An Introduction To Market Entry Frameworks
Another highly common case archetype, some examples of this type of case are:
Our client is an online yoga apparel retailer looking to enter the UK market. The CEO would like your help in formulating an entry strategy.
A high-end watch manufacturer is considering entering the Asia market. The CEO would like you to find out whether or not this is a good idea, and if so, what countries/regions his company should expand to first.
When tackling a market entry case, your framework broadly needs to encompass these three core questions:
Is this a good market?
Does our client have the proper capabilities to enter said market?
If the answer is yes to the above two questions, then what’s the best way for our client to ultimately enter said market?
IS THIS A GOOD MARKET
Here are some things for you to consider when mapping out your framework and plan-of-attack for a market entry type case:
Overall market — What is the current market size? Is it highly fragmented (re: lots of small players, no clear market leader) or highly consolidated (re: few large players that control most of the market share)? What are its current and historical growth rates? Is market demand increasing/decreasing? If so, are certain segments growing/decreasing ? Any popular substitutes? What does the future of the market look like?
PESTLE - PESTLE stands for Political, Economical, Sociocultural, Technological, Legal, and Environmental trends. Examples may include regulations and government intervention in the market (political), broader macroeconomic environment (re: recessions, trade wars, etc.), threat of lawsuits, human rights issues, and more. Some PESTLE trends are advantageous; others present threats to market success, so your job is to accordingly map these out on a case-by-case basis.
Competitors — Who are they (intensity, frequency)? Have there been any new entrants (locally or from foreign regions/different verticals)? What’s our projected / potential / actual market share (by segment)? Is it changing? What are our competitors’ market shares? Have these changed over time? Have other [outside] competitors already entered the market? If so, how are they doing?
Customers — What are their needs and are we addressing them? Are their needs, demographics, or regions shifting (or is one need, demographic, or region accounting for most of the shift)? What are their attitudes towards our product/brand/company? In the region we’re entering, are there any cultural attitudes towards foreign companies (re: do they like foreign companies, or are they more likely to favor local champions)?
IS OUR CLIENT ABLE TO ENTER THE MARKET
When assessing whether or not our client is even able to enter the market, we will now take a step back from external factors and look inwards to our client’s capabilities.
Company — Is our client’s management team experienced or inexperienced in market entry? Are they considering hiring a new team in charge of this new territory?
Product/Service — Does our client’s product/service have any differentiating factors that are attractive to these new customers? What are the prices of our client’s products? Are they more or less expensive than current market options?
Channels — Which distribution channels does our client currently use? Are they able to use the same one if they enter this new market, or will they have to find a new distribution channel? How do they compare in pricing/penetration? Are there opportunities to shift share or introduce new channels?
Financials — What is the current financial situation of our client? What is the cost to enter this market? What are some ongoing costs the client must consider as the price of maintaining market presence? Does our client have the budget/capacity to afford this strategy? What are expected revenues and ROI, and do they offset the risk of entering the market? Is our client willing to accept said risk?
HOW SHOULD OUR CLIENT ENTER THE MARKET
Once you’re able to determine that, yes, this is a fantastic market and that, yes, our client has all the internal capabilities needed to enter said market, your job is to determine how the client should enter this new market.
Some things to consider when setting-up this part of the framework include:
Approach to entry: do we enter organically, join a strategic alliance or joint venture, or acquire another competitor in the market? This is a tough question, and your findings to the questions below will help you answer this one. Check the links here for more analysis on when to pick one strategy over the other.
Should we do a test-run in the region first (re: open pop-up shops, small experimental centers, etc.) and test the waters, or should we launch full-scale operations from the get-go?
Timing: when should we enter the market? ASAP? Or do we need to collect more data lest we prematurely rush into a bad decision?
Should we centralize company operations from HQ (re: if client is based in America and is entering India, then America HQ will control decisions made in India), or should we decentralize (re: have our own Indian team in charge of their territory, they still report to HQ but they generally call their own shots)?
How much time/investment is required to enter the market?
Customer mix/segmentation: which customers should we target first?
Go-To-Market strategy: how should we position and market ourselves accordingly (think 4 P’s: Product, Price, Promotion, and Place)?