7 Key Aspects to Examine Before Entering New Markets
The decision to expand a company’s footprint to a new market is one of the most challenging decisions a CEO can make. It’s fraught with risks, yet offers immense growth opportunities and can shift the trajectory of the business to significant new heights.
Similar to jumping into a dark pool blindfolded, many executives take the step simply following other companies in their industry or out of the belief it’s the natural progression of their growth. In essence, making the decision without thorough thought.
It all depends on the primary strategy of the business, answering the question if expanding at the moment is the right move or not. To answer this question you’ll need to examine seven aspects.
Your First Three Steps
1- Conduct an MER
The first step in entering any new market is research. Specifically, Market Environment Research (MER).
MER involves researching and understanding the demographic, geographic, buying patterns, political and economic developments in the market, and more. In short, it includes all essential elements that contribute to the success, or failure, of both market entry and continued business in that country.
For an accurate picture, your MER needs to also include intangible, yet crucial, elements such as understanding the impact of the languages spoken on cultural perceptions; how different social classes respond to different products and different marketing styles; consumer behavior patterns and their history of changing, among other things.
MER needs to look beyond the typical regulatory and legislative requirements. How often are regulations changing? Are monopoly laws enforced? How pro foreign players is the market and the government? Most importantly, what’s the political climate and what’s its impact on business?
There are several methods to conduct this research, either through research houses, relying on recent (not older than two calendar years) official data sources, or having your research team conduct the surveys.
2- Review your current business model
By reviewing your current business model, products or services, and nature of your target audiences, you can then compare them with your MER findings and shift your offerings accordingly.
3- Get Feedback from Your Existing Customers
No business is perfect. Your company can access a wealth of ideas for improvement by simply asking your loyal customers. Improving your primary solution can dramatically improve your chances for success in your new market venture.
What to Consider Before Entering a New Market
Not all research or data is the same, here are key factors that help you reach a sound decision.
1- Competitive Analysis
Review local direct and indirect competitors in the new market you wish to enter.
How long have these competitors been in the market? What are the unique selling points (USPs)? How does your product or service stand out from these competitors?
2- Consumer Behavior
Research the buying behavior and psychological perception of the overall market as well as your target audience. This is best done through local market research firms.
3- Customer Segmentation
As is the case with any market, you need to segment your potential customer base. Use data from market environment research and competitor analysis to create new, detailed customer profiles. Then, use this information to create customer segments.
Research shows that 80% of companies using market segmentation see higher sales. The main benefits of market segmentation are better ideal customer targeting, higher efficiency, and increased personalization.
4- Language and Cultural Barriers
It’s not only important to know the languages spoken, but also how they impact the perception of your product and message.
For example, When to use slang and when to use proper language.
5- Risk Level
Entering any new market is a risk. But how much risk is involved? And what is the potential return on investment (ROI) in the short, medium, and long terms?
Risks can vary from political to cultural to financial risks, like reliance on paper money or high-interest rates to risks like infectious diseases to limited skilled labor, among others.
An accurate understanding of your target market, your audience and their behavior in that market, the competition, and your USPs, can alleviate much of the risk involved. Alternatively, this wide-net understanding will help you anticipate what is to come from entering that new market.
6- Your Company’s Future Goals
A business’ primary goals are the same, regardless of how many markets they expand to. Sometimes, the needed shifts to enter a new market steer the company away from its primary goal or even delay its achievement.
Your business’ goals should supersede the need to expand to a given market.
7- Communication Channels
Finally, before entering a new market, you must assess the available communication channels for your target market and their different levels of impact.
Here’s How Three Companies Did It
Netflix in India
When the global streaming service decided to enter the Indian market, it knew its global content wouldn’t be enough. So, apart from offering Indian translation to its popular movies and shows, Netflix began investing in localized Indian content and dubbing shows in India.
Netflix also considered its pricing strategy, offering a different pricing from the one it offered to its consumers in the United States.
Its market environment research showed the Indian population consumed video content on mobile phones. Accordingly, they offered a plan specific to mobile users.
India is not the only country Netflix has expanded to. In fact, the global streaming service surpassed 190 countries in a 7-year period. More than half of its 130 million viewers are from countries other than the United States.
Uber’s Expansion
When ride-hailing service Uber sought its global expansion, it uncovered the top challenges consumers faced with local taxis and taxi companies. Among those were price negotiations and security.
Uber uncovered changing customer behavior and used these changes to stress its USPs, making itself a more convenient alternative for customers.
Apple’s Smartphone Launch
When global tech company Apple sought to enter the smartphone market, its research uncovered demand for smartphones that were user-friendly and intuitive.
With the launch of the iPhone, Apple seized an opportunity, making an eternal name for itself in the smartphone market. Furthermore, the company created a new segment, which is the high-end smartphone user.
VALUWIT’s experts can help you prepare and enter the market of your choice. Request a discovery call today.
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