Market entry tactics

Perhaps the most perplexing decision a manager must make is when and how to enter new markets. A manager must first clearly decide upon the segments to be addressed and then, taking into account all the environmental factors and his or her company’s resources, choose the most effective market entry strategy. The key points from this chapter are as follows: A range of environmental factors – including economic, demographic, competitive, political/legal, technological, and social/cultural – are all at work affecting the new market entry decision. Firms can take their current products to current or new markets or develop new products for their current or new markets. The latter is the riskiest strategy. Firms that do not realize which alternative they are choosing can often experience severe difficulties. Technology is often a key factor in driving firms to new markets and is also a critical success factor. While first movers into markets have traditionally been seen as gaining major benefits, they also experience major cost disadvantages when compared to followers. A follower strategy can be successful, as well. Firms that are successful in moving into foreign markets usually have proactive reasons. Rather than simply reacting to declines in their domestic market, they see foreign markets offering new opportunities. Positive management attitudes toward foreign market entry are critical to success. The most successful firms in foreign markets have at least one clear competitive advantage they can translate to their new market. Choosing the correct market and the correct market entry strategy is an iterative process requiring thorough knowledge of the environmental factors in a market, as well as the company’s resources and requirements. The three basic ways of entering foreign markets are exporting, investment, or contract. While some believe firms move through stages in their international efforts, newer research tends to reinforce the idea that many firms choose the proper strategy even if they have no past international experience. Deciding on the correct entry strategy requires a firm to decide how it can maximize profit subject to company resources, risk, control requirements, and non-profit objectives. Many firms encounter blocked markets and need to explore ways to exploit the barriers or take a long-term approach to opening these markets. Strategic alliances offer a firm an opportunity to work with other firms that have complementary strengths, without the need for a formal relationship such as a joint venture, but careful selection of the partner and clear goals and communications are prerequisites to success.