discuss the objectives of market entry, including market attractiveness;

Objectives of market entry

click to edit

DESC
develop new markets;
secure access to critical resources,
cost efficiencies or new knowledge; or
establish a base for regional coordination.

Issues

click to edit

MOMST

Timing is crucial and having first-mover advantage may be attractive. However, it is less risky to follow other organisations when the pitfalls are well known.


scale of entry is also important. A small but significant investment might involve less risk than attempting to achieve large-scale penetration in a new market at an early stage.


mode of entry must be viable and allow further investment and development later (if this is attractive). 


selection of market—identifying the market to enter that is the most promising;

entry objectives—why the organisation is entering the new market and what it hopes to achieve;

Among the modes of entry most employed are:


exports;


licensing;


franchising;


strategic alliances;


joint ventures; and


foreign direct investment in wholly foreign-owned enterprises.
JFLEWS

table 4.5

considerations

relevant considerations include:
distribution of income among the population in the country,


stability of growth and


existing degree of local and international competition in the market.

HAM


Access to resources remains a major reason for overseas market entry, including:


mineral resources, such as oil, iron ore and copper;

agricultural products; and

human resources,

whether in terms of plentiful supplies of low-wage labour (India for high resources and low pay) or scarce supplies of highly skilled people (Germany for car clay‑modelling and design).

BPP selecting the right market slide

The objectives for entry may be multiple but should be clearly articulated and prioritised. This will influence subsequent decisions on timing and mode of entry.

Market Attractiveness

click to edit

Selecting the right market to enter is critical to increasing the chances of success and the likelihood of further overseas investments.

• The size and value of the proposed market.
• Market growth.
• Market profitability
SVGP

In gauging the potential of new markets overseas, the following factors are also relevant to consider:
• Obsolescence and leapfrogging of products.
• Prices
• Substitutions
SOP

Market size

In general, a generous tolerance
on market size is permissible under the following conditions:
• Where an investment is very small within the total market;
• When the study is preliminary scan of the market and/or
• When the key objective is to decide how something rather than what is going to be achieved.
PHS

On the other hand a higher degree of accuracy would be expected when:
• The investment is large within the total market and the investor aims to achieve a significant share within it;
• Market size from different years is needed to show a trend; and/or
• It is necessary to separate out segments of the market which could be attractive targets.


LMS

The next consideration is how the product will get to the market:
• Distribution
• Value proposition

The organizational capabilities required to enter the market need to be considered and whether they are available:
• Resources;
• Capacity;
• Service.


RCS

Is the offer better than the current suppliers’ offer to the proposed customer segment? How?

How will the customers in the market be reached? Does anyone have control over distribution channels to reach these customers? Can new methods of distribution be established?

Using a standard approach makes it easier to directly compare possible market alternatives as
objectively as possible, to answer the following questions (Lasserre 2003):


organisation with its competitive advantages to generate returns equal to or higher than
the cost of capital?


• Will the specific investment in some significant way develop the organisation’s capability,assets or competitiveness with regard to competition in other markets?



• Are the risks of operating in this particular market acceptable for employees, shareholders
and the organisation’s reputation?
RCR

Market development resources

click to edit

Key to effective strategy implementation is a natural fit of the organisation in its desired position, and in order for this to happen a number of external resources can be used.

Global financial organisation resources

The World Economic Forum produces a report each year that ranks countries in order of their competitiveness

Information on a country’s competitive environment can help organisations identify gaps in the market. More importantly, it also helps them understand whether growing into that geographic market would be strategically effective and successful.

Basic requirements


Institutions.


Infrastructure.


Macroeconomic environment.


Health and primary education.


IHIM


Efficiency enhancers


Higher education and training.


Goods market efficiency.


Labour market efficiency.


Financial market development.


Technological readiness.


Market size.


LhEFTGM


Innovation and sophistication


Business sophistication.


Innovation.


BI

World Bank,


which compiles an index in which countries are benchmarked against one another in a region and then against OECD averages (World Bank Group 2015).

Six key indicators are covered:


The life cycle of companies.


Business entry regulations.


Labour regulations.


Contract enforcement.


Access to credit markets.


Bankruptcy provisions.


CBBALL

Regionally focused organisation resources

Assisting imports into that region or by facilitating business investment into particular countries & provide legal info


government and non‑government groups, can assist in market development in foreign markets by enhancing your awareness and knowledge of potential differences between your home market and a new geographic market.

Issues affecting an organization’s implementation of strategy

• The laws and regulations of that country including taxation laws, corporate governance system and customs restrictions.


• Foreign exchange regulations because it can be difficult to repatriate future profits back to the head office.


• Barriers to entry (in selected industries in some countries), which may prohibit or at least discourage foreign firms from entering some industries.


• The attitude of the regulators in the target market to bringing in expatriate workers and their families.


• Consideration of corporate social responsibility.

Timing

It can be as expensive to move too early as it is to leave investments too late. Judging what is the best window of opportunity is paramount.

If the objective is to secure access to resources, the right moment is when there is a realistic opportunity to secure rights of access, without competitors pre-empting this.

If the objective is market penetration, the move has to be made when sufficient demand exists but competition is not too intense.

highly innovative products can succeed no matter how crowded the market is

Key success factors for new market development

click to edit

The successful development of new markets, either from a geographical or customer-base perspective, depends on several common factors
:
• The identifiable benefit of expanding into new market must be in line with the long-term strategic goals of the organization.



• The organization must ensure that it has sufficient cash reserves to finance the new business until such time as it becomes self-supporting.



• The organization should perform both internal and external analysis.
LAC

In their research, de Wit and Meyer (2010) suggest that a number of requirements must be met before the process of internationalization begins:


• Leverage of location-specific advantages.


• Strategic capabilities or competencies.


• Potential for organizational success or growth.


PLS

considerations ALL


Consideration for market entry:

  1. Which market(s) to select?

  2. Entry objectives (refer to above table)

  3. Timing of entry  when to enter (refer to Timing of entry below)

  4. Scale of entry: how much investment is required   the higher the investment, the higher degree of accuracy in determining market size and profitability

  5. Mode of entry: how to entry? (refer to mode of entry below)

  6. Market distribution of income among population (can potential customer afford your product?)

  7. Size and value of the proposed market

  8. Market growth/ profitability  what is driving the growth/ profitability of a particular industry

  9. Existing degree of local and international competition in the market ( is there any substitution?)

  10. How the product will get to the market?

  11. a. Distribution how will the customer be reached? Anyone has control over the channel?
    b. Value proposition if target customers are already being served, could to entice these customer to switch?
  12. Organisation capabilities  sufficient resources to enter the market? Sufficient capacity to supply/service the market? If not, how to get it? 

  13. laws and regulations of that country (taxation laws, corporate governance systems and customs restrictions)

  14. Barriers to entry which may prohibit, or at least discourage, foreign firms from entering some industries

  15. The attitude of the regulators in the target market to bringing in expatriate workers (and their families)

  16. Considerations of corporate social responsibility

  17. stability of growth and 

  18. existing degree of local and international competition in the market.

local chamber of commerce groups