A Complete Guide to Market Entry Strategy

Your essential guide to market entry strategy – here’s how to succeed globally with a tailored market entry approach.

If your company has ever dreamed of expanding internationally, you need to choose the right market entry strategy to suit your needs.  

A market entry strategy is the blueprint you draw up before you take your business into a new territory.

Each market entry strategy comes with its own set of positives and negatives. The right strategy for your company won’t be the same as your main competitor’s, and it should vary with every market you expand into. 

So let’s dig in. We’ll cover: 

• What exactly a market entry strategy is – and why you need one
• What goes into creating a market entry strategy
• The pros and cons of expanding into new markets
• The different types of market entry strategies 

What is a Global Market Entry Strategy?

A global market entry strategy is a comprehensive plan businesses use to introduce their products or services to a new international target market. 

Companies that look to expand into new markets must first consider factors such as target customers, competition, legislation, and market trends.

Your market entry strategy should outline the approach, resources, and timeline required to establish a foothold in the new market and provide insights into potential challenges and potential opportunities.

Why are Global Market Entry Strategies Important?

Choosing and creating a market entry strategy is a prerequisite for success. Without one, you won’t be able to anticipate risks, set goals, define execution and make credible projections for outcomes over time.

Setting up shop in a new territory is not a straightforward or interchangeable task. Every country differs in its laws, the tastes of its consumers and its competitive landscape. That’s why each market entry strategy should be tailored to achieve two primary objectives:

1. Risk Management and Resource Optimisation

• Minimising Risks: Entering a new market involves various risks, including political, economic, and cultural challenges. A well-crafted market entry strategy helps businesses anticipate and mitigate these risks by thoroughly analyzing the target market’s environment and potential obstacles.
• Efficient Resource Allocation: By selecting the appropriate entry strategy, companies can allocate their investments towards activities that maximize returns.

2. Better Decision-Making

• Choice of Entry Mode: The decision on how to enter a market—whether through exporting, joint ventures, franchising, or wholly-owned subsidiaries—depends on the company’s objectives, resources, and the specific conditions of the target market.
• Adaptation to Local Conditions: To win in a new market, you may well need to adapt your products, services or marketing approaches to local preferences. Going in with a strategy based on extensive research will help prevent blunders.

Why Expand into a New Market?

When executed well, a new market expansion can unlock benefits like: 

• Increased Revenue – Entering into new markets opens your business up to more customers, growing your revenues. 
• Reduced Risk – Expanding into multiple markets means if one market suffers an economic downturn or other challenges, the business can rely on revenue from other regions to remain stable.
• Competitive Edge – Carrying out a successful market entry strategy before your competitors allows you to become an established brand and capture market share early, making it harder for others to compete effectively.
• Brand Positioning: Establishing a presence in multiple markets can enhance a company’s global image, providing a competitive edge over less internationally-recognised rivals. A position as a global industry leader is a very powerful asset.

Global expansion isn’t limited to big companies with the resources to overwhelm their rivals. 79% of businesses surveyed by Visa in 2023 in ten global markets reported that they’re focusing their growth strategies on expanding into new geographies. Globalisation is cascading down the tiers of the world economy, and the doors are open for companies of all sizes to make their mark on the international stage.

Types of Market Entry Strategy

There are a range of market entry strategies to consider when looking to expand internationally. The strategy you choose depends on factors such as your current size, your business objectives, budget, competitive landscape, level of risk tolerance, and the degree of control you wish to maintain over operations.

Direct Exporting

This involves selling goods or services directly to customers in another country. 

Organisations that select this option maintain greater control over branding and pricing while avoiding significant investments in foreign infrastructure, or paying a third party to handle operations for you.

Indirect Exporting

Indirect exporting is when businesses use third parties like agents or distributors to sell their products or services internationally. Intermediaries will be experts in their own regions which minimises the risk element, however, the expenses to pay the third party will dig into your profits. 

Franchising

Franchising is when organisations allow foreign partners to operate under their brand and business model. The franchisee can sell the products or services of the franchisor while paying a fee to have access to them. Franchising works most successfully if the brand is already globally recognised. 

Licensing

Licensing is similar to franchising, except licensing agreements are usually more limited. In a licensing arrangement, a company grants a foreign business the rights to use its intellectual property, such as patents or trademarks, in exchange for fees or royalties.

Unlike franchising, the licensor does not typically provide ongoing support or impose strict operational guidelines. This strategy is worthwhile for businesses looking for a low-cost, low-risk way to enter a new market, while leveraging the local licensee’s resources and expertise. However, it also means the licensor has less control over the quality and marketing of its products, which could impact brand reputation.

Merging

Merging involves partnering with or acquiring a local company in the target market. This is very expensive, but grants access to local expertise, infrastructure, and customer bases. This expenditure makes the transition into a new market much easier.

Greenfield Investments

Greenfield investments are when a company sets up a local office or builds facilities in a new region. This gives businesses complete control over their market entry, making it simpler to adhere to the region’s regulations. This requires substantial investment, so this market entry strategy is typically used by established organisations.

The Risks of Entering New Markets

Entering new markets is inherently risky. A market entry strategy needs to plan for all the common pitfalls:

• Cultural misunderstandings – Entering a new market will likely involve adapting your business, products, and services to a new culture. Brands must be aware of cultural nuances to help build relationships with local customers and partners. Embarrassing gaffes could kill your chances of success early. 
• Legislation – You must be aware of the different laws and regulations your business must follow in the new market to avoid heavy financial penalties and bad PR.
• Natural disasters – When choosing locations to set up new facilities, companies must consider the chances of experiencing extreme weather conditions and natural disasters. When companies overlook this, it can lead to significant operational disruptions, increased costs, and delays in delivery or production.
• Logistical issues – Good logistics are essential for meeting customer expectations and managing costs. Poor logistical planning can result in delayed deliveries, damaged goods, or higher transportation expenses. These can all be fatal for the crucial first impressions that influence success in new global markets.

Additional Risks

• Political Instability: Political upheaval can disrupt supply chains and market operations. Companies must assess the political climate of target markets to anticipate potential disruptions.
• Economic Volatility: Changes in inflation, currency exchange and interest rates can impact growth potential. Businesses need robust financial planning.
• Competition: Capturing market share in highly competitive markets requires differentiation strategies.

Use Centuro Global to Enter New Markets with Ease

Centuro Global’s Award-Winning AI Global Expansion Platform lets you execute a successful global market entry strategy three times faster. Our platform’s Market Entry Playbook will generate a country-specific blueprint with all the information you need to enter any country in just a few clicks. You’ll have instant access to a database of global legal, tax, and immigration rules for over 170 countries.

With over 20 years of cross-border experience, you can be confident that Centuro Global will help you choose the best market entry strategy for your circumstances. Contact us today to find out more and receive a free global expansion consultation.