Essay Sample on Entry Into a New Market

Entering a new market has become imperative for most companies, especially those companies that want to market their products and services outside their domestic markets. However, all markets are not equally attractive, and no firm is competent to get into every market. Therefore, it is important that a company be wise in selecting a market for its products. This will include examining the potential of your company, whether it can survive in other new markets or not (Ang et al. 2015). It is also important to evaluate the factors that can favor or hinder your entry into a new market.

Is your time best spent reading someone else’s essay? Get a 100% original essay FROM A CERTIFIED WRITER!

Order now

Growing a business in a foreign country is never easy, and every company uses different strategies to survive in new markets. A company like the Advanced Electronic Company in Saudi has adopted the use of social media as their strategy (Diestre et al., 2015). The strategy requires that a company post different products that they sell with their prices and invite the public through the social networks to make orders of the goods and services they need. The strategy is better on, especially where you want to reach a larger market within a short time. However, this strategy has some limitations and advantages that will be discussed.

Advantages of the Strategy

The application of social media systems as a strategy to market products can be beneficial since it covers a wider area within a short period. Therefore, it is the best strategy to use, especially for a company that wants to serve a wider market. However, this strategy has several limitations that make it unnecessary to be used by many companies.

Disadvantages of the Strategy

Use of social media as a marketing strategy does not give more than 50% positive result, because of the following reasons. First, it may be difficult to implement since it requires the use of social networks that are very expensive. The strategy is sometimes viewed to be biased as it only caters for the literate individuals. Therefore, it means that individuals who cannot access social media and are potential customers will be locked out. Thus, if a company wants to get into a new market, then it must consider very many conditions regarding the market rather than relying on one strategy.

Conditions to consider before entering a New Market

When a company wants to get into a new market that is in another country, it is not necessary for that company to only consider the gross national product and the per capita income. It should dig deep into the demography of the new country and find out the number of people that can buy its products. It is important to understand the income level of the people to determine whether they will manage to buy the products and services that the company proposes to sell. Alongside this, the company should also consider the economic conditions and stability of the country (Balsmeier et al. 2016). This includes assessing the currency stability, modes of payments, and the trade patterns of the new country. When these critical areas are well assessed, it will help the company to know the level of risk that is associated with the market or the country that is being considered as a prospective market. The other factors to consider include;

Social and Cultural Factors

Countries exhibit several social differences, such as the language spoken, religious practices, and even the food eaten (Ruhl & Willis, 2017). The differences are vital and should be assessed to check if they can favor the entry of the company into that market. Once the company realizes that it wants to sell products that are related to the culture of a people, it should tailor its products to match the social and cultural behavior of the target population.

Legal Political Factors

As a company, before you commit any resources in a business that is in a foreign country, it is important that you study and understand the position of the government and the people of that host country. Political stability is one key consideration that a company should be keen on since it affects the company that wants to try a new market. Any change in the government policy may favor entry into the market or may render the business illegal, thus blocking the company from doing businesses in that country.

The Attractiveness of the Market

Market attractiveness should be evaluated to know if the market has greater potential. Such concerns that should be considered here are the amount of revenue that can be generated in the market (Estrin et al. 2018). It is also important to assess if the host country welcomes investments by companies from other countries, consider the level of competition in the market and the dynamic nature of the industries in that country.

The ability of the Company

Lastly, a company before deciding to go and make investments in another country, it is important for it to do an internal audit to identify if it has enough resources to invest (Ha & Zuckerman, 2018). Before going global, it is necessary for the company to evaluate if they have a competitive advantage regarding market knowledge. The company should also consider if they have the right technology that can help it survive in the new market. After considering all these factors, the company will now be able to develop a good plan to start and operate a business outside the domestic market. The company will know the resources that are required and even the legal measures that must be fulfilled when entering a new market.

Challenges of Internationalizing the Business

As firms seek to internationalize their operations, they are likely to encounter various problems. Uncertainty in politics of a given country and inconsistency of economic policies may be a great drawback to the internalization (Sullivan et al., 2019). Governments that do not like foreign firms may greatly hinder the entry of those companies into their markets to compete with their local firms. Governments usually achieve this by imposing unfavorable terms such as high taxation thus scaring away foreign investors.

The global opinion towards internationalization may also hinder the internationalization of business operations (Ruhl & Willis, 2017). The cost aspect of starting a business abroad may be a challenge, and this does not only include the cost of starting the business only but also such costs like securing a space for the firm, salaries, training of staff, and many more.

The nature of a firm may also hinder internationalization, especially if it is a firm that is characterized by limited resources (Min et al. 2017). In this case, the firm will not be able to carry out its operations in a foreign country effectively. Other problems that are associated with internationalization may include lack of support from the home government, differences in pricing of the product, and many more.

Steps to Enter a New Market

When entering a new market, a firm should follow the following steps;

• Identify who you will be selling to and that is the market to be served.
• Identify the entry points. After making a decision on the market to be served, it is important that you the potential entry points.
• Come up with a strategy for the entry into the new market.
• Develop a plan
• Research on the plan before implementation.
• Test the plan
• Do a ramping up
• Exit strategy

Recommendations to Gain a Competitive Advantage

If the firm wants to create a competitive advantage, it is important that it revisit its strengths. The firm should then reduce its operating costs and focus on service and product quality. The firm should also ensure that it differentiates its products and services to make a difference with those of the competing firms. If the competition is very stiff, then it is wise for the company to consider merging with other companies. Generally, entry into a new market, especially in a foreign country, is never easy; it is important that any firm that wants to establish itself in a foreign country set a good strategy that can help it survive. It should consider all the factors that may hinder such entry and formulate a way to encounter such limitations.

References

Ang, S. H., Benischke, M. H., & Doh, J. P. (2015). The interactions of institutions on foreign market entry mode. Strategic Management Journal, 36(10), 1536-1553. Retrieved from: https://onlinelibrary.wiley.com/doi/abs/10.1002/smj.2295

Balsmeier, B., Manso, G., & Fleming, L. (2016). Escaping competition and competency traps: Identifying how innovative search strategy enables market entry. Working Paper, University of California at Berkeley. Retrieved from: http://www8.gsb.columbia.edu/faculty-research/sites/faculty-research/files/finance/bymf20161210.pdf

Diestre, L., Rajagopalan, N., & Dutta, S. (2015). Constraints in acquiring and utilizing directors' experience: An empirical study of newmarket entry in the pharmaceutical industry. Strategic Management Journal, 36(3), 339-359. Retrieved from: https://onlinelibrary.wiley.com/doi/abs/10.1002/smj.2215

Estrin, S., Gozman, D., & Khavul, S. (2018). The evolution and adoption of equity crowdfunding: entrepreneur and investor entry into a new market. Small Business Economics, 51(2), 425-439.Retrieved from: https://link.springer.com/article/10.1007/s11187-018-0009-5

Ha, J., & Zuckerman, E. (2018, July). The Inauthenticity in Legitimacy: Identity Trade-Offs in Firms' New Market Entry. In Academy of Management Proceedings (Vol. 2018, No. 1, p. 14934). Briarcliff Manor, NY 10510: Academy of Management. Retrieved from: https://journals.aom.org/doi/abs/10.5465/AMBPP.2018.265

Horstmann, I. J., & Markusen, J. R. (2018). Learning to sell in new markets: A preliminary analysis of market entry by a multinational firm. Review of International Economics, 26(5), 1040-1052.Retrieved from: https://onlinelibrary.wiley.com/doi/abs/10.1111/roie.12369

Min, S., Kim, N., & Zhan, G. (2017). The impact of market size on new market entry: a contingency approach. European Journal of Marketing, 51(1), 2-22. Retrieved from: https://www.emeraldinsight.com/doi/abs/10.1108/EJM-12-2013-0696

Ruhl, K. J., & Willis, J. L. (2017). New exporter dynamics. International Economic Review, 58(3), 703-726. Retrieved from: https://onlinelibrary.wiley.com/doi/abs/10.1111/iere.12232

Sullivan, J. J., El Asmar, M., & Sullivan, K. T. (2019). Consensus-Building Workshops to Uncover New Market Entry Decision Factors for the Sheet Metal Engineering and Construction Industry. Journal of Management in Engineering, 35(2), 04019001. Retrieved from: https://ascelibrary.org/doi/abs/10.1061/(ASCE)ME.1943-5479.0000679