Export Market Research and Entry Strategies [P-2]

Md. Joynal Abdin, BBA (Hons.), MBA

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Founder & CEO, Trade & Investment Bangladesh

 

  1. Understanding Market Entry Strategies:

Selecting the appropriate market entry strategy is a pivotal decision for businesses seeking to expand internationally. Each strategy has its own set of advantages and disadvantages, making the choice contingent on factors like business goals, market conditions, and risk tolerance. Here’s a breakdown of four common market entry strategies: exporting, joint ventures, licensing, and franchising, along with their pros, cons, and ideal scenarios for utilization:

1. Exporting:

Pros:

 

Cons:

 

When to Use:

Exporting is suitable for businesses with limited resources, smaller market entry budgets, or those testing the waters in a new market. It’s particularly useful for companies selling non-perishable goods, like consumer electronics or fashion items.

 

2. Joint Ventures:

Pros:

 

Cons:

 

When to Use:

Joint ventures are ideal when entering markets with high entry barriers or when local expertise is crucial. They are suitable for industries where regulations, cultural nuances, or local relationships play a significant role, such as pharmaceuticals or manufacturing.

 

3. Licensing:

Pros:

 

Cons:

 

When to Use:

Licensing is suitable for businesses with well-established, unique intellectual property, such as technology, patents, or brand names. It’s a useful strategy when the company aims to exploit its intellectual property without investing heavily in foreign markets.

 

4. Franchising:

Pros:

 

Cons:

 

When to Use:

Franchising is suitable for businesses with a successful, replicable business model, like fast food chains or retail outlets. It’s ideal when the company wants to expand quickly with limited capital investment.

 

The choice of market entry strategy should align with the company’s resources, objectives, and the specifics of the target market. It’s often beneficial to engage in a detailed market analysis and, if feasible, seek expert advice when making this critical decision. Additionally, businesses can opt for a hybrid approach, combining two or more strategies for diversified market entry.

 

Export Market Research and Entry Strategies [P-2]
Export Market Research and Entry Strategies [P-2]
  1. Direct vs. Indirect Exporting:

Direct and indirect exporting are two common approaches businesses can take to expand into international markets. They have distinct characteristics, advantages, and considerations, which make them suitable for different circumstances.

 

Direct Exporting: Direct exporting involves a business selling its products or services directly to customers in foreign markets. This can be done through various means, such as establishing a local sales team, setting up subsidiaries, or using an e-commerce platform.

 

Advantages:

  1. Greater Control: Direct exporters have more control over their product, branding, and customer interactions.
  2. Enhanced Profits: By cutting out intermediaries, businesses can often retain a larger share of the revenue.
  3. Closer Customer Relationships: Direct exporting enables businesses to build direct relationships with foreign customers, which can lead to better customer service and brand loyalty.

 

Considerations:

  1. Higher Costs: Direct exporting typically requires a greater investment in terms of local infrastructure, personnel, and marketing.
  2. Market Expertise: Companies need to have a deeper understanding of the foreign market’s regulations, culture, and customer preferences.
  3. Operational Complexities: Managing an international sales team or subsidiary can be operationally complex and demanding.

 

When to Choose Direct Exporting:

 

Indirect Exporting: Indirect exporting involves using intermediaries, such as export agents, distributors, or trading companies, to facilitate the sale of products in foreign markets. Businesses do not directly interact with foreign customers but work through these intermediaries.

 

Advantages:

  1. Lower Risk and Cost: Indirect exporting is typically less expensive and less risky as intermediaries handle market entry complexities.
  2. Market Expertise: Intermediaries often have local market knowledge and relationships that can facilitate market entry.

 

Considerations:

  1. Reduced Control: Companies have limited control over branding, pricing, and customer relationships.
  2. Lower Profits: Intermediaries take a portion of the profits, reducing the margin for the business.

 

When to Choose Indirect Exporting:

 

In summary, the choice between direct and indirect exporting depends on factors like market expertise, budget, risk tolerance, and brand strategy. Companies must carefully assess their specific circumstances and goals to make the right decision. Some businesses even adopt a hybrid approach, combining both direct and indirect exporting methods to balance control, costs, and risk.

 

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Export Market Research and Entry Strategies [P-2]
  1. Market Entry Barriers and Risk Assessment:

Expanding into foreign markets can present several barriers to entry, ranging from regulatory hurdles and cultural differences to economic challenges. To succeed, businesses must assess and mitigate these risks effectively. Here’s how to address common entry barriers and manage associated risks:

Regulatory Hurdles:

 

Cultural Differences:

 

Economic Challenges:

 

Political and Legal Risks:

 

Competitive Challenges:

 

Financial Risks:

 

Supply Chain and Logistics:

 

By conducting comprehensive assessments and implementing risk mitigation strategies, businesses can navigate these common barriers to entry in foreign markets with greater confidence and success. Continuous monitoring and adaptability are key, as market conditions and risks may evolve over time.

 

  1. Adapting to Local Markets:

Localizing products, branding, and marketing strategies is crucial when expanding into foreign markets. It ensures that your business resonates with local customers, maximizes your chances of success, and enhances your brand’s reputation. Here’s why localization is essential:

 

Examples of Successful Localization:

McDonald’s: McDonald’s is known for adapting its menu to cater to local tastes. In India, for instance, McDonald’s offers a range of vegetarian options to accommodate cultural dietary preferences. In Japan, they’ve introduced items like the Teriyaki Burger and Green Tea Sundae, aligning with local flavor preferences.

 

IKEA: IKEA localizes its product offerings and store layouts to match the cultural and spatial needs of each market. They have smaller, urban-focused stores in densely populated areas, while in some countries, they adjust the color palette of their furniture to reflect local design aesthetics.

 

Coca-Cola: Coca-Cola is renowned for its marketing localization. In various countries, they personalize their marketing campaigns to resonate with local cultural events, traditions, and celebrations. For example, during Ramadan, they often release special edition packaging and campaigns in predominantly Muslim countries.

 

Unilever: Unilever successfully localized its product portfolio by tailoring the formulation and packaging of their personal care products to match different climates and preferences. For example, their skincare products in India differ from those in North America due to the varying climate and consumer needs.

 

Procter & Gamble: P&G adapts its product offerings and branding for different markets. One example is the Head & Shoulders brand, which is marketed as a dandruff shampoo in some countries but positioned as a beauty and anti-hair fall product in others, depending on local market needs.

 

These companies exemplify the importance of localization in successful international market expansion. By showing a deep understanding of local preferences and adapting their products and marketing strategies accordingly, they have built strong and enduring relationships with customers around the world.

 

Export Market Research and Entry Strategies [P-2]
Export Market Research and Entry Strategies [P-2]
  1. Conclusion:

Embarking on an export journey can be both challenging and immensely rewarding. The global marketplace offers a wealth of opportunities for businesses willing to take the plunge, but the key to success lies in thorough market research and well-structured entry planning.

 

We encourage you, our readers, to consider expanding into international markets and taking your products or services to a broader audience. By conducting diligent export market research, you can make informed decisions, mitigate risks, and set the stage for a successful entry.

 

To make this journey more accessible and less daunting, consider availing the Export Market Selection & Product Positioning Services of Trade & Investment Bangladesh. This service is designed to assist businesses like yours in identifying the most promising export markets and positioning your products effectively within those markets. Trade & Investment Bangladesh can provide you with valuable insights, access to local expertise, and guidance on tailoring your offerings to suit the preferences and demands of your target customers.

 

With their support, you can navigate the complexities of international trade with confidence. So, seize the opportunity to expand your business, broaden your horizons, and reach new heights. The global market is waiting, and Trade & Investment Bangladesh is ready to help you take your first step towards international success. Don’t hesitate to explore new possibilities, and remember that the journey of a thousand miles begins with a single step. Start your export market research and entry planning today!

 

Export Market Research and Entry Strategies [P-2]: Export Market Research and Entry Strategies [P-2]: Export Market Research and Entry Strategies [P-2]
business consultants in Dhaka
Md. Joynal Abdin

Mr. Md. Joynal Abdin is a Business Consultant & Digital Marketer based in Dhaka, Bangladesh. He is Founder & CEO of Trade & Investment Bangladesh, one of the leading Business Consultancy Firm in Bangladesh. He is also Co-Founder & CEO of Bangladesh Trade Center. Previously he served at Dhaka Chamber of Commerce & Industry (DCCI) as Executive Secretary; DCCI Business Institute (DBI) as Executive Director; SME Foundation as Deputy Manager; and the Federation of Bangladesh Chambers of Commerce & Industry (FBCCI) as Assistant Secretary.

 

The list of services Mr. Abdin is offering includes but not limited to Business Mentorship, Business Research and Documentations like Feasibility Study, Project Proposal Preparation, Writing Business Manual, Standard Operating Procedures etc.; Export Market Selection and Product Positioning at Home and Abroad; Buyers-Sellers Matchmaking; Website Development; Search Engine Optimization (SEO); and Social Media Marketing etc.

 

Export Market Research and Entry Strategies [P-2]: Export Market Research and Entry Strategies [P-2]: Export Market Research and Entry Strategies [P-2]

 

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