An international market entry strategy is defined as the planning and implementation of delivering goods or services to a new target international market. It often requires establishing and further managing contracts in a new foreign country. Few firms successfully operate their business in a niche market without ever planning to expand into new markets (mostly due to the localized nature of their Business) but most firms strive to expand through increased sales, brand awareness and business stability by entering a new market. Developing a win-win market entry strategy involves a thorough analysis of multiple factors, in a planned sequential manner.
There are 2 basic Strategic Frameworks for Market Entry Strategies which are all dependent on Product type and the Product Lifecycle.
These frameworks have been developed built upon the theories of Innovation Diffusion Models in monopoly and a competitive Game Theory frameworks based on theories of Business Economics.
The Waterfall Strategy
In a Waterfall strategy, the business is spread in international markets sequentially. First a firm enters a new market and establishes an identity in the same. Establishing an identity involves estimation of potential market size and revenue patterns, identification of target segment, creation of brand awareness, identification and creation of possible distribution channels and finally formulation and implementation of sales strategy. All these strategies at individual stage is dependent on the product type and the life cycle.
Once the product identity is established in the new market, the learning from the same is utilized to expand into another new market, somewhat with similar structure, sequentially. Learning is an iterative process in such a strategy formulation and it is a less risky process of expansion of business.
Typically, products with a longer product life-cycle or in the maturity phase would follow a Waterfall Strategy, for expansion into new markets.
The Sprinkler Strategy
Markets are approached simultaneously in the sprinkler strategy. While this is a more risky strategic framework for entering new markets, typically it is more suitable for products with a shorter life cycle (like Technology products) or are at the Introduction and Growth Stage of the Product Life Cycle. In such a strategic framework, markets are entered simultaneously and often a Skimming Product Pricing strategy is used to generate as much profits as possible from sales. Experiences from market responses are limited to individual markets and the same are not replicated in the other markets.
While there is a third Strategic Framework (Namely the Wave Strategy ), it is much less popular for its limitations.
Have you read the article on the Porter’s Five Forces analysis of industry competitiveness? This is a must-read article for anyone planning to get into a new market.