49.

FORMULATING MARKET ENTRY STRATEGIES

INTRODUCTION
Choosing the best way to enter a market is no simple task. Should the market entry objective be rapid acquisition of significant market share or stay below the radar to secretly build market share? There is no single strategy to fit all companies, products and markets. owever the following framework can be used to guide decisions about the right market entry strategy for your venture.

DECISION FRAMEWORK
!n broad terms, the decisions are around a forceful or a focused market entry strategy or both. Forceful is about a highly aggressive entry, using significant marketing, sales and production effort and resources. Focus is about the e"tent to which the effort is narrowly focused or on a broad front. #ll combinations of force$focus have their advantages and disadvantages, so therefore two further factors can help decide the most appropriate entry strategy % the e"tent to which the market being targeted is bountiful &or sparse' and hostile &or benign'.
IS THE MARKET BOUNTIFUL?

Start first with whether the target market is bountiful &(' or sparse &)' by reviewing*
+arket Si,e &(' or &)'

-udging market si,e and growth for a new venture is difficult, all the more so when it is an unfulfilled market need. Traditional market research is limited in what it can reveal. .eel, intuition and personal contact with customers in the market may be the most revealing. This is where entrepreneurs come in, with their visions of a future market and their personal immersion in the task to alter, modify and adapt to fill the need that has been perceived. !n addition to the potential market si,e factor in deciding bounty ) three other characteristics are recommended for review* customer risk, technology turbulence and category lifecycle.
Customer /isk &(' or &)'

0hat is the level of customer risk attached to buying the new product? !f customers perceive major risks in switching from their current product and its inherent sets of processes, then they will be slow to buy.
Technology Turbulence &(' or &)'

/apid change in technology can reconfigure a market. 0ord processors irrevocably altered the market for electric typewriters. # critical question and judgement is about how long market bounty will last.
+arket 1ifecycle &(' or &)'

2pportunities for success are higher quality for first movers with products in the early stages of their life cycle.

IS IT HOSTILE ?

Then assess the level of market hostility, by reviewing*

Competition 1evels &(' or &)'

Competition is the principal key to determining hostility of a market. !f a market is crowded with competitors and the business is crucial to their success, then the market will be very hostile. .ragmented competitors and no clear leadership may mean a benign market.
+arket Share &(' or &)'

The combined market share of the 3 or 4 main players is a strong indicator of the e"tent to which they are entrenched and an indication of how much may be left for the new entrant. Salience of the product to the competitor will determine their competitive response.
5ependence &(' or &)'

!f they are highly dependent on the product for their success, then they will respond aggressively.
+arket Capacity $ Si,e &(' or &)'

+arket hostility is also affected by industry capacity compared to market si,e. 0hen capacity is greater then market si,e, competitive action will be intense and entry may not be sensible at all.
6overnment /egulation &(' or &)'

/egulations may make a market hostile, in terms of onerous compliance.

ENTRY STRATEGY DECISION

Then use the +arket 7ntry Strategy .ormulation Chart &below' as a decision) support)tool. !t simplifies the decision making process around two levels of aggressive entry* #66/7SS!87 929)#66/7SS!87

and whether this is then conducted across* .2C:SS75 79T/; </2#5 ./29T 79T/;

The degree of aggressiveness will be in the timing, spend and effort put into activities like= advertising, sales promotions, marketing and sales organisations, pricing, production, services to customers, discounts, introductory deals and publicity. The degree of focus will be about the number of market segments initially addressed, geographical reach and the si,e$range of product line.

>.

T 7 <1!T?@/!76 79T/;

& #66/7SS!87 %</2#5 ./29T'

This is a highly aggressive, broad)front strategy using all forces across a wide scope of geography and market segments. <ecause this strategy requires rapid market penetration, it probably would not be appropriate where there is not a bountiful market.
A. T 7 C#8#1/; C #/67 & #66/7SS!87 ) .2C:SS75'

This strategy is highly aggressive and focused. #ll the elements of aggression are still used, but in limited deployment to specific market segments and geographies. !n building a cavalry charge for a technology product, one application would be promoted in a concentrated way to ensure early success. The cavalry charge requires a munificence market, but not so hostile that market segments into which entry is deferred are not lost to competition.
3. T 7 ST/!@7 .2/C7 & 929)#66/7SS!87 ) .2C:SS75'

This is a non)aggressive and focused entry strategy. !t is a low key, calculated entry into a narrowly defined market. This strategy might be appropriate to a market that is sparse and hostile. !t is a back)doorB, below the radar, mode.
4. 6:7/!11# T#CT!CS & 929)#66/7SS!87 % </2#5 ./29T'

The guerrilla approach is a non)aggressive and broad)front market entry. !t uses relatively low resources to target the most promising positions in markets that are munificent, but hostile. !t can also be used to e"plore markets to focus on later without generating strong competitive interest or counteraction.

Overleaf

Mar!e" E#"r$ S"ra"e%$& De'()(*# F*r+,la"(*# C-ar"

Mar!e" E#"r$ S"ra"e%$& De'()(*# F*r+,la"(*# C-ar"

DECISION FACTORS 0. MARKET CONDITIONS
HOSTILE BENIGN BOUNTIFUL SP !SE

BLIT.KRIEG ENTRY

CA/ALRY CHARGE

STRIKE FORCE

GUERILLA TACTICS

123 123 123 1&3 123 1&3 123 1&3 123 1&3 123 1&3 123 1&3 123 1&3

1&3 123 123 1&3 123 123 123 1&3 123 1&3 123 1&3 123 1&3 123 1&3

123 1&3 1&3 123 1&3 123 1&3 123 1&3 123 123 123 N 123 N 123

123 1&3 123 1&3 1&3 123 1&3 N N 123 123 123 N 123 N 123

4. COM5ANY RESOURCES
"PLE !EST!I#TE$ #!ITI# L " SS NEE$E$

6. DI/ERSITY
G!E T %POO! FIT& S" LL % GOO$ FIT&

4. COM5ANY CULTURE
!IS' (E!SE E)PE!I"ENT L

7. MARKET LIFE CYCLE

E !L* ST GE $E(ELOPE$ ST GE " TU!E ST GE

8. MARKET SALIENCY
HIGH TO ENT!* FI!" LO+ TO ENT!* FI!"

9. THREAT TO E:ISTING CUSTOMERS

LO+ HIGH

123 1&3 123 1&3

123 1&3 123 1&3

N 123 123 1&3

N 1&3 123 1&3

;. 5RO5RIETARY 5ROTECTION
ST!ONG +E ' &(' C #ppropriate $ necessary strategy &)' C 9ot appropriate$not necessary 9 C neutral