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What Is Market Entry Strategy?
A market entry strategy is a comprehensive plan for entering a new market or industry, considering the target market, competitive landscape, and the company's strengths and weaknesses. The strategy aims to minimize risk while maximizing the chances of success.
Identifying entry barriers and planning marketing strategy is important for every new business. A well-planned market entry strategy can help a business identify opportunities and make decisions based on its strengths to gain a competitive advantage in a new market. It can also help a company save time and money by determining the most efficient and effective way to enter a new market.
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- A market entry strategy is a business plan that outlines how a company intends to enter a new market or industry.
- It typically includes a review of the target market, the competitive landscape, and the company's strengths and weaknesses.
- A well-executed market entry strategy can help a company quickly establish brand recognition and consumer awareness.
- It frequently necessitates significant R&D, marketing, and logistics investments, which can be costly. As a result, a market entry strategy can fail, resulting in financial losses for the company.
Market Entry Strategy Explained
Market entry strategy is an organization's technique while introducing new products or services. The whole process starts with identifying and emphasizing new market or industry opportunities and contains a set of steps that a company should follow to enter and compete in a new market successfully.
Companies generally follow a series of steps to enter a new market or industry. These steps usually involve market research to identify key trends, developing a unique value proposition, building infrastructure to support entry, creating a comprehensive marketing strategy, ensuring compliance with legal and regulatory requirements, and launching the product or service. These steps help companies assess the potential success of entering and establishing a strong presence in a new market.
Types
There are several market entry strategies that a company can use to enter a new market or industry. The most common types include:
- Exporting: Selling products or services directly to customers in another country or through intermediaries such as agents or distributors.
- Licensing: Licensing products or services to a local company in the new market to produce and sell.
- Franchising: Allowing another company to use its business model and brand in exchange for royalties or other forms of compensation.
- Joint venture: Collaborating with another company to enter a new market or industry. Both businesses contribute resources and share profits and risks.
- Wholly owned subsidiary: Establishing a new company in the target market owned and controlled by the parent company.
- Acquisition and merger: Acquiring or merging with an existing company in the target market.
- Greenfield investment: Constructing new facilities or launching a new business from the start, which comes under Greenfield investments.
Examples
Let us look at the market entry strategy examples to understand the concept better:
Example #1
Amacon Ltd., a company specializing in household appliances, conducted market research to identify key consumer trends and preferences. As a result, they discovered a growing demand for environmentally friendly and sustainable products. Using this information, they entered the market and took advantage of this opportunity.
To gain a competitive edge, Amacon Ltd. invested heavily in research and development to create innovative and unique products that were not currently available. This strategy aimed to establish them as a first-mover in the environmentally friendly household appliances industry. Additionally, they formed strategic alliances with other renewable energy companies to broaden their reach and gain access to new technologies.
To promote their products, Amacon Ltd. launched an extensive marketing campaign to educate consumers about the benefits of their products and their commitment to sustainability. They also offered special promotions and discounts to encourage early adopters to try their products. By doing so, they hoped to establish a strong brand presence and customer base for environmentally friendly household appliances.
Amacon Ltd. established itself as a leader in the environmentally friendly household appliances industry by utilizing a market entry first-mover advantage strategy. With their innovative products, strategic alliances, and effective marketing campaigns, they were able to meet the growing demand for sustainable and eco-friendly products and establish a loyal customer base.
Example #2
Amazon entered the online retail market in the late 1990s when the online shopping industry was still in its infancy, and there were only a few established market players. Nevertheless, Amazon saw the potential for growth in the e-commerce market and took advantage of the early opportunity.
To enter and establish itself in the market, Amazon focused on creating a user-friendly website that offered a diverse range of products at competitive prices. They also invested heavily in logistics and fulfillment infrastructure to ensure timely and dependable delivery.
Amazon used a "multi-sided platform" strategy by creating an online marketplace where third-party sellers could list and sell their products in addition to Amazon's products. This increased the number and variety of products available on the site.
To enhance the customer experience, Amazon implemented a customer-centric approach by gathering and using customer data to personalize the shopping experience and make recommendations. They also launched the loyalty program Amazon Prime, which provided members with free shipping and other benefits.
By combining a user-friendly website, a wide selection of products, a customer-centric approach, and a multi-sided platform strategy, Amazon established a strong brand presence and customer base in the online retail market. Today, Amazon is one of the world's largest e-commerce companies, offering millions of products and services worldwide.
Advantages & Disadvantages
The advantages and disadvantages of the market entry strategy are as follows:
| Advantages | Disadvantages |
|---|---|
| Provides access to new markets | High costs and risks |
| Increases revenue and profits | Requires extensive research |
| Allows for diversification | Can harm existing relationships |
| Builds brand awareness and image | Legal and regulatory challenges |
| Enables competitive advantage | Cultural and language barriers |
| Facilitates economies of scale | Time-consuming |
| Enhances innovation | Potential for failure |
Frequently Asked Questions (FAQs)
Direct investment market entry strategy is when a company invests in establishing its operations in a foreign market by creating a new subsidiary or acquiring an existing company. This means that the company controls its operations in the foreign market and is responsible for all aspects of the business, including marketing, production, distribution, and logistics.
The market entry strategy of partnering refers to forming a partnership or alliance with an existing company in the target market to enter the market and benefit from its established infrastructure, resources, and knowledge.
Brownfield investment is a market entry strategy that involves purchasing or leasing an existing facility or property in a foreign market and repurposing or renovating it to meet the needs of the new business. This strategy is often used in manufacturing or industrial sectors where building a new facility from scratch can be prohibitively expensive or time-consuming.
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