Market Entry Strategy Examples: 6 Proven Tactics For a Successful Overseas Debut

“So, we started selling abroad, and... crickets.”

That's a scenario you want to avoid.

Launching a product successfully in new markets requires more than just a killer product and an enthusiastic “Open for Business” sign. It needs a solid plan.

In this article, you’ll find tried-and-true market entry strategies, with clear examples and a handy checklist to ensure you’re not just open for business, but thriving too.

Pro tip: For an effective market entry, adapt your product and messaging with a professional localization management platform – Centus. Find out how.

Read on to learn:

-What is a market entry strategy?

-6 types of market entry strategies

-How to create a market entry strategy

What Is a Market Entry Strategy?

A market entry strategy is a plan for introducing and establishing goods and services in a new market.

In addition to making your offerings available abroad, the strategy also helps to make them appealing through marketing, product adaptation, and partnerships.

Why should you have a market entry strategy?

Entering a new market without a strategy is like sailing without a compass; you might move, but not necessarily in the right direction.

Here’s why a market entry strategy is non-negotiable:

• Risk reduction: A strategy minimizes the risks and uncertainties of venturing into unknown territories. You can foresee challenges and prepare for them in advance.

• Customer connection: It helps you understand, connect and build mutual trust with your target customers effectively from the get-go.

• Performance measurement: Having a strategy allows you to set benchmarks and KPIs that help in measuring and evaluating the performance of your market entry over time.

• Clear objectives: With a roadmap, there are clear goals and objectives set from the onset, ensuring that every team member knows what needs to be achieved and how to achieve them.

• Efficient resource allocation: Proper planning ensures optimal use of resources, be it time, money, or manpower. This efficiency is crucial for maintaining profitability while expanding.

• Informed decision-making: A market entry strategy involves thorough market research, which is invaluable for making informed decisions on pricing, marketing, and customer service.

• Building competitive advantage: A deep understanding of the new market’s landscape allows you to position your product uniquely and gives you an edge over competitors.

With a robust entry strategy, you're not merely surviving the complexities of expansion; you’re connecting, and growing where it matters most.

Types of Market Entry Strategies

When a business eyes a new market, a well-thought-out strategy is the map guiding its entry journey. There are several market entry strategies, each with its own set of benefits and challenges. We'll explore these strategies starting with direct exporting.

1. Direct exporting

Source: Pexels

Direct exporting is a market entry strategy where a business chooses to sell its products or services directly to customers (B2B or B2C) in a foreign market, without engaging local intermediaries such as agents or distributors.

This can be done in several ways, including setting up an online storefront that caters to consumers in the target market, establishing a domestic sales team to manage foreign orders, or creating a sales subsidiary in the foreign market to handle sales and distribution.

In direct exporting, the business retains full control over the exporting process, from marketing and sales to logistics and customer service, allowing it to build a direct relationship with overseas customers.

Why choose direct exporting:

• Internal capabilities: Companies with strong internal capabilities in marketing and distribution may lean towards direct exporting. They have the resources and expertise to manage overseas sales operations​.

• Risk tolerance: Direct exporting is considered low-risk, especially for companies making their first entry into a new market​.

• Market size and potential: A larger market with high demand for the products can influence the choice of direct exporting​.

• Flexibility: Direct exporting provides companies with greater flexibility to adapt to changes in the foreign market.

• Competition: If a market has fewer competitors, a company might find it easier to enter and establish itself through direct exporting.

• Legal environment: Companies might try direct exporting in countries with favorable trade regulations.

• Control over operations: Companies preferring to have complete control over their brand, marketing strategies, and customer interactions often opt for direct exporting​.

An example of direct exporting is Imprimerie Gauvin, a Canada-based commercial printing company. The company entered the US market more than a decade ago through its first shipment of book orders. They expanded their production capacity with new digital presses and a print-on-demand service. This strategy of direct exporting helped Imprimerie Gauvin to widen its horizons and thrive beyond its home country.​

Disadvantages of direct exporting:

• Resource intensive: Direct exporting can be resource-intensive requiring significant investment in setting up sales channels and marketing efforts. Smaller companies with limited resources and even more limited market knowledge might prefer the expertise of an intermediary.

• Lack of local market knowledge: Without intermediaries who understand the local market, companies may face challenges in adapting their strategies to local preferences.

• Logistical challenges: Handling shipping, customs, and other logistical aspects can be complex and time-consuming.

Overall, the decision to use direct exporting as a method of entering a market is frequently motivated by the need for more control, bigger profit margins, and better market connection.

2. Indirect exporting

Source: Pexels

Indirect exporting involves a business selling its products or services to a domestic intermediary, who then sells them to customers in a foreign market.

This middleman is in charge of handling shipments, coordinating marketing, and managing paperwork and permissions. Common types of intermediaries used in indirect exporting include export management companies, trading companies, and export intermediaries.

Why choose indirect exporting:

• Less upfront investment: Unlike direct exporting, where a company might have to establish a physical presence or spend significantly on promotional activities, indirect exporting doesn't require a substantial initial financial investment.

• Quick entry: Companies can enter foreign markets more rapidly, relying on the existing network and market knowledge of their intermediaries.

• Less risk: Companies can test foreign markets without significant financial commitments or direct involvement.

• Reduced management overhead: With a third party handling exports, the primary company can concentrate on core operations.

• Flexible commitment: It's easier to adjust strategies, such as pulling out or scaling presence, based on market responses.

• Limited in-house expertise: Companies with limited knowledge about international markets or those that don't possess an established export department might find indirect exporting a more viable option.

• Diverse market exploration: With intermediaries, a company can explore multiple markets simultaneously, since intermediaries often operate in various regions.

Disadvantages of indirect exporting:

• Lower profit margins due to intermediary cuts.

• Reduced control over market branding, strategies, and customer relations.

• Possible market conflicts if the intermediary serves multiple clients.

• Slower reception of market feedback due to the presence of a middleman.

Indirect exporting can be a less daunting way for companies to step into international markets, especially small to medium-sized enterprises with limited resources and limited risk appetites.

3. Licensing and franchising

Source: Freepik

Licensing is when one company (the licensor) lets another company (the licensee) use its brand name, technology, or other assets for a fee.

It's a way to expand and earn money (royalty fees or other fees) from these assets without creating or selling products directly. For instance, Disney licenses its characters to toy manufacturers, allowing them to produce and sell toys based on Disney movies.

In contrast, franchising is an agreement in which the franchisor authorizes the franchisee to operate a business under the franchisor's brand name, business model, and operational rules.

In return, the franchisee pays a one-time fee and ongoing royalties.

Why choose licensing or franchising:

• Less capital intensive: Franchising or licensing allows businesses to expand without investing heavily in new outlets or operations.

• Rapid expansion: Companies can grow quickly as franchisees invest in setting up the outlets.

• Reduced risk: The franchisee bears a significant portion of the business risk, including operational and financial risks.

• Consistent brand image: Franchisors provide guidelines ensuring that all outlets maintain brand consistency.

• Revenue stream: Royalties from licensing and franchising can be a stable and significant source of revenue.

• Local market expertise: Franchisees often have better insights into local markets, aiding in customization and adaptation.

McDonald's, the global fast-food giant, is one of the most recognized franchising models in the world. Instead of owning all its restaurants, McDonald's franchises a majority of them. This strategy has allowed the brand to grow exponentially across various countries while ensuring that local franchises adapt to cultural tastes and preferences. For instance, while you can get a McChicken in many parts of the world, in India, there's a McAloo Tikki burger catering to vegetarian preferences.

Disadvantages of licensing and franchising:

• Less control: With licensing, companies may have less control over how their intellectual property is used, which can lead to brand dilution.

• Dependency: Reliance on franchisees or licensees for business growth can sometimes limit the parent company's agility.

• Reputation risk: Poor performance or negative actions by a franchisee can reflect poorly on the entire brand.

• Limited profit: Although franchising/licensing offers stable income through royalties, the parent company might miss out on larger profit margins that come with direct operations.

• Contractual issues: Complexities related to contracts can arise, especially if terms aren't clear or if there are disagreements between parties.

4. Joint ventures

Source: Pexels

A joint venture occurs when two or more businesses decide to embark on a new project together, sharing the costs, risks, and benefits. They collectively invest resources, such as capital, technology, or expertise, while also sharing the resultant profits and losses.

When going into a joint venture, pick a partner who gets you and has strengths you don't. Make sure you're on the same page about money, managing the business, splitting profits, and how you might eventually go your separate ways. This helps keep things smooth and drama-free.

Why choose joint ventures:
Businesses might opt for a joint venture as their market entry strategy for various reasons, such as:

• Risk sharing: Entering a new market could be risky and having another party share that risk can be advantageous.

• Shared expertise: Companies may come together to leverage each other's strengths and expertise, which they might lack independently.

• Local partner benefits: When entering a foreign market, collaborating with a local business might help in understanding the local market, culture, and regulations better.

• Cost efficiency: Shared investment means that high entry costs and operational expenses are divided among the participants.

• Access to established distribution channels: Partnering with a local entity often provides access to their already established distribution and marketing channels.

The partnership between Starbucks and Tata Global Beverages in India is a famous instance of a fruitful joint venture. To penetrate the booming Indian market, Starbucks formed a joint venture with Tata, which already had a significant presence there.

This gave them access to a well-established supply chain and essential local expertise. With the support of this partnership, Starbucks was able to effectively enter and grow its business in India by customizing its products to suit local tastes and preferences.

5. Direct investments

Source: Pexels

Direct investments are when a company sets up shop in another country.

This often involves establishing actual business operations in the new market, like opening a new office, manufacturing facility, or retail store. There are a few ways businesses can make direct investments:

Greenfield investments:

This involves starting from scratch in the new market. Instead of partnering or buying out another business, the company builds its operations—like factories, offices, or other facilities—right from the ground up.

Greenfield investments provide total control over the operations but also require a large capital investment and involve higher risks due to unfamiliarity with the new environment.

In 2016, Toyota decided to make a greenfield investment by building a new plant in Mexico. They established a brand-new facility to manufacture the Corolla model. As a result of their investment and growth strategy, Toyota has two plants in Mexico and is the fifth largest vehicle producer in the US, boasting a market share of 8.0 percent.

Strategic acquisitions:

This involves buying an existing company in the target market. This method allows the entering company to quickly gain market share, resources, and expertise specific to the market. It's quicker than greenfield, but can be tricky if corporate cultures clash or if the acquisition is not integrated properly.

In 2005, Lenovo, a Chinese computer company, acquired IBM's Personal Computing Division. This move allowed Lenovo to quickly gain a strong presence in markets outside of China, leveraging IBM's established brand and expertise.

Why choose direct investments:

• Faster growth: Buying an existing business can lead to quicker growth as you tap into its already established customer base.

• Complete control: With Greenfield investments, you have full control over operations, branding, and decisions since it's your business from the get-go.

• Market knowledge: Acquiring a local company often means inheriting its local market understanding and expertise.

• Barrier bypass: Sometimes, local regulations or tariffs make it difficult for foreign companies. Buying a local business can sometimes bypass these challenges.

• Market size and potential: If a market has a large size and high potential for growth, it might make sense to commit fully to a direct investment.

• Control: Companies might prefer direct control over their operations and brand.

• Legal environment: In some countries, the legal environment might be more favorable for foreign direct investments, offering tax breaks or other incentives.

However, it's essential to have ample capital and be prepared for possible regulatory hurdles, cultural differences, and the challenges of managing operations far from home.

6. E-commerce entry

Source: Pixabay

E-commerce entry refers to a method where businesses use online platforms to introduce and sell their products or services to a new market. Instead of setting up physical stores or outlets, companies use digital channels like websites, social media platforms, and third-party marketplaces to reach consumers directly.

Why choose an e-commerce entry:

• Market size: E-commerce allows businesses to tap into a broader customer base, not limited by geographical boundaries.

• Cost efficiency: Setting up an online store can be more cost-effective than a physical storefront, especially when considering rental, utilities, and staffing costs.

• Rapid expansion: Online platforms mean faster scaling without the logistical constraints of physical expansions.

• Consumer behavior: An increasing number of consumers prefer online shopping due to its convenience.

• Competition: Entering e-commerce can level the playing field, especially if the competition isn't as established online.

• Adaptability: E-commerce platforms can quickly adapt to market trends and shifts, allowing businesses to pivot when necessary.

Disadvantages:

• Logistical challenges: Ensuring efficient delivery, managing returns, and handling customer service can be complex.

• Intense competition: Online stores are a dime a dozen, due to the low barrier of entry. This means more competition

• Cultural differences: Online content and marketing strategies may need significant adjustments to connect with a foreign audience.

• Technical glitches: Dependence on technology means businesses are vulnerable to website downtimes, hacking, and other technical issues.

• Customer trust: Building trust with online consumers, especially in a new market, can be challenging without a physical presence.

Choosing the right market entry strategy can make all the difference. From e-commerce to joint ventures, each method has its perks. Pick what fits your business best and go for it.

Step-by-step Guide to Creating a Market Entry Strategy

A well-laid plan can be the difference between a grand opening and a quick exit. Here, we'll break down the steps to creating that winning strategy, so you can make informed decisions along the way.

1. Understand your business: First, understand the strengths, weaknesses, and unique aspects of your business. What does your product or service offer that others don't? Recognize your USP (Unique Selling Proposition) and the exact target audience you want to cater to. This clarity will form the bedrock of all decisions going forward.

2. Market research: This is your homework phase. Explore potential markets by understanding their demand patterns, potential customers, local competitors, and purchasing behaviors. Use tools like surveys, focus groups, or third-party market research reports. Ask yourself: Is there a genuine demand for your product or service?

3. Legal and regulatory research: Every country or region has its business regulations. Familiarize yourself with local trade restrictions, import/export duties, and local business laws. Some markets have friendly policies to invite foreign businesses, while others may be more protective. Understanding these can save you from future disputes and tell you which market entry strategy to use.

4. Cultural sensitivity study: What's acceptable in one country might be taboo in another. Study local cultures, tastes, and preferences. Sometimes, a successful product in one market fails in another solely due to cultural differences.

5. Cost analysis: Lay out all potential costs, including setting up, operations, marketing, and distribution. Balance these against potential returns, and always account for hidden or unexpected costs.

6. Risk assessment: Business is about taking calculated risks. Identify potential challenges and threats in the new market. It could be political instability, economic downturns, or sudden policy changes. A SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis can help here.

7. Choose your market entry strategy: Now that you've done the groundwork, decide how you'll enter the market. Your choice will depend on your business type, risk appetite, investment capacity, and market research findings. Here’s a helpful checklist to help you:

• Product demand: If your product is highly sought after, direct methods like exporting or e-commerce might be more helpful.

• Local laws and regulations: Complex environments might require partnerships or joint ventures for local expertise.

• Long-term vs. short-term goals: Licensing or franchising might be best for short-term engagements, while direct investments suit long-term market presence.

• Financial capacity: Limited resources? Then, licensing or franchising might be more appropriate.

• Risk appetite: If you prefer to share the risk, consider collaborations or partnerships.

• Brand control: If brand image and control are paramount, direct methods should be your pick.

• Infrastructure: Does the market have the necessary infrastructure for your business? E.g., digital infrastructure for e-commerce.

8. Implementation: You've planned; now execute. Depending on your strategy, this could mean setting up local offices, partnering with local businesses, launching an e-commerce platform, or establishing manufacturing units. Remember, pilot projects or phased launches can help gauge real-world reactions before a full-scale rollout.

9. Monitor and modify: The real insights come when you're on the ground. Monitor your progress, gather feedback, and be ready to tweak your strategy. The market will always throw surprises, and your adaptability will define your success.

Pro tip: To ensure the effectiveness of your market entry strategy, use Centus to streamline the translation and localization of all your software, business documents, and marketing materials. Learn more.

To Sum Up

Entering a new market can seem daunting, but with the right strategy and tools, it becomes manageable. Do your homework, understand the playing field, and lean on reliable partners. Success is about preparation meeting opportunity. Here's to expanding your reach and growing your business. Best of luck on this adventure!

FAQs

What is an example of a market entry strategy?

An example of a market entry strategy is licensing, where a company allows another firm in a different country to use its brand, patents, or technology in exchange for a fee or royalty.

What are the 4 types of market entry?

The four main types are exporting (direct and indirect), licensing and franchising, joint ventures, and direct investment (which includes Greenfield investments and strategic acquisitions).

What is the most popular market entry strategy?

Exporting, especially indirect exporting through intermediaries, is often a favored choice for businesses looking to test the waters in new markets without significant investments.

What are the three market entry strategy types?

Three common types include: exporting, contractual (like licensing or franchising), and investment-based (such as joint ventures or direct investments).

However, the classification can vary based on context and sources.