Before the actual market entry, the market entry analysis, the selection of the appropriate market entry strategy and the selection of the market entry form are carried out. Then the market entry is planned and prepared with the go-to-market strategy.
1. Market entry strategies
General
International
Conclusion
Companies need to evolve and develop strategies to win new business outside their home market. These market entry strategies can take place on a national level as well as on an international level. In the latter case, access to foreign markets is referred to as international market entry strategies.
2. Markt entry process
Market selection /market screening
Which target market should the company target?
Market entry form
Which market entry forms are available for selection in the markets?
Market development / Go-To Market
How can the individual instruments for market development be used in the selected markets?
3. Determine your target market
The first step is to determine which target market(s) you want to focus on. This can either be derived in a structured way or depend on other external effects ("the competitor is already there").
4. Conduct a market entry analysis
The market entry analysis involves determining the local market potential and assessing the specifics of the local market. This can be the local competitive situation, i.e. how competitive the market is. Also, the buying behavior of potential customers, what is important to customers and what is less important. In addition, there may be barriers to entry that make it difficult for your company to enter the market.
What are the market needs?
The data required for the analysis is obtained through targeted market research, consisting of secondary research (Internet and database research) and personal interviews (on-site or by telephone).
5. consider barriers to entry
As mentioned earlier, it is important to identify and consider barriers to entry. What barriers might exist? The following is a list of the most common factors that make entry difficult:
Market entry is particularly difficult in China. Barriers to entry are extremely high, such as import tariffs on passenger cars.
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6. Possible forms of entry
As a company, you need to consider the most appropriate form of entry into the new market. You can choose from the following types, which differ in the amount of resources and capital they require:
MARKET ENTRY FORMS
Exporting
The first step in establishing contact with a new market is to export your products. There is a difference between indirect and direct export.
Indirect export
In indirect export, the company uses a sales agent in the home market. This intermediary then exports the goods to the target country at its own expense. The risk to the company is lower, but so is the margin.
Direct Export
In direct export, the company itself becomes active in the target market and either sells directly to the end customer or looks for local partners. This requires a good knowledge of the country and leads to a higher entrepreneurial risk. On the other hand, the margins are higher than with indirect exports.
Licensing
If there is increased interest, you can think about licensing.
Franchising
If there is interest in several countries and you do not want to take the entrepreneurial risk, you can consider a franchise concept. For more information, see the article on franchising or contact the franchise association.
Loose Dealer Cooperation
If you are not yet ready to invest in your own subsidiary, you can distribute your products locally through selected distributors.
Joint Venture & Strategic Alliance
More binding is a joint venture, where you set up a joint company with a local partner.
Sales Subsidiary
Establishing a local subsidiary is the next capital-intensive step into a new market. It puts you on the ground with your own brand.
Production facility
If you want to produce as well as sell, setting up a production facility is the most capital-intensive form of market entry. One reason may be local supply of your products, another may be lower local production costs.
Acquisition (M&A)
Buying a company in the target country through M&A (Mergers and Acquisitions) gives you immediate access to an existing network of suppliers and customers.
7. Analysis tools for market entry
We rely on the following commonly known analysis tools, among many others:
- Produktlebenszyklus
- PESTEL Analyse
- Branchenstrukturanalyse
- SWOT Analyse
Do you want to tap into new markets?
8. Timing strategy - the right time to enter the market.
In addition to the form of market entry, it is also important to plan the ideal time to enter the market. What is the ideal time to enter a market? One possibility is when a market is opening up for the first time (e.g. Iran) or when a competitor has to reduce its territory due to economic difficulties. It is also important to decide whether to follow a first-mover or a follower model. When considering the right timing strategy across countries, a distinction is made between the waterfall strategy and the sprinkler strategy:
Timing-Strategy
Cross-country: sprinkler vs. waterfall approach
Waterfall Strategy Features
Sprinkler Strategy Features
Country Specific: First Mover vs. Follower Approach
9. Examples of market entry strategies
Expansion into Germany
Initial situation:
Entering the large German market is of interest to foreign companies. In the past, there has been a sharp increase in market entry by Chinese companies.
Implementation:
The chosen form of entry was the acquisition or takeover of German medium-sized companies. Concrete examples are the acquisition of Putzmeister, Kuka, KION or the automotive suppliers Carcoustics, Kiekert and the kitchen manufacturer Siematic.
Market entry turkey
Initial situation:
A medium-sized German company was previously only active in Istanbul with a local partner. Due to the booming Turkish market and the strategic positioning as a bridgehead to other Asian countries, the company considered establishing its own location, i.e. venturing into the Turkish market. Another option was to set up a production facility in Turkey.
Implementation:
An analysis of the market environment revealed that the market and surrounding regions were already well served by a large local player. In addition, market forecasts were deteriorating, leading the customer to decide against an increased market presence in Turkey.
Aldi's market entry in Switzerland
Initial situation:
Before German retailer Aldi entered Switzerland, the local market was closely scrutinized. Top dogs Coop and Migros waged an effective PR campaign against the company, citing lower quality and exploitation of employees.
Implementation:
Aldi's response was a market presence tailored to Switzerland, which also brought the desired success in the medium term.
Market Entry Strategy for a Software Startup.
Initial situation:
An Austrian startup had attractive market shares in its home market and decided to enter the German market. Previously, customers in this market were supported from Austria, but local service was not possible.
Implementation:
In order to improve market development while keeping entry costs low, the following market entry strategy was favored: Freelance sales representatives were recruited who already had experience with the company's target industries in Germany. They were mainly incentivized according to sales success, the fixed cost burden was low.
Markt Entry China
Initial Situation:
A German engineering company is considering expanding into China as part of its internationalization strategy. There are several options for entering the market:
- Cooperation with a Chinese distributor
- A joint venture with a local company
- A 100% subsidiary in China
Implementation:
The company entered into a joint venture with a local company. The advantage of this option was that contacts with potential customers already existed. In addition, the entrepreneurial risk was shared.
FACTORS FOR SUCCESSFUL MARKET ENTRY
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10. Market development / go-to-market strategy
In the market development phase, your task is to position your products and services in the market and identify sales opportunities. It is also important to overcome local market resistance. Go-to-market strategies consider the unique selling proposition that appeals to the target market. Of course, the competitive positioning has to be planned and taken into account. Operationally, this results in a go-to-market plan or a product launch plan.
Go-to-Market Strategie
We work with you to develop a coherent go-to-market strategy. We ask questions such as
What is your USP to be successful in the target market?
What is the customer value?
Where will your products and services be available?
How will customer service be organized?
11. First to Market / First Mover-Strategy
In some markets, you are the first to market. We ask questions such as
- What is the acceptance in the target group?
- How do customers respond to pricing?
- How do you prevent other companies from entering the market?
12. Market Entry Consulting
Whether you need advice on the best way to enter a market or have specific questions about preparing a market entry study, our experts can help. Our services include the following
Market Check
Are you interested in a market, but not sure if you want to get involved? And whether you should enter this market?
Our Market Check gives you a compact overview at a reasonable cost. Based on this, you can decide how to proceed. You can decide not to investigate the market any further or to have a detailed market analysis done.
Market Analysis
You have decided on a market and want to get a comprehensive and in-depth insight into the market in preparation for market entry?
Our market analysis will provide you with an understanding of the market drivers and players, the best go-to-market approach, and best practices from the market.
market check
Compact overview at
reasonable costs
starting at 5.000 €
markEt analyIS
Comprehensive and in-depth
market insight
starting at 10.000 €
Selected References of ACRASIO
- Go to market strategy for a software company in the German market
- Go to market strategy for the positioning of a software company
- Market potential analysis for a service company in the DACH market
- Market Analysis Health Tourism
- Market entry consulting for a franchisee in the healthcare sector
13. FAQ
What is market entry?
Market entry is the process by which a company or organization enters a new or existing market. This can be done by introducing new products or services or by expanding into geographic regions where the company has not previously operated.
What factors affect market entry?
There are several factors that can influence market entry, including
Market potential: The size and potential of the market are important factors affecting market entry.
Competition: Competition in the market can influence the entry of competitors.
Regulation: The regulatory requirements of the market may also affect entry.
What is market development?
Market development involves positioning products and services in the market and determining sales opportunities.
What forms of market entry are there?
In addition to indirect and direct export, market entry can take place through joint ventures, strategic alliances, acquisition/takeover of a local supplier, establishment of a subsidiary, or licensing or franchising.