full analysis of the market. Cutting corners can in this case lead you astray.
In analysing the market, you should begin by defining the segment: B2B or B2C. It is of great importance for the following stages of designing a strategy of entering a new market. It is so because it forces you to address specific issues and specific indicators for B2B or B2C.
Adopting a PAM/TAM/SAM approach and analysing the market from three perspectives will also be helpful. The first one is your Potential Available Market. The second is the Total Available Market. The third is the widest category, covering the Serviceable Addressable Market, along with the competition and the substitute offer.
The better a company understands its customers, the more accurate the business decisions. It’s only when you know your target audience well that you can identify possible strategies to reach the market and select the most effective one. So it’s worth focusing on issues such as preferences and needs, the purchasing process, the frequency and social dimension of shopping, and the awareness and perception of the brand. An additional benefit will be an analysis of not just consumers, but also the final product consumers and decision makers involved in shopping. Such thorough research of the market from the perspective of the consumer is of particular importance where the shopping is irregular, the purchasing process complicated, and distribution channels scattered.
The next stage of the market analysis is adopting a sales perspective and learning about the distribution channels used in a particular market. This means identifying effective ways of reaching the customer, specifying the value of individual distribution channels and their sales potential, and defining the route-to-market for the product offer.
The matter is not simple, because in every industry there are many different distribution models. Some of them do not include any intermediaries between the manufacturer and the customer. Others are multi-level, branching and diversified in organisational terms (entities and scopes of activities) and financial terms (margins).
An analysis of the competitive environment generally includes creating a list of competing companies and developing a profile of each of these entities. You should also research their offer, strategy, pricing policy, distribution and supply.
Sometimes however, companies neglect such important issues as the identification of the image and perception of competing brands by their consumers and business partners. When performing this step, you must carefully separate the image of the company from the brand image and product image. This requires some time, but it’s worth it. The results of this review will help you prepare a good portfolio and effective marketing communications. It is important especially when it comes to a niche market or an unusual competitive environment in a particular industry or country.
A separate issue is a financial analysis of the competition. It is a difficult subject. But it is really worth to find out how the competition is doing in terms of managing capital, what are the sources of financing, and investments are being carried out or planned.
By combining all the information about the competition and comparing it with data on their offer and brand, you can determine the real strength of individual companies. You may also identify opportunities, threats, and barriers to market entry.
A good practice when performing a market analysis is to obtain quantitative and qualitative data – opinions of industry leaders and experts. Professionals operating in the area (geographic and sectoral) are e.g. journalists, researchers and advisers. They know the market well and can provide you with a lot of additional information. Sometimes their opinions can explain complicated interrelationships, vague facts or new trends.
Recommendations how to enter a new market
Recommendations are the crowning achievement of analytical and research work. After all, the purpose of conducting a market entry project is not just obtaining in-depth knowledge of the new market, but also creating an action plan – including specific steps and decisions to take.
Developing a market entry strategy requires the cooperation of all parties involved in the project. An external advisor can create practical and effective recommendations only when they cooperate closely with the company from the very beginning. Such communication involves assessing the needs, abilities and preferences of the company, determining their knowledge and skills, as well as eliminating those scenarios and pathways that are unrealistic. After such extensive cooperation, at the end of the project it is possible to propose steps best suited to the situation of the company.
Recommendations can respond to these sample questions:
- Is the chosen market attractive and worth investing in? If so, how best to do the investment?
- Is there space for a new product on the market? If so, what characteristics (quality, price, packaging, taste, etc.) should the product have to meet the needs of local customers?
- Should I open my own factory or rather rent an existing facility? Or perhaps it would be best to produce in my current factory and transport products to a new place of distribution?
- Which of the solutions considered would be most favourable for me in terms of taxes?
Although this article is quite long, we have only scratched the surface of the subject of preparing to enter a new market. However, we managed to show you the general outline of such a project, together with tips on what to pay attention to.