The expansion of your business into a market is a great thing, however, it does require investment in money and manpower. You don’t want to make a big mistake by not planning out the market in advance.

There are several markets entry strategies, with varying cost, risk and degree of control. In this article, I’ll mention 5 most common barriers to foreign markets.

Costs

Pricing of market entry plans varies with the entry mechanism, other factors including intellectual property protection, regional alliances and relationships, resources, and risk. Such expenses must be paid close attention to when planning business growth to ensure there is adequate money available to hit the ground.

Advertisers underestimate demand for cheap taxis in Seoul; Uber overestimated it by more than half; Facebook underestimated political influence in Myanmar; Walmart underestimated supplier power in Japan. If you want to have the best possible chances of hitting new markets, White Space Strategy can help your company create a market entry strategy based on extensive research. Contact us now to learn more!

Marketing

Entering any new market requires understanding how to adapt product and service offerings to the local culture and needs of the consumers, making the products and services that fit what local consumers are looking for. This could mean completely retooling brand products to satisfy local customer needs.

You also can look at exporting, and introducing your firm to locals as marketing methods. Through this, a company can access resources and relationships needed for foreign market access.

Adding international markets comes with a whole lot of other advantages such as diversification. Diversification allows you to reduce your dependence on a specific market or product range and help your business better withstand economic volatility, while creating more margins through economies of scale. You can do this strategy by direct and indirect export, contract manufacturing or joining an export processing zone or free trade zone.

Technology

Innovative technology will make it so much easier for the business to get into new markets. For instance, new-product manufacturing companies can employ AI (artificial intelligence) and machine learning algorithms to predict customer demand and supply chain routings, while using blockchain to secure operations.

And the firms have to check periodically their market entry strategy, as they can find out that it works (through sales figures, customer surveys, competitors).

Risk-based market entry strategies can be assessed and used by organizations to focus their resources appropriately and to reduce overspends or underspends in those critical areas, resulting in costly mistakes and bad customer experiences. Business plans with objectives and requirements should lead companies to success.

Limited Knowledge

Each industry has their own set of barriers to entry into that market. They can be financial (low starting fees) or regulatory (trade restrictions). They even exist in natural way with loyalty and switching fees.

They can be tackled through strategic planning, local partnerships, and successful marketing, but time and resources are a challenge. So, all available market entry strategies should be taken into consideration by the business when choosing an entry path: direct export, franchise, greenfield investment or joining venture – there are risks and benefits associated with these three methods and they should be evaluated in market scenarios and regulatory environments carefully before making a choice as the pathway.

Economies of Scale

Economy of scale: Advantages in production that reduce unit costs can give big companies an advantage over smaller businesses. Price discounts provide cheap goods for the consumption and boosts the economy.

Other firms leverage economies of scale by “piggybacking,” or by aligning with another firm that already operates in a new market to minimize infrastructure, manage capital and minimize the risks associated with an international market. It’s one of the common solutions for FI companies seeking international market entry; banks may offer this useful channel by riding on regional bank networks.