5 steps to create a winning market entry strategy
You want to start exporting or expand to a new foreign market. But how? Which products should you export? What is your target market?
A market entry strategy is where you spell out such all-important specifics. It outlines your business goals, an overview of the target market, precisely what you will sell there, expected sales and how you will achieve them. A typical market entry plan can take six to 18 months to implement.
“A market entry strategy gives you and your team the overall direction for your export project,” says Igor Chigrin, a Senior Business Advisor with BDC Advisory Services and Certified International Trade Professional (CITP) who coaches entrepreneurs on exporting.
“It’s quite common for businesses to start exporting without figuring out their strategy, but this often leads to poor results. It’s better to have a strategy before you start.”
Chigrin shares a five-step approach to creating a winning market entry strategy to expand into a new market.
1. Set clear goals
The first step is to decide on what you want to achieve with your exporting project and some basics about how you’ll do so. Details to spell out include:
- business goals for the expansion
- your targeted level of sales
- the specific product or service you’ll export
- the target market
- major action items and a timeline for achieving them
- budget and other available resources
Not the same as an export marketing plan
It’s worth keeping in mind that a market entry strategy is not the same as an export marketing plan. You generally start with a market entry strategy, which is a big-picture document giving the broad strokes of your direction. You can then use it to create an export marketing plan, which is more detailed and includes particulars such as:
- needed adaptations to products, packaging and branding tailored to the target market
- pricing and promotion details
- a more comprehensive look at your target market and competition
2. Research your market
Now it’s time to do a first round of research on the target market. Information to collect includes:
- size of the market
- consumer trends, needs and perceptions of products like yours
- domestic and international competition
- your unique value proposition in the market
- regulatory, certification, trade and other barriers and opportunities
- potential support from Canadian and foreign governments for your exports
This information should give you a good sense of whether a target market is suitable or not for your business.
“One of your purposes is to figure out why buyers should buy your product or service, versus from someone local or a competing exporter,” Chigrin says. “Businesses often underestimate the degree of competition in new markets. If you don’t see how you would be different, it’s better not to go to the target market.”
Don’t worry at this stage about a more detailed assessment of the market’s social, political and cultural landscape. That’s important information, but it’s usually collected when you create your export plan.
Doing all this research may seem daunting, but the information is often easier to find than you may think. “The worst mistake is not to do any research,” Chigrin says. “Even some basic research is better than going in unprepared.”
Chigrin says a lot of information is available for free without the need to buy costly market research reports. Reports on target markets are often freely available at public or university libraries. You can also:
- do online research, including in publications, studies and statistics available from governments and international bodies
- talk to other businesses operating in the target market
- contact trade and industry associations
- connect with services such as the Trade Commissioner Service, Export Development Canada, Canadian and foreign embassies and consulates, and local chambers of commerce
- attend virtual trade shows and conferences or consider travelling to trade shows and visiting the country as part of a trade mission or on your own
3. Choose your mode of entry
Next, choose how you will enter the market.
You may need to rethink how you get your products or services to market. Do you sell directly to the end-user, or do you work with intermediaries such as wholesalers or distributors? And even if you sell directly to a target clientele, do you require the assistance of an in-country sales agent to “open the doors” and facilitate sales.
You can consider choosing from or combining a number of options.
- Using the services of an in-country distributor or agent.
- Acquiring an existing local business.
- Partnering with a local business. This can take various forms, such as franchising, licensing, a joint venture, co-production and cross-manufacturing.
- Opening a physical presence. This can be anything from buying or renting an office to hiring a local representative.
- Selling through online marketplaces.
- Offering direct sales through your e-commerce site.
- Selling indirectly to a target market through another company that exports your products or uses them as components.
4. Consider financing and insurance needs
To determine the amount and type of financing needed to support your export venture, it’s important to do calculate how the initial investment in production, shipping, hiring and other costs will affect working capital. Keep in mind that foreign buyers may want longer payment terms.
See your banker about any financing needs to cover shortfalls. Better to arrange a line of credit or loan ahead of time than risk a cash crunch while you wait for sales to ramp up.
You may also want to consider getting insurance to protect your company from the unexpected. Export Development Canada offers various products, including:
- credit insurance in case a customer doesn’t pay or a contract is cancelled
- performance security insurance in case a customer wrongfully calls a letter of guarantee or in the event of political risks
5. Develop the strategy document
Be sure to write down the details of your market entry strategy. Don’t keep it all in your head. This document will be handy for arranging any needed financing and as a framework for your export marketing plan. You can ask your accountant, lawyer, banker or an outside expert to give you comments for improvements.
“You should regularly revisit your market entry strategy to monitor how you’re doing and make updates,” Chigrin says. “It’s an important blueprint to keep you on track, ensure buy-in from your team and have everyone in the business pulling in the same direction.”