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Market entry strategies. Trade Related Technical Assistance for SRE. Peter Bennett Trade Development Consultant. Routes to market - Characteristics. Characteristic of the market Not a characteristic of the product Do not assume commonality between markets

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market entry strategies

Market entry strategies

Trade Related Technical Assistance for SRE

Peter Bennett

Trade Development Consultant

routes to market characteristics
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

routes to market options
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

decision based on
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

most used option
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

identification of distributors buyers
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

distributors what do they do
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

ingredients of success
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

background information
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

exporter s expectations
Exporter’s Expectations
  • What is the exporter expecting from the distributor?
  • Is it realistic?
  • Do you agree?

Market Entry Strategies

are distributors easy to find
Are distributors easy to find?
  • Good ones always work with competitors
  • Why is this?

Market Entry Strategies

characteristics of distributors
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

disadvantages
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

identifying distributors
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

selection criteria
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

what are distributors worried about
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

distributor support programmes
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

sales subsidiary
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

direct selling
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

acquisitions and franchising
Acquisitions and franchising
  • Unlikely to be involved
  • Refer to specialists

Market Entry Strategies

agents
Agents
  • Less and less common
  • Associated with specific industries

Market Entry Strategies

joint venture
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