For many businesses who want to increase revenue, find new customers, or diversify their offerings, market expansion is often a key growth strategy. Whether it’s moving to a new geographic region, starting a new country, or a specific segment of new customers, successfully entering new markets requires investment in planning and resources.
Strategic market development strategies can sometimes help mitigate risk and offer more even advantages when assessing business entry criteria in unfamiliar spaces.
Effective Market Development Strategies
There are generally some common accepted strategies to consider to assist businesses develop new markets:
- Market Research: Understand what the new market needs, what the preferences of the target market are and what the new market trends are. Understand the size of the market based on demographics, purchasing power, and competitors to grasp opportunity.
- Competitive Analysis: Examine what competing businesses are in the market, and model your market entry based upon their strengths, weaknesses, and market gaps, where viable to your operation.
- Local Businesses: Consider aligning your business with a local distributor, supplier, or influencer who is already strong in the market and can help you navigate the market’s culture and geography.
- Market Fit: Consider adapting and tailoring your products or services addressing local tastes, cultural regulations, and pricing sensitivity, now that you are appealing to a new group of consumers.
- Regulation: Research local laws, tax rules and trade programs to avoid inconvenience or legal fees.
Steps to Implement a Market Entry Strategy
Using a structured method makes it easier to enter a market:
- Assess Market Potential: Use data to gauge the demand and profitability of the new market. Surveys or industry and marketing reports will give clear insights into customer needs and market size.
- Decide on an Entry Mode: Each market entry mode available to you (e.g. exporting, franchising, joint ventures, locally establishing a subsidiary, etc.) will require a different investment of time and money. Select the entry mode aligned to your capabilities and strategic objectives.
- Establish a Local Presence: It is important to develop trust with local customers. If you can’t enter the new market with a full marketing and retail effort, then you could hire staff, buy ad space, or establish a local office. This shows you are committed to the market and understand local relationships and regulations.
- Test then Grow: Don’t make a large time or financial investment until you have launched a small pilot in the new market. For example, you don’t need to go all in on a brand-new product launch; testing revisions of existing products would be less expensive.
- Measure and Improve: Assess your performance – this could be sales metrics, or customer inputs, and consider adjustments to improve ongoing performance.
Real World Examples
Many businesses from a variety of sectors have effectively entered new markets using these methods:
- Retail: When Starbucks entered Asia, they introduced a green tea latte made from condensed milk and real tea leaves, as local customers easily accepted the syrupy green tea latte.
- Tech: Software companies localise their apps by translating their interface and compliance with local data laws.
- Manufacturing: The company partnered with suppliers already within the region to minimize costs and reduce the import/export regulations of their new markets.
- E-commerce: Amazon uses localized websites, fulfilment, and delivery services to cater to country consumers using shopping assumptions of country specific to their visitor markets.
Benefits of Strategic Market Entry
- Grow revenue by reaching underserved customer groups
- Diversify risk by reducing dependence on a single market
- Expand brand recognition in new regions
- Build financial stability in changing economies
Challenges to Consider
- Cultural misalignment with local consumers
- High initial investment for research, logistics, and compliance
- Aggressive competition from established local players
- Unfamiliar legal and regulatory environments
Future Trends in Strategic Market Entry
- Digital tools simplify testing and entering new markets without physical presence
- Data analytics enhance decision-making and personalization
- Social media and influencers lower costs of brand awareness
- Sustainability and ethical practices gain traction globally
Conclusion
The fundamental to effectively entering new markets, is completing extensive research, strategic planning, and localizing your efforts. By completing your research on the target audience, making use of local partners, and being adaptive to finding opportunities, businesses can overcome the challenges that exist and find ways to enter new markets.
As new digital advancements and connects us globally, businesses must be proactive to shorten the gap between the best practices of entering and integrating into new markets with changing demands.
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