Market Entry Strategy Analysis
Whether you are introducing a new product to the market or entering a new market with an existing product, a coherent market entry strategy is necessary. Your business needs to evaluate any barriers to entry, such as cost, legal considerations, industry regulations and existing competition. If there are no significant barriers to market entry, your business should proceed in designing and implementing its market entry strategy.
Your business' product or service should fill a market gap. In other words, you need to provide something that doesn't already exist in the marketplace. It doesn't have to be completely original. Perhaps you serve a previously untapped consumer group or cater to a specific niche. Your business could also fill a gap by doing something better or cheaper than anyone else. Identifying what market gap you fill is helpful in positioning your product or service.
If your business is entering with an already existing product or service -- which is very likely -- you have two primary means of differentiation, price and quality. How you position your product within the market should help determine which strategy you pursue. Using a price strategy attempts to undercut your competition by providing your product cheaper. If you use this strategy, your business is striving to maximize profits through volume. A quality strategy attempts to position your product as a luxury good, one that is worth paying more for.
Whether you jump into the market all at once, or favor a more gradual implementation, is an important strategy consideration. If you enter very quickly, you risk overestimating demand and consequently having overproduction. Overproduction can be very costly in terms of capital investment, driving prices down and operations management up. If, however, you enter too slowly, you risk losing market share to competitors or substitute products. The strategy you choose depends on your product, its positioning and your evaluation of the market.
When entering a foreign market, there are a number of additional considerations. Your business has four general strategies for entry: exporting, licensing, joint venture and direct investment. Exporting and licensing are indirect ways to enter a market and rely on a foreign company in the host country. These methods are lower risk and require minimal investment. The potential profits are lower. A joint venture or direct investment strategy is riskier and can require significant investment. The profit potential is higher.