Market entry strategies

1. Market entry strategies Trade Related Technical Assistance for SRE Peter Bennett Trade Development Consultant

2. Routes to market - Characteristics • Characteristic of the market • Not a characteristic of the product • Do not assume commonality between markets • Several distribution channels for same product • Some channels may be accessible • Other channels will not be accessible • Must know characteristics of your market before advising an exporter Market Entry Strategies

3. Routes to market - Options • Use of a distributor / s • Formation of a sales subsidiary • Direct selling • Acquisition • Use an agent / s • Licensing and franchising • Joint venture In an large market may use more than one option. Market Entry Strategies

4. Decision based on • Characteristic of market • Local legislation, regulatory standards and practice • Requirement for after sales service • 24hr. Delivery • Spare parts • Financial resources • Local expertise – it may not be available • Relevant in high-tech industries Market Entry Strategies

5. Most used option • Distributors • Used by majority of exporters • Sales subsidiary • Usually a second option. Used in absence of distribution • Large companies. Costs money! • Direct selling • Common where there are a limited no. of customers • Very common. Very problematic • Agents • Associated with specific industries. Increasingly uncommon • Acquisitions / JVs/ Licensing • Large companies Market Entry Strategies

6. Identification of distributors / buyers The most valuable service of a TPO • Identification of potential distributors / buyers – specific to the exporter • Setting up a series of meetings for exporter • Success is based on the selection, appointment, support, motivation of the distributor and meeting buyer’s needs Market Entry Strategies

7. Distributors – What do they do? • Import and pay the exporter. Distributor owns goods. • Warehousing, and local transportation • Sales and local distribution • After-sales service, spare parts, technical support • The distributor is the exporter’s customer • Local market knowledge and selling skills • Provide market coverage at low cost and low risk Market Entry Strategies

8. Ingredients of success A successful relationship is based on: • “Trust” • Clearly defined understanding between parties • Support. Market visits to help sales force. • Frequent contact • Joint decision making • Genuine effort to understand distributor’s needs Key task - Advising exporters how to develop this relationship. Market Entry Strategies

9. Background information • Geographical area / market segment • Current range / what products or services? • Customers • Size (T/O, no employed) • Sales force • Warehouse / storage / showroom • Measurement of performance • Very theoretical! Nice to have. Market Entry Strategies

10. Exporter’s Expectations • What is the exporter expecting from the distributor? • Is it realistic? • Do you agree? Market Entry Strategies

11. Are distributors easy to find? • Good ones always work with competitors • Why is this? Market Entry Strategies

12. Characteristics of distributors • Small family owned businesses • Less growth oriented than exporter • Loyalties will be with their customers • Serve multiple suppliers • Exporter must compete for distributor’s time • Finance may be short • May lack management and marketing skills • Hi-Tech: Will need training and support Market Entry Strategies

13. Disadvantages • Exporter’s experience of market is limited • Exporter may have no relationship with end customers • Exporter has no permanent presence in market • Limited control over distributor’s marketing strategy • If “Private Label” there is no control Market Entry Strategies

14. Identifying distributors • Observe competitors and approach competitor’s distributors (Most cases will not work! Also dangers.) • Trade fairs / trade fair catalogues • Unsolicited contacts! • C of C and trade associations – take you chances • Trade magazines – rich source of information • Referrals from major customers, buyers, end users – same names will keep coming up. Market Entry Strategies

15. Selection criteria • Large company not always best choice • Small to medium sized – best • Limited number of products / specialised • Avoid competing products. However … • Co who supplies 2 or 3 major customers is the prime target • Attach a high premium to referrals from buyers • Attach a high premium to market knowledge, technical capability and enthusiasm Market Entry Strategies

16. What are distributors worried about? • Lack of support and commitment • Arrangement discontinued when sales reach a certain level • Direct supply • Not been listened to! Market Entry Strategies

17. Distributor support programmes • Communication / listening • Establishing trust • Trade literature and support material • Web site – links and referrals • Market visits • Pricing • Keeping distributor informed / partnership • Asking for advice – listening • Training • Visits from the distributor Market Entry Strategies

18. Sales subsidiary • Only in principle or main market • Potential sales large enough to cover costs • Where exporter cannot locate a distributor You should have info on costs associated with establishing a sales subsidiary Market Entry Strategies

19. Direct selling • Common in • Engineering industries • Sub-contractors and sub-supply • Software and IT • Services • Major retail / department store chains • Exporter has small no. of customers • Vendor audits are common Market Entry Strategies

20. Acquisitions and franchising • Unlikely to be involved • Refer to specialists Market Entry Strategies

21. Agents • Less and less common • Associated with specific industries Market Entry Strategies

22. Joint venture • Partner search similar to distributor search • Must get a very specific brief from exporter • Draw up a short list of candidates • Set up meetings Market Entry Strategies