Expanding into new markets has the opportunity for a company to experience significant growth as well as increase its overall profit levels. Entering a new market without the appropriate research and planning can result in costly errors. Therefore it is vital that a company enters a new market with strategic precision by understanding the new market and how it will affect the company’s operations and by being able to minimize its risks. If executed properly, a solid market entry strategy can assist a company in establishing itself in a new area, providing a foundation for future success.
1. Complete Market Research
Conducting a thorough study of the new market is critical prior to the expansion into that market. The study of local demand, competition, and consumer preferences are all important factors in developing an effective plan for entering the new market.
Some of the additional research conducted includes:
- Market size and potential: Evaluate the demand for the company’s product or service within the targeted market.
- Competitive landscape: Identify the major players in the market and evaluate their strengths and weaknesses.
- Regulations of the government: Study all applicable federal, state, and local regulations, including tax laws and trade restrictions.
Completing these studies will assist in identifying both the opportunities and challenges that exist in the new market.
2. Offer Products and Services that Meet the Needs of the Local Consumer
There is no better way to develop a successful product and service offering than to fully understand the needs of the consumers in the new market. The fact that what is successful in one market does not necessarily translate to the next is well-documented. To ensure that you understand the cultural practices, customs and habits of the local population and the way they buy and consume your product or service, researching local consumer behaviors is very important.
Examples of customized offerings include:
- Modification of the product: Adapting the product to fit the local taste, size, or preference.
- Branding and language: Customizing the company name, logo, packaging, labeling, literature, and web site to be appealing to the local population.
- Pricing: Establishing prices based on the local economy, consumer spending ability, and price sensitivity.
To be successful in the new market, you need to make sure that your products and services meet the needs of the local consumers.
3. Create a Go-To-Market (GTM) Plan
A complete and effective GTM plan defines how the product or service will be positioned and marketed in the new market to attract the end-users of the product or service. The plan should be broad-based and cover all of the activities required to market and sell the product or service to the end-user, including marketing, sales, distribution and customer service.
The essential components of a GTM plan include:
- Segmentation of the target audience: Developing a definition of the ideal customer profile and tailoring your marketing activities to meet those criteria.
- Selection of sales channels: Determining whether to sell directly to the end-user or to use intermediaries such as wholesalers, retailers, or e-commerce platforms to sell the product or service.
- Selection of marketing programs: Developing a marketing program for the product or service that incorporates the local culture and customs and uses a variety of marketing tools such as advertising, direct mail, digital communications, etc., to communicate the value proposition of the product or service to the end-users.
Creating a well-thought out GTM plan is necessary to generate interest for the product or service and to drive sales in the new market.
4. Form Strategic Relationships with Local Businesses
Establishing relationships with local businesses can provide valuable information, resources, and distribution channels for a company expanding into a new market. Additionally, forming a relationship with a local business can assist in navigating cultural and regulatory issues associated with doing business in the new market.
Relationships to form include:
- Distributors/agents: Utilize the knowledge of the distributor/agent to obtain access to a larger number of end-users.
- Joint Ventures: Partner with a local business to utilize each other’s resources and to mitigate the risk associated with doing business in a new market.
- Government or Industry Associations: Develop relationships with government agencies and/or industry organizations to assist with obtaining the necessary approvals to operate in the new market.
Developing relationships with local businesses can assist in reducing the amount of time it takes to enter the new market and reduce the financial risks associated with entering a new market.