Entering a new market once an opportunity is seen is a great chance to have skyrocketing profits if the entry is done right. A mixture of the right product and the right market makes a company successful. There are general rules that apply when it comes to entering new markets, regardless of the geographical region. Here are some Do’s and Don’ts:
1. Have a flexible organizational structure
Due to the different cultures, it is important to create a flexible structure, until you find one that fits the organization best. This can however be mitigated by the company creating a global strategy in terms of a flexible structure, right from the start.
2. Be on the lookout
As a company in a new market, it is vital to always be alert on the market trend, thus avoiding to be left behind and be complacent. The firm should have ears on the ground and act towards being the game changer and not a follower.
3. Local partner
There are quite a number of benefits to having a local partner. As a matter of policy, some local governments require a certain percentage be locally owned. This is more common in developing countries to protect them from being exploited. However, it still is important to consider getting a local partner in instances where it isn’t mandatory to get one. The partner will bring vast knowledge of the local market into the firm; from buying habits and preferences of the local buyers, to the existing channels of distribution, it is definitely easier for the partner to form relationships with suppliers. However, the partner should have a common vision with the company, they should possess complimentary skills, there should be clear structures, and division of roles to avoid conflicts. In addition, there should be a well written agreement to seal the deal.
From advertisements to translating documents to local language (if different from home country), to size of brochures, all materials should be localized so as to avoid giving the buyers a perception of a foreign owned company, which may end up to loss of potential customers.
This is the most important and basic top of the things to do before entering a new market. Be it culture of the people, consumer behavior, business intelligence, government requirements or forecasted demand. This builds up to an in depth analysis of the market hence avoiding preventable pitfalls. Do not rely 100% on industry experts. It is important to do independent research on understanding the customers’ needs.
6. Product Marketing
Try out different ways of marketing the products to your new consumers. Be prepared to adopt new ways of marketing your products to suit the local market.
7. Best business model and entry strategy
The most expensive way is to establish a local office, before considering this option; it is advisable to use a local partner as a re seller or a distributor. This is like tasting the waters before going to the market fully. This will help the firm gauge whether there is a need for the expansion, and how to enter. Be it through joint venture, licensing or franchising.
8. Conduct a pilot test
This minimizes the chances of failure. It should however be designed carefully such that it can give accurate results. If a pilot project is successful, chances are high that when the company is full board, whatever problems that are faced, were anticipated.
9. Make room for growth
It is common to find most companies expecting slow growth for their products. However, what happens if the new market enjoys the products and the demand grows exponentially? Firms should gear up for increased demand to avoid problems with distributors and consumers.
All things considered, here’s the most important step…
10. Have an exit strategy
Once the firm has its plan, target and goals, there should be a plan on how to exit the market with minimal loss. The firm should plan for other options if the targets are not met.
1. Organizational structure
Do not import a domestic organizational culture. That worked perfectly in the organization’s home country. The culture of the organization drives the business. How people communicate, dress, to little things as to how employees greet their colleagues varies massively from organization to organization leave alone different countries. Importing organizational culture before studying the way employees work is a recipe for disaster and can lead to the downfall of an organization. Do not import a domestic organizational culture.
2. Importing Employees
Another visible mistake that most organizations do is import employees from the home country. Some countries have s law that a certain percentage of employees have to be locals, however, for those countries that do not have the law; it is advisable to employ locals to a bigger percentage to avoid problems with the local community. Many organizations have paid the cost for this mistake.
3. Avoid cognitive biases
These are very common especially when entering a new market. There are common mistakes made by firms venturing into a new market, such as overestimating the potential market and underestimating the potential of existing competition. Companies should ensure that they avoid such related biases.
4. Do not enter too many markets
Whenever companies become successful, there is a temptation to expand too quickly which more often is a recipe to disaster. The implications of entering to a new market cannot be underestimated. Lots of time and money is invested. Companies should therefore consider entering one new market at a time.
In summary, companies that consider doing business globally should go ‘glocal’, ensuring that they consider global values while localizing the products as much as possible. It should be clear especially to the leadership of the organization that entering a new market is not an expansion of the domestic business, but a different business altogether with different requirements and operations.