Market entry strategies
Trade Related Technical Assistance for SRE
Peter Bennett
Trade Development Consultant
Routes to market - Characteristics
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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
Mexico: SRE
Market Entry Strategies
2.
Routes to market - Options
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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.
Mexico: SRE
Market Entry Strategies
3.
Decision based on
• Characteristic of market
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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
Mexico: SRE
Market Entry Strategies
4.
Most used option
1. Distributors
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Used by majority of exporters
2. Sales subsidiary
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Usually a second option. Used in absence of distribution
Large companies. Costs money!
3. Direct selling
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Common where there are a limited no. of customers
Very common. Very problematic
4. Agents
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Associated with specific industries. Increasingly
uncommon
5. Acquisitions / JVs/ Licensing
Mexico: SRE
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Large companies
Market Entry Strategies
5.
Identification of distributors / buyers
The most valuable service of a TPO
1. Identification of potential distributors /
buyers – specific to the exporter
2. Setting up a series of meetings for exporter
3. Success is based on the selection,
appointment, support, motivation of the
distributor and meeting buyer’s needs
Mexico: SRE
Market Entry Strategies
6.
Distributors – What do they do?
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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
Mexico: SRE
Market Entry Strategies
7.
Ingredients of success
A successful relationship is based on:
1. “Trust”
2. Clearly defined understanding between parties
3. Support. Market visits to help sales force.
4. Frequent contact
5. Joint decision making
6. Genuine effort to understand distributor’s needs
Key task - Advising exporters how to develop this relationship.
Mexico: SRE
Market Entry Strategies
8.
Background information
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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.
Mexico: SRE
Market Entry Strategies
9.
Exporter’s Expectations
• What is the exporter expecting from the
distributor?
• Is it realistic?
• Do you agree?
Mexico: SRE
Market Entry Strategies
10.
Are distributors easy to find?
• Good ones always work with
competitors
• Why is this?
Mexico: SRE
Market Entry Strategies
11.
Characteristics of distributors
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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
Mexico: SRE
Market Entry Strategies
12.
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
Mexico: SRE
Market Entry Strategies
13.
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.
Mexico: SRE
Market Entry Strategies
14.
Selection criteria
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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
Mexico: SRE
Market Entry Strategies
15.
What are distributors worried
about?
• Lack of support and commitment
• Arrangement discontinued when sales
reach a certain level
• Direct supply
• Not been listened to!
Mexico: SRE
Market Entry Strategies
16.
Distributor support programmes
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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
Mexico: SRE
Market Entry Strategies
17.
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
Mexico: SRE
Market Entry Strategies
18.
Direct selling
• Common in
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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
Mexico: SRE
Market Entry Strategies
19.
Acquisitions and franchising
• Unlikely to be involved
• Refer to specialists
Mexico: SRE
Market Entry Strategies
20.
Agents
• Less and less common
• Associated with specific industries
Mexico: SRE
Market Entry Strategies
21.
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
Mexico: SRE
Market Entry Strategies
22.