Market Entry Strategy

The ultimate preparation that may lead to exporting to a particular market

The EU market is a very complex and competitive market with as many threats as opportunities. The market is very dynamic: market structures change constantly and buying motives are today different from those of 5 years ago. Business opportunities that existed a few years are today not much more than an anecdote. The EU is not a market where every exporter can score easily!

Exporters that are determined to enter this market should prepare themselves thoroughly. An effective preparation for market entry is making a draft Strategy.

The sequence of the process in which strategy development plays a vital role is as follows:

• Compilation of a draft market entry strategy . The exporter thinks of all threats he may have to address. He thinks of the risks and problems and tries to find solutions for it (the if-than-scenario).
• Market research is to be undertaken. Desk research can be done now already: collect all possible information on your priority markets without actually going into the market (priority market are those parts of the EU where you would like to start initially).
• Field research will complete the analysis and will influence to a large extend the critical question: does the exporter stand a serious chance in the chosen market? (the market research phase is part of the export audit)
• With the market information in hands, the draft strategy will be adjusted and transformed into a final Market Entry Strategy
• The final market entry strategy becomes part of the Export Business Plan, which is still to be developed.

The draft market entry strategy

A market entry strategy gives answers to a few very essential questions, which include

The exercise of putting a strategy together is probably the best exercise you can have. It forces you to think of all aspects of exporting. The process of making the strategy is as important, if not more important, than the final result.

		Example I		Example II
Product		Cast iron housing, for pumps and electric motors		Aluminium profiles for window and door frames, greenhouses, conservatories, etc
Market		Germany		Germany
Segment		Manufacturers of pumps and electric motors.		Building trade, DIY hobbyists, green house operators, the “green finger brigade”

• Is there a difference in packaging both products? Do both products need packaged with a “silent salesman” character?
• Is there a fundamental difference in logistics (Packing, stocking, warehousing, shipping, etc)?
• Is there a difference in the way the products will be promoted
• Is there a difference in the price sensitivity of both products?
• Can one importer or agent handle both products?

You are hereby requested to think very thoroughly about all aspects of bringing your own products to the European market.

First of all: Try to answer the questions WHY, WHAT, WHEN, WHERE before you start with the HOW question. Do not make it too easy for your self - strategy development is not so simple that it can be done quickly the day before a deadline!

The WHY question: Give a good reason why you think you should export. Could your company do well without exporting? Please throw light on three alternatives:

• stick entirely to the domestic market and your historical export markets.
• supply exporters and let them do the exporting
• get involved in exporting yourself.

The WHAT question: You certainly do not want to export everything you can lay your hands on. Restrict yourself to a limited, but logical products assortment. Describe the products and the product characteristics, the quality (not “the best quality” but an exact description of the size, colour, weight, finish, tensile strength, etc), technical standards, testing procedures, specific alterations/adaptations that are needed for the market you want to enter, the packaging and packing, etc. Try to think in terms of a “product/market match”. Avoid products that move towards the end of the Product Life Cycle or products that have been or will soon be outran by technological developments.

The WHEN question: Should your products be introduced in a specific part of the year or before a critical date? Why? If the product should arrive in the market in September, when will you have to promote the product? How much time do you need to alter a design, change a finish or make a new mould?

The WHERE question: Europe and the US are (sub) continents, not markets. Europe is a patchwork of markets with totally different characteristics. Select just a few, or even only one market(s). Tell us why you made this selection? Will you expand after a few years? To which markets? Why to those markets? Do you have a specific market segment in mind? Do the chosen market segments exist in the selected geographical market? Gut feeling should not be the only justification; more rational arguments are recommended.

The How Question will give an answer to all the marketing aspects.

Before you are able to answer the HOW question, you should first know what you want. You should try to quantify your dream.

How many pieces do you hope to sell to specific, pre-selected, markets in the first, the second and the third year? What is the basis of this hope (your output? The market demand? The competitive situation?)

Once you have set the targets, you now will develop a HOW strategy that should lead to the desired business volume. The HOW STRATEGY consists of two parts:

• the supply-side strategy
• the demand side strategy

The supply side strategy:

Before designing a supply side strategy you have to consider a number of options:

  Will you stick to supplying other exporters (indirect exports)

• Will you initiate or join an existing export cluster and export through such a cluster (export clusters can offer distinctive advantages if well prepared)
• Will you team up with your neighbour and start exporting to Europe together
• Do you intend to make use of an export agent in your own country (the agent who will do the selling for you)
• Any other alternatives? (don´t say NO too easily . Try to find some innovative workable alternatives, even if you later decide for good reasons not to use them)

You furthermore have to look to your company´s capabilities: Who will be responsible for the export? Who will undertake the desk research or the selling trips? Who will co-ordinate the preparation of a trade fair participation? Is there enough money at the right time to pay for all the marketing expenses? Are you technically and technologically able to meet the demand of today´s (and tomorrow´s) market? Will you be able to develop, and later produce, the products, which the market needs? If not, what solutions do you see?

The demand side strategy

  When developing a demand side strategy there are two major components:

• How to let the potential trade partner, or the potential direct buyer, know that you exist? How to tickle them and raise their interest in your company and your company´s products and services.
• How to get the right product at the right time at the right price at the pre-identified buyer´s doorstep. In order to develop a demand side strategy you will have to fine-tune the balance between all the marketing components:

Identification and preparation phase

• How will you identify the needs of the buyers and the characteristics of the products or services they need
• Identify the stake holding organisations that may facilitate or aggravate the introduction of your products or services (think of test institutes, certifying agencies, standardisation institutes, prescribing consulting engineers, etc.). Get to know their raison d´être, and their possible role in your strategic process

The Introduction and execution phase

• How will you introduce your company, the products and services to the buyers (think of known and new marketing tools such as trade fairs, visits to the market, telephone sales, selling through agents, etc)
• Promotional support materials: will you use any promotional materials? Which? How? When?
• Which trade channels do you intend to use? Importers? Specialised importing/wholesalers that cover a specific market segment? A non-stocking agent? What should be the function of your trade partner? What do you expect from him and what will you offer him in return in terms of services and support? In case you do not intend to use a trade facilitator and want to do direct business with the user, please support your decision with arguments.
• In case you decide to work with a trade partner, how will you select “ mr. ideal ”. Will you select a trade partner or will the party in Europe select you as a new supply partner? How will you prepare yourself for this problem?
• How will you communicate with your trade partner? What will you do to keep him interested - not only today but morrow and next year as well?
• In case you intend to do direct business with the user of your services or products, how do you intend to maintain the contact?
• In a competitive market you are expected to offer a well-balanced, competitive package comprising the product, conditions and services. Put a good package together that the buyer/trade partner can not irresistible.
• Logistics: How will you address the logistic problems (e.g. freight cost, frequency, packing, stocking,) ? Are there any alternatives? Please weigh one against the other and explain why you choose a specific alternative.
• Pricing: How will you set, or determine, the sales price
• Payment conditions are part of the competitive package. How are you going about this issue? Do you first have to talk to your bankers? If so, why?
• What will you do to ensure a sustainable growth?
• Think of a few more strategic decisions which you will have to take, or which are essential in order to become successful.
• Try to be an innovative marketer. Think of at least one market entry strategic component that will set you apart from all your competitors. Think of one USP ( UNIQUE SELLING PROPOSITION ) that may impress the prospective buyers and could make you a desirable supply partner.

Whilst working on the strategy you will find out that you do not have all the information needed to make a reliable strategy. Do not worry too much about that. Try to get the information through desk research and for the rest you may assume anything that you think is realistic. It is however important that you think of ALL aspects that could influence your position in the market, your activities or intentions. It is better to include too many subjects rather than having to admit later that you overlooked some issues. Better be over- than under-prepared.

There will most likely be a number of strategic components that are new for you. For other issues you may realise that it is a problem but you do not have an answer yet. There may be as well a number of subject that should be included in the Market Entry Strategy that were not mentioned in this paper (Sure! Not everything has been mentioned). This is no big problem. We only request you to seriously try to make a balanced M.E.S. to consider all alternatives and look at all problems from all angles.

N.B.Meijer./ january 2001