Market entry strategy

A market entry strategy is the planned method of delivering goods or services to a target market and distributing them there. When a company decides to enter foreign markets, it must choose an entry strategy. It depends on different levels of company involvement, which is related to the level of risk and control a company wishes to undertake. Before selecting the appropriate market entry method several criteria such as company objectives and expectations, size and financial resources, existing foreign market involvement, skills, abilities and attitudes of management, the nature and power of the competition, the nature of the product or service itself and the timing of the move relative to competitors should be considered.

Entry methods are classified into four main groups including indirect exporting, direct exporting, manufacturing strategies and cooperative strategies.

Indirect exporting can be subdivided into export agents and export merchants. Export agents receive a commission for exporting goods produced by firms, but do not have ownership over the goods. Export merchants buy the goods off the manufacturer and then export them.

Direct exporting allows firms more control over activities such as market selection, marketing mix variables, adaptation to local markets and monitoring competitor activity but involves a long-term investment, high costs and risk. This strategy may be implemented by agents, distributors, franchising and direct marketing. Distributors differ to agents in that they take ownership and responsibility for the goods. Franchising is less risky, less costly and the fastest-growing method of market entry for a firm wishing to expand geographically. Direct marketing involves database marketing tools such as mail order, telemarketing, media marketing, direct mail and the internet to expand abroad. It can be an effective method when there are high barriers to entry in a foreign market or insufficient or underdeveloped distribution systems.

Many firms become involved in foreign manufacturing strategies. Assembly is attractive for certain companies as the importation of components is usually subject to lower tariff barriers. Wholly owned subsidiary is the most expensive method, but it can possess the additional advantage of avoiding communication and conflict of interest problems.

Acquisition often allows the acquiring company to enter new areas with more speed in comparison to internal development of the desired. Yet, it can take a considerable amount of time to search and appraise probable acquisition targets, engage in extended negotiations and then integrate the acquired company into the existing organisational culture. In addition, a company may acquire a company who possesses a de-motivated workforce, out of date products and processes and a poor image and reputation

A cooperative arrangement is a partnership based on a contractual agreement which is shaped by a mutual balance of interests. A joint venture offers a number of opportunities such as access to expertise and contacts in local market, reduction in market and political risks associated with the foreign country, economies of scale due to the pooling of resources and the sharing of knowledge. The problems encountered by international joint ventures can include cultural barriers, different negotiating styles, different pay systems and different business practices.

Дата добавления: 2015-10-24