The market research industry in India is thriving, but it is not without its’ own challenges and complexities.

Size of the Market Research industry in India

According to Statista, the size of the market research industry globally is around US$74 billion, with more than half (US$47 billion) coming from within the U.S. At roughly Rs.1500 crore or US$15 billion (2017-18), the Market Research industry in India may be smaller in comparison. Still, it is the fastest-growing market globally, growing by an average of 10 per cent per year, compared to the industry’s global growth of just over 2 per cent in recent years. Most of India’s market research comes from overseas brands.

What makes India a favourable outsourcing destination for Market Research firms?

The overseas demand is mainly due to the enormous cost advantages of conducting market research in India. The processing of data is about 50% cheaper in India than in developed nations. Therefore, the outsourcing business is doubling in value every year.

The rising middle class comprises young people who are very familiar with U.S. brands. India has the second-largest population of English speakers globally, coupled with a relatively stable political backdrop. These factors make India an attractive country for international companies.

India has also developed a pool of trained market research professionals who can provide companies with superior study methodologies, data processing, analysis, and reporting, making India an attractive outsourcing destination.

What are the high-growth sectors in Market Research in India?

India is evolving into a ‘Service Economy’ with telecom, retail, and financial services as the high-growth market research sectors. Marketing research in India has been focused more on fast-moving consumer goods (FMCG). Besides these, India’s most significant growth area for the market research industry is the media measurement business, followed by the auto, telecom, healthcare sectors, durable goods industries, and the public sector. Market research is mainly focused on customer insights and satisfaction in all industry sectors.

What are the challenges of conducting Market Research in India?

India faces unique, complex challenges because it can be viewed more as a continent than a country. This is because of many diverse cultures, customs, behaviour, languages, and even regional dialects.

In India, one size does not fit all. Researchers need to understand the cultural nuances peculiar to different parts of the country when designing surveys and studies and selecting local markets.

To obtain data for nationwide studies, market research firms in India have to target multiple cities, each with its language and cultural nuances. While Indian market researchers understand and know how to work within the complexities, it becomes challenging to warrant the high costs of conducting national studies to clients.

On the plus side, this has helped Indian researchers attain higher standards of conducting studies. However, it is also true that it is difficult to attract high-quality research talent in India due to relatively lower salaries. While Indian companies understand the importance of Market Research and use it effectively, they are amongst the most demanding but lowest paying countries for market research.

One of the biggest challenges is the size of the country. In the past, with fewer households having access to phones, it was challenging to conduct market research. In 1997, less than one percent of the population had access to a telephone, and with low literacy rates, telephone and mail surveys were non-existent. However, in recent years, technology has lifted many barriers to market research in India.

India’s digital journey has been remarkable. The number of internet users grew from 0.62 million in 2010 to 843.06 million in 2021 (the second-largest in the world). Estimates suggest that this figure would reach over 1.5 billion by 2040, and Smartphone usage far surpasses desktop and laptop usage. Today, smartphones are present in 84% of households. (Source: Statista)

These developments are a massive advantage in a country the size of India because the cost savings from using the internet or phone over face-to-face interactions are enormous. The rise in social media usage has also immensely helped the growth of market research in India.

Face-to-face research was dominant before the pandemic; however, the first wave of COVID-19 pandemic and the lockdown helped speed up digitization, making it easier to use technology and social media for research studies.

What is the state of market research in Rural India?

Nearly 70% of India’s population lives in rural areas, and the rural market has been growing five times as much as the urban market. However, doing market research in the rural areas of India remains cost-prohibitive due to the size of the country and its hugely diverse population. Additionally, largely rural population groups have not seen the technological breakthroughs and are beyond reach in many ways.

During the pandemic, there has been an upsurge in digitizing rural India. The government has been pushing the adoption of digital technology in rural areas for many years now, but during the lockdown, it gained momentum.

During the first pandemic wave, many jobless migrant workers had to go back to their villages from the cities, which triggered a rise in rural digitization.

Still, market research firms face many challenges when it comes to the evolving, post-pandemic rural population. Furthermore, the complexities of hyper localization in languages, dialects, and traditions are even more pronounced in rural areas than urban centres.

How did the sudden spike in mobile internet penetration further help the growth of the market research industry in India?

The availability of cheap smartphones in India since 2010 laid the foundation for digital literacy and adoption. Furthermore, the Indian government understood the importance of investments in its telecommunications sector and further deregulated the industry.

In 2016, Reliance Jio disrupted the Indian telecommunications market by offering cheap 4G, high-speed data plans with free voice calling. This competitive data pricing pushed other telecom providers to drive down their pricing and led to a cumulative growth in affordable mobile internet accessibility amongst the Indian masses.

What challenges do Indian Market Research companies (in particular) face?

In India, market research firms deal with the most demanding but lowest-paying clients in the industry. This makes it very difficult to attract top talent of market research professionals as the salaries are relatively lower. Industry attrition in Indian market research firms is high at about 30%, and people leave due to low salaries.

The Future of Market Research In India

The growth of Market Research in India is clearly on the rise and shows no signs of stopping, despite the challenges. The market research industry in India is over three decades old. In recent years, there has been a rapid rise in the number of Indian Market Research firms and the interest of U.S. and European firms in outsourcing market research work to India. Companies in developed nations have 40-60% cost savings when they outsource market research to India.

Telecommunication disruptions, technological developments, the rising middle class, a young country familiar with International brands, and lower research costs in India have led to growth in the market research industry.

Market research is critical to building a robust business plan, and while many companies understand this, it is costly and time-consuming to undertake market research. Market research firms are more pressed than ever to deliver accurate insights and solutions to help companies make the right decisions while keeping turnaround times shorter and costs lower.

Artificial Intelligence (AI), machine learning, and big data are changing how Market Research is carried out.

Organizations use many traditional market research techniques to learn more about their customers. Traditionally, these include interviews, surveys, focus groups, and market reports, which are costly and time-consuming. The Market Research industry in India now has access to and is adopting new technologies to collect, analyze, and present data faster yet accurately.

Indian market researchers are using social media, advanced analytics, and data collection.

New developments like Artificial Intelligence, machine learning, and ‘big data‘ offer a viable solution. This also means expanding the skill set of the researchers so they can effectively employ these market research methodologies for streamlining and automating data collection and analysis. AI can also scan market data in any language, which can be invaluable in a multilingual country like India.

The rapid rise in the number of Indian Market Research firms and the growing demand from international agencies in outsourcing to India show promising potential for the future growth of Market Research in India.

Although many challenges lay ahead, there will always be a need for high-quality, flexible market researchers. While technology and automation may be invading the market researcher’s territory, you still need people to uncover data and insights. The best market research teams of the future will combine techies and problem solvers, who will use technology to streamline and speed up their studies. A good quality, accurate, fast, and lower-cost research workforce will ensure India’s future growth as a market research provider to the western world.

With the growing global demand for cost-effective and high-quality market research, the rising trust in Indian researchers, and the value of the Indian market, the future of market research in India looks promising.

Selecting an Indian Market Research Agency

With many providers to choose from, appointing an agency for your next market research project that understands your unique research needs is crucial. If you are looking to conduct market research, selecting an agency with national expertise is a must.

At Kadence International, we have offices in 10 countries, including India. Our office in India is recognized as one of the leading market research companies in the country.

With a Head Office in New Delhi, our diverse team has hundreds of years of collective market research expertise and speaks 12 different dialects.

We would welcome the chance to discuss your next market research project. Learn more about our Indian Office here or submit your market research project here.

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Global manufacturing leaders are carefully considering the pros and cons of both.

China still leads the world in manufacturing, with close to 30% of the country’s economic output coming from this sector. Many industry experts and leading economists believe that China will no longer be the manufacturing powerhouse it once was within the next five years.

How the pandemic changed the manufacturing industry

The global pandemic caused a notable decrease in manufacturing production in 2020 due to containment strategies in economic and social lockdowns. Both had a significant impact on both supply and demand.

Consumer demand declined overall due to uncertainties triggered by travel restrictions, remote working, business cessations, and job losses. At the same time, the production of many goods came to a halt worldwide for many months.

A shift away from Made in China

For some major manufacturing companies, the pandemic spurred a sea-change in where they manufactured their product. The American Chamber of Commerce in Shenzhen, China, surveyed its manufacturing membership and learned that over 30 per cent were in the process of moving some of its manufacturing out of China.

In July 2020, Apple announced it was shifting the assembly of its iPhone 11, the most advanced model in its product line, from China to India.

A couple of weeks later, Samsung and several other Apple suppliers applied for the Indian government’s incentive program targeted towards large-scale manufacturers of electronic products, which would see a significant part of these companies’ manufacturing transferred to India.

In recent years, China has attempted to replace the term “Made in China” with “Engineered in China”: the country would no longer be known as the world’s factory, a cheap place for countries to outsource manufacturing. Chinese manufacturers have increased automation and switched to using robots instead. In these instances, up to 80 per cent of workers were sent home and replaced with specialized production line workers — typically experts in machine maintenance and machine learning. Mechanised factories boast much higher output with fewer errors and accidents, and a higher dependence on technology and automation meant wage costs were no longer critical.

With these changes, China is slowly losing its foothold in the global manufacturing sector for reasons with nothing to do with costs and output.

Other factors affecting this shift also include; trade tensions between China and the US (along with its western allies), the realization by global manufacturers during the pandemic of the flaw in the supply chain delivery due to over-reliance on one country for production, increased costs, and tariffs, and consumer sentiment of products made in China.

Even so, manufacturing in China is expected to recover in 2021, growing by 9 per cent.

The growth in manufacturing in India

By comparison, India is expected to grow by 10 per cent, recovering from significant economic strain during the pandemic.

The average age of a citizen in India is 28 years versus 38 years in China. This country has a massive population, and the demand for technology is high. Manufacturing overseas is not always about importing; it is also about global supply. If you have a product that appeals to 20 somethings or 30 somethings, manufacturing locally in India makes sense.

India is a lot less controversial geopolitically, and the Indian government is poised to capitalize on that notion.

The government of India has launched several policies over the past few years to create a favourable environment and attract investment in manufacturing, with a focus on electronics manufacturing, including mobile phones, industrial electronics, consumer electronics, electronic components, computer hardware, and LED products.

Due to these commercially favourable initiatives, India’s electronics production has more than doubled in the last five years (2015-2020). According to the Indian Ministry of Electronics and Information technology, India’s electronics market is expected to reach US$132 billion by the end of 2021.

In China, manufacturing labour wages by location (in USD per hour) is $3.80 compared to India’s 0.70. Even with China’s focus on automation and robotics, labour in India is five times less than in China.

While the shift from solely or wholly manufacturing in China has seemingly begun, China will still be a global manufacturing hub.

Perception of manufacturing locale

Supply is synonymous with manufacturing. In economics, the rule of supply and demand states that if all other factors remain equal, the higher the price of a good, the fewer people will demand that good. For most, regardless of generation, price and availability are essential, if not the most important, in buying decisions.

However, in economics, “movements” and “shifts” represent different market phenomena concerning supply and demand.

In the past, companies chose to manufacture from an outside country due to price. Now other factors could negatively affect demand and brand perception.

Price, or cost of goods sold, is an easy measurement to evaluate in manufacturing. However, more and more companies see that consumer sentiment is a factor contributing to growth and demand.

Consumer sentiment is becoming an essential factor in manufacturing. After all, it does not matter how cheaply you can manufacture a product, whether that is in China or India, if the demand is not there or if consumers will choose a different, competitively priced product based on the manufacturer’s location.

A key question a company should ask is whether consumers would feel differently and ultimately decide to buy a product based on a “Made in India” label versus “Made in China.”

For Gen Z and millennials, these two generations are much more brand conscious. In one study, 62% of millennials surveyed said buying from brands that support their own political and social beliefs is essential. In another study, Gen Z consumers are more likely to switch brands that meet specific values like sustainability.

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The role of research in manufacturing

Moving the manufacture of parts or components to multiple countries is a huge undertaking. Deciding to enter a new market, along with evaluating manufacturers, can be incredibly daunting if “on the ground” knowledge is limited or non-existent. Commissioning a research agency to find out where to direct your attention is a crucial first step. Selecting a research company with direct market knowledge can save time and capital investment.

Understanding how your target audience perceives where your product is manufactured, alongside any impacts on demand, should be researched and evaluated.

Read case studies from the Manufacturing sector here

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Why consider developing a market entry strategy for India?

It’s very simple: India is a huge market. In population terms, it’s now on a par with China at around 1.3 billion people – and it’s likely to overtake its northern neighbour this decade. India is still a young country – 44% of its population is under 25 years old – and is seeing rapid growth in both its wealth and economic make-up, quickly becoming a global hub for technology and manufacturing.

It’s also seen massive urbanisation over the past 50 years, with six megacities in excess of 10 million inhabitants: New Delhi (31.2m), Mumbai (21m), Kolkata (15m), Bangalore (12.8m), Chennai (11.2m) and Hyderabad (10.3m). Like China, the latter years of the 20th century saw a rapid expansion in the middle class as the impact of globalisation opened international opportunities. The number of households with a disposable income of more than $10,000 a year leapt from around 2.5 million in 1990 to nearly 50 million in 2015.

India’s links with the rest of the world have not always been easy. Their historic relationship with the UK, for example, created lasting cultural ties, but is scarred by colonialism, too. Although India’s recent history as a global powerhouse has been tense at times, businesses from all over the world – and especially anglophone nations and Asian neighbours – are now deeply enmeshed in its economy.

Brands interested in getting into the Indian market will find a strong legal system, democratic structures, a broadly market economy (although with caveats – more on that below) and an entrepreneurial and aspirational customer base with wide interests and diverse patterns of consumption.

One problem for overseas brands coming into the Indian market is that many decision-makers outside the country retain a very mythologised view of India. It’s still perceived by some, for example, as defined by widespread poverty and fixed traditions. While there is poverty – as there is in every country – a rapidly growing middle class and highly advanced tech infrastructure tell a far more nuanced story.

Nevertheless, brands entering India must be ready for a land of diversity and contradictions. This is a nation with a successful space programme; but faces complex challenges resulting from inequalities. It has a thriving cultural industry, and produces (and exports) some of the world’s best medical professionals; yet is in the third quartile for life expectancy.

So it’s no surprise that businesses both large and small rely on local expertise to ensure they can navigate the highly diverse and nuanced byways, trends, localities, attitudes and expectations that make up ‘India’. And it’s a reminder that proper research of this market – or, perhaps, these markets – is an essential stage for successful market entry.

Understanding the challenges – the barriers to market entry in India

Before brands even get to researching the nuances of the different markets in India – and which of them might turn out to be fertile ground in terms of consumer or B2B attitudes and behaviours – they need to some investigate the practical issues confronting companies entering the market.

At the highest level, Prime Minister Narendra Modi has looked to extend the ‘Atmanirbhar Bharat’, ‘make in India’ or ‘self-reliant India’, policy to accelerate the country’s economic development. This is built on five pillars, which offer some guidance for brands looking to enter India on the country’s political and economic priorities:

Economy – designed to deliver significant growth, not incremental gains.
World-class infrastructure – to facilitate additional growth.
Technology focus – where India’s vibrant tech sector offers strong foundations.
Vibrant demography – harnessing the energy of diversity for self-reliance.
Demand – a huge and growing population can massively fuel domestic economic growth with the right supply chain capabilities in place.

It also means restricting imports of many goods that might be manufactured in-country. Modi talks about creating a ‘new paradigm’ for job-creation and entrepreneurialism. “The mindset of free India should be ‘vocal for local’,” he said in August 2020. “We should appreciate our local products, if we don’t do this then our products will not get the opportunity to do better and will not get encouraged.”

In practical terms, that’s meant high-profile bans being phased in on imported armaments, for example (although not to universal acclaim). During 2020, the country’s three Covid stimulus programmes were labelled ‘Atmanirbhar Bharat’ packages; the development of Covid vaccines was cited by the Prime Minister as a success for the project; and India is planning a domestically equipped and run 5G network. There’s also been a push on loyalty to local brands in many consumer categories – right down to cooking oils.

Looking more broadly, India ranked 63^rd in the World Bank’s latest Ease of Doing Business rankings, scoring well for investor protections, getting credit and access to utilities; but very poorly on enforcement of contracts, registering property and starting a business.

The rules for trade are also complex. Even after the departure of Donald Trump and his hostile trade policies, India maintains considerable tariff and non-tariff barriers to US trade. And only China has more entries than India in the UK government’s lists of trade barriers for businesses looking to operate abroad. True, some are minor – such as adding labels to food and drink products; others are in very niche sectors, such as the export of luxury yachts.

But non-Indian professional services firms – legal, accounting, architectural – face considerable barriers to entry. And finished cars (including second-hand vehicles) face a basic customs duty of 125% – which can be augmented with additional levies taking total duty in India as high as 260%. There are even moves to adjust duties on car components and kits to deepen the Indian manufacturing base beyond in-country vehicle assembly.

Both national and state-level controls and tariffs need to be evaluated, and it will pay dividends to take advice on specific sectors, categories and regional variations from both home-country trade advisory teams and local Indian experts on the ground. India is not, therefore, a place to skimp on market research.

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Opportunities still abound

But don’t think this means the door is slammed shut. “It’s not going back to socialist India – we want imports to come in,” said Finance Minister Nirmala Sitharaman, speaking at The Economic Times Awards for Corporate Excellence in 2021. She says the government has been selective in choosing sectors to face rising tariffs. And the policy is far from universal (or universally popular), despite the nationalist rhetoric. So change is not inconceivable.

Trade does remain vigorous. India was the 12th largest export destination for US goods in 2018 (worth $59bn, including services), and the EU exports around €33bn worth of goods and services to the subcontinent each year. And EU-India free trade talks restarted in 2021 after an eight-year hiatus. One recent blip has been Chinese exports to India, which fell 11% in 2020 – albeit to a still massive to $66.7bn. (Note that China remains a major geopolitical rival to India, which shapes attitudes to the trading relationship.)

The recent Britain Meets India report, prepared by Grant Thornton, highlights the scale of inward investment into India (between 2000 and 2020 an estimated $29.5bn of UK capital was invested in India – and that’s just 6% of global investment flows into the country). Trade between the two countries was worth $26.7bn in 2020 alone – even with the effects of the Covid pandemic – with UK exports amounting to around £8bn.

The presence of major global companies such as Apple – especially as an investor in local manufacturing capacity – shows there’s deep interest in working alongside both state agencies and domestic business partners to ensure access to this massive market despite import controls.

Netflix is another example. Despite some initial challenges regarding insufficient Indian content and the possibility of fresh regulation, it’s slated to release 40 local productions to steal a march on streaming rivals, building on its existing five million subscribers. (Although Amazon Prime’s own $2bn investment in India is making Netflix’s progress more challenging.)
So it’s no surprise that many countries are eyeing up India as a potential trade partner. In post-Brexit Britain, Prime Minister Boris Johnson wants to “more than double trade with India to £50bn by 2030”, according to texts of a (Covid-suspended) trade speech the he planned to give in India.

Developing a market entry strategy for India: should you go deep or wide?

Standing up the commercial rationale and the practical issues around doing business in the country is a vital first step for brands wanting to enter the Indian market. But the top-level data – the rules and economics– is only half the story. Scale, diversity and local nuance are also important factors, and these demand more careful evaluation.

At the outset of any market entry project, organisations will need to make a series of choices that demand much deeper research into their specific sector, the markets they want to address, and the different audiences they will encounter. In other words, what’s your aim, where will you focus your efforts, what products and services might succeed – and how might you translate this into a sustainable market position?

In a market as diverse as India, that idea of ‘focus’ is central to a successful project. Geographically and culturally vast, the attitude to many of life’s fundamentals differ widely between regions. Of course, there’s language to consider (more on this below). But behaviours and preferences also differ across geographical areas. For instance, in the eastern and southern regions, rice is the staple carbohydrate and hardly anyone uses fresh milk; in the north and west, people eat breads and powdered milk is frowned upon.

That’s just a couple of examples of the kind of consumption gulf that can exist – before we even get to the differences between urban and rural consumers, or cater to varied cultural touchstones.

A misstep many brands make when considering market entry is thinking about how to capture the Indian market as a whole, then. It can be much more valuable to consider which slices of the pie you might be able to go after – the better to tailor your proposition, branding, logistics and competitive position.

Market research in the field: be clear on your objectives when it comes to market entry in India

This idea of ‘focus’ is particularly important when it comes to the market research methodologies you’ll need to inform your market entry strategy.

Imagine a global brand looking to understand its status or opportunities in lots of different markets. It decides to survey 200 consumers in a couple of dozen countries. In Germany – no slouch with over 80 million people, and some marked regional variations of its own – such a study might yield usable national results. But in India, just the top six megacities – each with a very particular identity – comprise over 100 million consumers. Those 200 interviews are only going to scratch the surface of the big cities, let alone the emerging conurbations and rural population.

There are two possible solutions. First, massively increase the sample for India to reflect its scale. Or second, as we mentioned earlier, focus in on higher-probability markets assessed in partnership with local research teams. It’s not simply an either/or choice, of course. But it highlights the need to make some very clear and well-informed decisions right at the outset of any market entry project.

Find the right partner: local research for local people

Because of the diverse nature of India, the key to a great research partner in India is coverage. That starts with teams based in the country whose ability to advise on high probability areas for focus will be much more acute than agencies based outside India.

Then it’s a question of being able to conduct research effectively to flesh out the objectives of that initial focus. The project leadership will need to understand the different regions – and in many cases, have a clear idea about the unique profile of the 28 states and eight union territories that make up administrative India (with all the conditions they impose).

With 415 living languages (22 of them ‘officially recognised’ for the purposes of administration) and countless local cultural nuances, research teams with local sensitivities are understandably valuable. (We joke that every 5km in India the language changes – but watch out, because every 2km there’s a new dialect…) Our teams speak a broad range of languages enabling us to conduct market research across the length and breadth of India.

Harness technology – India’s secret sauce

India is a global leader in technology, boasting one of the largest and best-trained IT workforces in the world. This is no flash in the pan: Indians, particularly in the middle classes, but increasingly across society, are heavy users of connected technologies and mobile devices. It’s a world leader in low-cost data plans, too, and smartphone adoption is widespread enough, even in many rural areas, to allow for the new generation of online research methodologies to make their mark, alongside more traditional face-to-face approaches.

When it comes to online research, to reach the urban middle classes, laptop-based methodologies should work well. It’s worth bearing in mind that good bandwidth can be spotty – which means limiting the use of video-intensive approaches – but surveys and even text-based communities can work really well. And with the level of smartphone penetration even outside the cities, there is even an opportunity to exploit app-based research or community platforms to build long-term engagement and insight.

Watch, too, for the roll out of India’s own 5G network. Like any country – especially one as vast as India – coverage will be limited at first. But as penetration grows, it should offer new opportunities for richer research projects.

Notable openings – target sectors for a market entry strategy for India

We’ve already noted that global brands in new categories are making a play for Indian consumers – such as Netflix and Amazon Prime in the streaming video space. So where else might brands research a successful move?

Premium brands

While ‘made in India’ is politically potent, for less price-sensitive consumers there remains an affection for overseas brands – particularly those with a reputation for quality and durability. Indian firms are catching up fast (its domestic chocolate brands see huge growth in premium products, for example), but the opportunity persists for now. As BCG noted in 2017, “Consumers in emerging cities… have high purchasing aspirations but are often constrained by product availability.”

Auto brands

While domestic makers Tata and Maruti Suzuki dominate (the former state car-maker now owned by the Japanese motor giant has about half of the market), tech and usage transitions create openings for overseas brands if they partner with local industry. India’s passenger vehicle market is something of a roller-coaster: a period of strong growth was halted in 2019 – unit sales fell 12.75% to 3 million – then further slowed by the pandemic. But the long-run pressure on enhanced mobility should present opportunities.

Fast moving consumer goods

Although this has been a target of the ‘vocal for local’ campaign, there are brands such as Unilever that have retained a dominant position in many categories. That suggests there is an option to leverage strong brand image to gain a firm foothold. In areas such as confectionary, for example, French/Belgian group Barry Callebaut sees huge growth opportunities. Kellogg’s initially struggled in India – it was overconfident with existing product and marketing formulas – but has carefully tailored its approach to succeed.

Youth brands

In more traditional rural areas, the division between young and old is less marked. But in bigger towns, fast reliable internet access and varied career opportunities mean young Indians are developing a more global outlook and in many cases, that creates fertile ground for international and ‘cool’ brands. With a median age of just 28 (across Asia as a whole it’s 32) and the ‘millennials’ ascent into higher income brackets, catering to youth in India has huge upside.

Top tips for success

It’s impossible in a market this large and diverse to offer up general principles that will hold true everywhere. But some of the research basics will serve brands well in India – and there are some tips for making market entry a success.

Let experts find you a product/market fit.

Desk research can take you so far, but local expertise will make the process of investigating high-probability markets much quicker and more effective. Kadence’s India team know where to find the populations that dovetail with your product values and attributes.

Adapt brand, marketing and packaging.

Try to get ahead of cultural biases with your presentation – from packaging (where hygiene and transport conditions are a factor for many Indian consumers, incidentally) to the language used. Guidance on these issues should drop out of your initial product/market fit conversations.

Target your fieldwork carefully.

If you’ve been clear on the product or service qualities and work with local experts who can identify more fertile ground, this ought to be easy. Fieldwork costs can mount up in India – and poorly targeted surveys are both money and time wasted so think carefully about the people you want to reach and how best to achieve this

Stay relevant.

India is a fast-evolving nation and its consumers’ tastes are changing too. Customers will reward brands that stay in touch with them – either through programmes such as loyalty schemes or through longitudinal research projects. These same methods are ideal for spotting emerging local and international rivals, as well as shifting attitudes towards overseas brands.

Above all, respect the fact that India is a single nation in many respects, by a diverse collection of people in others. With 1.3 billion people to satisfy, even the kind of precise targeting we recommend for overseas brands can open up vast potential markets. India is not for the faint-hearted. But the upside is enormous.

Developing a market entry strategy for India?

To find out more about how we can support your organisation to break into a new market, learn more about our market entry services or get in touch to discuss a potential project. Alternatively, you can consult our market entry resources – from our ultimate guide to market entry to our tips for breaking into China.

Entering the Chinese market is a strategic priority for many brands. But like any market entry project, whilst the rewards are great, so are the risks. Success relies on conducting nuanced research so you’re able to develop a comprehensive Chinese market entry strategy. In this article, we’ll share our top tips for getting this right based on our experience helping brands across categories break into the Chinese market. You can also conduct our ultimate guide for market entry for further information.

The pros and cons of getting into China

Potential market entry benefits and barriers in China

Benefits to explore	Barriers to consider
There’s money to be made there. It’s a huge and growing economy.	China is incredibly competitive – with both domestic and foreign brands in play.
Consumer appetite is evolving all the time, creating openings for new brands, products and services.	It’s dangerous to make assumptions about the state of the market – and long-term planning can be tough.
Wealth is spreading, creating evolving demand and growth in most categories.	There are still huge differences between the top-tier cities and the rest; and between urban and rural markets.
Chinese consumers tend to like branded goods and seek out quality where they can.	Domestic Chinese brands have upped their game into premium spaces.
“If you can make it there…” Learn the lessons from breaking into China, and you’ll have valuable insights for other international expansion.	China has some unique attributes – including tough regulation of key industries and some long-standing consumer attitudes that might never shift.

All that being said, China is obviously a vast market, with 1,394,000,000 people. That means even capturing a small niche or focusing on one region or even city can result in big revenues.

China has more than 600 cities often broken down into four tiers. First-tier cities including Beijing, Shanghai, Guangzhou, Tianjin and Chongqing are usually classified as having a GDP over $300bn (about the size of the entire South African economy). In these, and the tier-two cities, there is widespread demand for products and services that aren’t being catered for domestically.

And despite the fast development of homegrown brands, for many consumers, overseas brands retain an allure. So although the execution of any brand proposition needs to adjust to the needs of the market – and in a country as diverse as this, market research proves itself invaluable in this respect – a look at China must be a consideration for any growth-minded business.

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When to consider developing a China market entry strategy

We see a few different prompts for brands wanting to explore the Chinese market. One is where similar products or services are performing well there, with attributes that might be replicable. For example, we’ve seen strong demand for premium Korean cosmetics recently – it’s a sign similar propositions might fly. In niche areas such as luxury handbags and cars these is a persistent strong demand for foreign brands.

Those buying patterns are highly visible. But we can also pick up less obvious trends in consumer behaviour that give clues as to potential in China. For example, we’ve seen a growing love among the Chinese middle classes for avocados. (It’s not just 2016-vintage millennial hipsters!) That suggests possibilities for brands that take the time to probe shifting attitudes.

In the first case, then, we’re looking for product features and brand offering. In the second, we’re exploring new consumer behaviours – although in each case we need to evaluate whether this is a fundamental change in consumer mindsets, or just a fad.

Underlying all that needs to be the economic rationale for entering the Chinese market. We might be able to detect strong potential demand. But will the costs of entering and sustaining this vast market – especially given its competitive nature – make sense? Remember that China has a number of regulations on commerce and media. We’ll come back to that later, but it has a bearing on the risks, and therefore the economics, of market entry.

Don’t be arrogant – success in China isn’t guaranteed

It should be obvious by now that one of the biggest opportunities is bringing in a premium, overseas brand to woo and wow the expanding Chinese middle class. But don’t be fooled by that stereotype – and don’t assume that you can just transplant existing brand approaches and expect to deliver results.

For a start, the way you deploy advertising and tailor packaging will be crucial. Chinese consumers will often be swayed by the way brands are presented, so understanding exactly how people are responding to the brand image and packaging can’t be ignored.

Then don’t assume just because you’re a foreign brand that you’ll attain a ‘premium’ differentiation. Fifteen years ago, there was almost an automatic patina of exoticism attached to non-domestic brands; they were more likely to be seen as classy and rare, helping maintain margins. Today, local brands in many categories are considered to be delivering a premium, too. And for many consumers, reliable quality and attractive features are the acid test, not the brand image.

Categories are not universal

Market research can reveal exactly how your brand might be received, and whether or not it’s going to attract any kind of premium. It’s also extremely useful at understanding which parts of any given category represent an opportunity in China – and which might be duds.

At a recent industry conference, we heard how a extremely well-known global drinks brand approached this problem. Ideally it would have rolled out its full slate of premium-branded alcoholic beverages, creating leverage around ad spend, logistics and exploiting halo effects. But while whisky is a strong segment in China, for example, wine is a much smaller niche.

At that point, another decision comes into play: research might show you which sub-categories are worth pursuing. But you also think how to enter these sub-categories. For that luxury drinks brand, for example, do they pitch the quality of the alcohol? Is it trying to project ‘conviviality’ for consumers? Is it the product heritage – seeking that ‘foreign premium’ angle? Or is it the look and feel of the products on the shelf?

The same rule applies the other way around. Yes, there are categories that are highly unlikely to be fertile ground for overseas brands – such as food, for example. It’s intensely competitive, demands a sensitivity to local tastes … but yet there might be openings in the right niche.

Or take transport. In electric vehicles, China is some way ahead of most non-Chinese manufacturers. But outside that sub-category, partnerships with local auto-makers and dealers could yield good results. Research can help uncover where these niches might be.

Learn from others – analysing the China market entry strategy adopted by others can set you up for success

The Chinese market has been growing at pace for 40 years, so at this point there are few areas where someone else in your sector hasn’t had a go at joining the fray. Indeed, many big global businesses will have in-house experience of breaking China – and making sure the lessons from one brand, product, category or local market entry are learned for subsequent attempts is obviously crucial.

Then look at the history of the category – there will almost certainly be rival brands that have tried and failed to launch in China before you (and some that have succeeded). Analysing what they did right and wrong can reveal all kinds of lessons.

Marrying those insights with up-to-date and well-briefed market research is a recipe for success. The phasing goes something like this:

Work out where the existing opportunities lie – what can we see from published market data, the level of competition, and products or services doing well in similar markets (especially in South East Asia – countries such as Indonesia and the Philippines are also fast-evolving, diverse, vibrant and digital)?
Evaluate local competition, emerging players, and regulatory and economic risks. These will include local rules on product specifications, or potential requirements to partner locally.
Work out why there’s a gap – and why you’re well placed to exploit it. Landscape studies should also highlight consumer appetites that will help or hinder progress.
Look at who’s failed doing something similar and why; and who’s made their inroads work, and why.
Research the evolution of the market – things change fast. Who’s up-and-coming? What are the evolving consumer habits? How will you stay on top of changes?

“Can my brand expand in China?”

Regardless of what you want to test, brand is a key issue in Chinese markets. Food, for instance, is a crowded market, so launching a new product to stretch the brand is always tricky. Research can tell you whether halo effects will work in China – and how to exploit (and not devalue) existing brand equity.

For example, we recently worked with a confectionery company on the possible launch of a newly acquired brand in China. We ran taste tests, but also explored what the new brand might mean to Chinese consumers versus how it would be perceived under the umbrella brand of the parent company.

China is a fairly mature market, and there were a similar products in the market. So was it worth bringing in the new brand? Should they use the parent company’s branding to muscle into the segment? A big issue was how the new product might alter the existing overarching brand story if that was the case. Should it be a standalone brand?

We focused on one tier one city to establish the opportunity. In tier three or four cities, responses might have called into question the brand strategy – but the top-tier cities where a particular strategy might work are a very sizeable market on their own. But it’s still worth developing insights to frame that brand strategy, not just tailor a product.

The product’s premium taste and lavish packaging made its core product a hit for gift-giving Chinese, even at premium prices. But this project showed there are important areas for research to test what powers a brand has in new spaces in a market as sophisticated as China.

Research – set a baseline, monitor change

China’s rapid evolution means ‘the future’ is much nearer than many people think, however. We can assess the probable changes over the short term; the plausible over the medium term; and the possible in the long term. But when we research Chinese markets and opportunities, it’s extremely wise to keep an eye on what looks ‘long term’ because it can arrive quicker than in many other markets.

That’s one reason for entering the market with as detailed an understanding as possible is important: yes, it might change quickly – but you need a solid framework for local conditions and consumer attitudes to ensure you can monitor what’s changing, how fast and in which direction.

The good news is that Chinese consumers, very broadly, tend to be very tech-savvy. (The WeChat platform, for example, is more widespread than Facebook – with about a billion active monthly users, it’s near-universal – and has many more practical applications.) This tech-savviness is particularly useful for conducting online research, allowing for fast-turnaround methodologies and investigating consumers outside the big tier one cities. In short, it’s ideal to capture rapid changes from the baseline. And unlike some Western markets, China’s older population seems determined to be digital, narrowing the gap we see in some other countries’ research approaches.

But we would rarely suggest only conducting research online. In the huge markets of the big cities, face-to-face research is still the best way to test behavioural and experiential aspects of consumers’ lives and tailor your approach to their unique expectations and requirements.

Top tips for market research in China

Be open about what you want to achieve in China and be realistic about who the product or service might appeal to. China is huge and diverse, so pace yourself and target realistically.
Calibrate your results. It can feel daunting competing in a crowded marketplace with strong domestic rivals. But it’s a long game: what look like tiny positives from research compared to other markets can be valuable toe-holds, establishing your brand for more serious revenue growth later; or guiding your focus on high-potential niches.
Tailor your questions. You can’t be too assumptive about what people might be prepared to pay for a product or service and asking standard questions in surveys and focus groups might not help. Get your research team to develop a China-specific (and even city-specific) research plan to get into the nuances.
If it’s online, think mobile first. Not everyone has a laptop but due to encountering a “technological leapfrog” most people have a smartphone. You can conduct extensive studies very flexibly with mobile methodologies.
Test the tech. China does have more controls on internet activity than most. Test that the research platform functions properly, especially if running a study from outside its borders.
Work with local experts. Research teams with local knowledge and experience will be invaluable. These tips come as second nature and on-the-ground teams or those in the region with an intimate knowledge of China. They will provide essential depth to research – and frame insights more meaningfully.
Think about the media. Consumers love to use their phones to research brands and products, and especially influencers and social media users. Willingness to try brands often stems from these forms of media.

In most other markets – that are less fast-moving or exciting as China – your traditional strategies can secure your traditional wins. In China, research can tell you how and where you might chip away at competitors to help you target your offering more effectively – winning a slice of this lucrative market. It can also help you create a China strategy where the wins look entirely different – and deliver results that make a real difference.

If you’re considering entering the Chinese market, get in touch to discuss how we might be able to help you to build your China market entry strategy.

Whether it’s an entirely new geographical region with a range of cultural, linguistic, and economic factors to consider or just a new age demographic — breaking into a new market is rarely easy.

There are all kinds of risks to try to mitigate and hurdles to overcome. Brands will never manage to avoid every potential pitfall, so a degree of complication should be expected.

Businesses that can minimize these risks and challenges can reap serious rewards. In this article, we’ll look at 5 of the biggest risks and barriers businesses typically face when entering a new market.

Let’s start with the risks.

The risks of market entry

There’s no risk-free way to enter a new market. Some may be easier than others, but problems are always possible. We can break down market entry risks into three main categories — internal, external, and legal.

Internal risks for market entry

Internal market entry risk factors are those that come from within the organization. These are generally easier to control than external risks but are often unpredictable and seriously damaging.

Management and organization

How well is your company structured? In your home market, it’s sometimes possible to function successfully with a flawed organizational structure. However, those drawbacks can become painfully obvious when you enter a new market.

Some common management mistakes include:

Unclear vision from leadership. A lack of coherent vision from the people in charge can lead to widespread confusion and inefficiency. Ensure your goals are established and communicated to everyone on the team.
Sudden staff changes. When a new member joins the team to replace someone else, they must have all the necessary information and direction. Failing to do this can often result in failures in communication and significant setbacks when entering your new market.
Lack of coordination. Working together effectively is critical in a new market — especially one far away from your home market. Your team members must be on the same wavelength, up-to-date with current processes, and in regular communication with each other and leadership.

Human error

Human error is one of those risks that we can’t always control. Mistakes happen in business and life, and while we can’t predict them very accurately, we can certainly say that people will make mistakes.

When entering a new market, a simple mistake can set a project back and send out ripples into the entire process. Usually, one or two small mistakes won’t mean the end of the world, but a series of minor errors can add up.

That could involve failing to convert currency accurately, using the wrong measurement units, or giving incorrect advice about cultural norms. In these cases, one small mistake can quickly snowball into a major setback if nobody catches it.

Logistical issues

Things like delays, accidents, labor shortages, transport and delivery problems, and other logistics and infrastructure challenges can be significant roadblocks for businesses when entering a new market.

These hurdles are especially relevant when expanding into developing countries and regions. Here, infrastructure and technology are often very different from what you might be used to in your home market, so it will be harder to predict delays and disruption.

Markets in developing countries sometimes use more manual processes, so there is often a greater need to work closely with local teams and sometimes the need to adapt your services.

Tech issues

The technology and equipment you rely on as a business won’t always work seamlessly. One considerable risk for market entry involves technology failing to get the job done effectively in a new market.

One example is the Internet of Things devices, which can be powerful assets for businesses when monitoring conditions and optimizing processes in manufacturing. However, if your devices or networks fail, it could cause a significant setback.

If you’re looking to enter a developing country, it’s worth bearing in mind that technological infrastructure can differ greatly from your home country. In some countries, we’ve seen a leapfrog effect, where newer technologies have been adopted to a greater extent, as there are fewer issues with moving away from legacy systems.

Cash flow problems

Entering a new market requires a lot of financial resources, and if the supply of money is interrupted or halted, it can cause major problems for your operation. If not promptly dealt with, internal issues like this can quickly stop a market entry attempt.

External risks for market entry

Businesses must contend with many external risk factors and risks that stem internally within their organization. These can be much more difficult to control and are often unpredictable.

Regulations

It’s essential to be aware of and comply with the local laws in your chosen market. One recent example is Europe’s GDPR law which requires anyone doing business with European customers, or any company based in Europe, to adhere to strict data privacy rules.

Local regulations and requirements are often overlooked — and this can be especially tricky in emerging markets where regulations can be harder to interpret if you’re unfamiliar with the landscape.

Failing to keep up with regulations can be high — the maximum fine for GDPR violations is €20 million or 4% of your annual global revenue. A mistake here can seriously damage your entire company, not just your new market activities.

Politics

Politics can be hard to predict anywhere in the world, although businesses can be reasonably confident that radical changes won’t disrupt their market entry efforts in stable regions.

However, all bets are off in less stable parts of the world. Revolutions, wars, and sudden and significant new legal changes are just some of the political risks you must contend with when entering a new market.

Sudden changes to government can have severely damaging effects on your business. One example is when Fidel Castro’s government took control of Cuba in 1959, seizing hundreds of millions of dollars of US-owned property and companies.

Social unrest

A country (and a market) is nothing without its people. Events involving social unrest and widespread disruption are constant sources of risk for businesses in many markets around the world.

Riots, protests, and revolutions can cause damage to premises and shut down businesses for long periods, while nationwide strikes can leave you without a workforce. It’s crucial to have a plan of action to ensure survival during civil unrest.

Major non-violent social movements and trends can also impact your business. If you fail to show solidarity or are perceived as insensitive to a specific public sentiment, this could cause reputational damage.

Cultural differences

Entering a new market often involves introducing your business to an entirely new culture, which comes with a whole host of new risks.

Brands need to be aware of different customs and cultural nuances. Failing to adapt can impact how your products and services are received in the new market. You’ll need to consider how culture will affect how your new customers will receive your marketing. A television commercial beloved in Western cultures might be perceived as grossly insensitive in more conservative cultures.

It’s easy to get excited about entering a new market and the potential it might offer your business, but you need to do your research upfront. Is there actually a market for your product? Will it need to be adapted for success? And at what point does this become unfeasible?

Knowing when not to enter a market is just as important as knowing when to invest.

Natural disasters

It isn’t just people that businesses have to worry about when entering a new market — nature itself is often working against them. Natural disasters are a significant source of risk when establishing a presence in certain parts of the world.

Hurricanes, earthquakes, floods, droughts, and many other disasters can quickly stop any market entry effort. They can destroy property, interrupt shipping, and close down entire economies in hours. Worst of all, it’s often impossible to predict when the next disaster will strike.

One way to mitigate damage is through insurance, although coverage in developing countries has historically been low. Research shows that only about 1% of natural disaster-related losses between 1980 and 2004 in developing countries were insured, compared to approximately 30% in developed countries.

Market issues

There are several external risks in the market. These can take the form of unexpectedly tough competition, fluctuations in the cost of services and resources your business relies on, and volatile exchange rates, leaving a dent in your profit margins.

Legal Risks

There are many legal risks to consider when entering a new market, and this type of risk encompasses internal and external activities.

Every region in the world has its own set of laws and regulations, which can change significantly even between parts of the same country. For example, it’s legal in many U.S. states to sell cannabis; however, this could carry a severe penalty in others.

Some legal risks to consider are lawsuits, patent rights, and data privacy regulations. To ensure you stay on the right side of the law, you must work with local lawyers in your target market. A major legal setback like a big lawsuit could end your market entry campaign, so ensure you stay on the right side of local laws.

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Barriers to market entry

As well as risks, there are also multiple market entry barriers to consider. Fortunately, these are far more predictable than the risks mentioned above. It’s almost guaranteed you will encounter these obstacles during your market entry journey, so it’s easier to prepare for them.

There are many barriers, but we will cover two of the main ones here – costs and marketing challenges.

Costs

Entering a new market is a costly endeavor. You’ll generally need considerable resources to make this happen, and costs can be much higher than expected.

Some market entry campaigns cost less than others — trying to reach a domestic demographic with your product is more financially workable than establishing a solid presence in a foreign market such as China.

A successful market entry will allow you to make back your investment over and over. But it’s important to understand what costs you might need to consider when entering a new market.

Export and import costs

Moving to a new overseas market typically involves a certain amount of moving goods across borders. Even if you establish a manufacturing base in your new market, there will be costs associated with importing certain materials and goods from your home market.

Switching costs

This refers to the cost involved in switching to a new supplier, brand, product type, or alternative. You might have to do this a number of times when entering a new market, and these costs can add up quickly.

Marketing costs

Reaching your target audience in a new market will require a certain level of expenditure, depending on how well-known your brand is. For example, KFC opening a restaurant in a new region will have less work to do than a smaller and less famous company. Costs include market research, advertising, digital marketing, and analytics.

Access to distribution channels

This is how you make your product available to your customers. Accessing and managing a distribution infrastructure in a new market comes with various costs.

It’s important to anticipate as many costs as possible when entering a new market. Even if you do a great job of this, it’s likely that some costs will still spring up and take you by surprise. Make sure you have the financial resources available to handle these unexpected expenses.

Getting your marketing right

As well as the many costs associated with market entry, another barrier facing companies involves marketing.

Marketing is essential to make your voice heard and your product known in your new market. You need to immediately start connecting with your target customers across various channels and establish your brand as an option.

Marketing in a fresh market comes with a range of challenges. We already covered costs above, but here are some other key marketing considerations:

Demand

Before you even set foot in a new market, do enough people want to buy your product? Your marketing campaign will be an uphill struggle if there isn’t existing demand for your offering. It’s much easier if people are already clamoring for what you have. This is where market research is crucial for helping you to size the opportunity.

Competitors

Entering a new market means — most of the time — walking onto another company’s turf. You’ll need to show your target audience that you can offer something better than your competitors.

Brand identity

Your brand has an identity; it can take a lot of work to import that identity and everything associated with it into a new market. How do you establish yourself in a certain way and send out the right message to your potential customers? Again market research is vital here to understand what to retain and what to adapt.

Customer loyalty to existing companies

We already mentioned your competitors. Many of the customers in your new market will have existing loyalties and strong ties to them. Luring customers away from a brand they have used and loved for decades is much more complex than simply attracting a new customer to your brand. You must stand out, offer something extra, and communicate this clearly. It’s worth paying attention to your competitors and what people like about them.

How will you reach your audience?

Consider how the people in your new target market get their information and spend their time. For example, if you’re targeting an older demographic, investing heavily in influencer marketing might not be a good idea. On the other hand, magazine and TV ads may work to great effect.

Cultural issues

If you’re expanding into an overseas market, you’ll need to consider the differences in culture and how this affects the tone of your marketing. Make sure your messaging doesn’t come across as offensive or inappropriate or appear tone-deaf due to a lack of understanding about cultural nuances and norms. Understanding cultural differences is an area where it pays to work with people who understand the culture intimately. Take the case of Starbucks — whose attempt to break into the Israeli market fell flat due to hubris and a lack of understanding of what the Israeli customers wanted.

Marketing can take a lot of work to get right, which is even more true when entering a new market. The most important thing is to research your new market as heavily as possible and gather as much information as possible before beginning your campaign. Also, be prepared to adapt your approach as you go along in response to data and feedback.

Market entry always comes with a massive amount of risks and challenges. No business can escape this, not even those with a global presence.

But when you get it right, you can reap significant rewards.

Kadence has helped companies of all shapes and sizes research their target markets and gather all the intelligence they need to lead an informed and successful market entry campaign. To find out how we can help you do the same, check out our guide to market entry or get in touch today.

How do you enter a new potential market?

Expanding your brand into new markets allows you to reach potentially vast numbers of new customers and grow your revenue massively. However, the process can be complex and filled with complications.

A market entry strategy maximizes your chances of success when moving into a new market. In this article, we’ll look at some reasons to consider moving to a new market, the differences between domestic and international markets, and some strategies you can use.

Market entry defined

Market entry strategy is a plan to expand the visibility and distribution of a product or service to a new market. Market entry research helps brands to expand into new domestic or international markets where the competitive, legal, political or cultural landscape might be less known.

Market entry research is the path to understanding a new market. It helps brands identify different success factors, reveal potential challenges, and discover hidden potential opportunities.

Why move to a new market?

First up, why should you consider moving to a new market in the first place? It’s challenging and expensive, so what are the reasons that make it worthwhile? Here are some of the main ones:

You’ll gain more customers and make more money – The number one reason to consider new markets is to grow your business and increase revenue by selling more products to more customers.
There might be no more opportunities for growth in your home market – If you’ve maxed out what your local market is capable of in terms of revenue, expanding to new markets may be the only way to grow.
You’ll reduce risk by diversifying your business – If one market suffers for whatever reason, you’ll have others to keep you going.

Domestic markets vs. international markets

Are you planning to enter a new domestic market or take your products overseas to sell in a foreign country? The approach for each of these will be very different.

Domestic markets

Typically, this will be much easier than entering an overseas market. The culture will be the same, everything will be geographically closer, and things will likely be very similar to your existing markets.

International markets

Global expansion is where things become more complicated. You’ll have to factor in several differences in how you currently run your business. These include:

Cultural differences
Administrative differences
Economic differences
Logistical challenges involved in transporting goods abroad

Things to consider

Before you enter any new market, it’s crucial to take some time to confirm whether you can afford the move. Can you afford the costs of exporting, working with intermediaries, tax, and all the other expenses involved? And what proportion of the market can you realistically expect to be able to serve?

You must also consider if the product or service will work in your intended market. Market research (both online and offline) plays an important role here — ensuring demand for your product justifies the export cost.

Risks of entering new markets

There are also numerous risks involved in entering a new market, including:

Country risks, like the possibility of political unrest, sudden changes, or financial issues that could impact your business.
Foreign exchange, such as the possibility of currency exchange rates changing, could seriously affect your bottom line.
Cultural risk, which essentially means the possibility of your new business venture running into challenges due to significant differences in culture and customs.
Weather unpredictability. Are you moving into a market where natural disasters and weather conditions could cause damage to your facilities and cost money?

Once you have carefully researched your new market and weighed the potential risks, you may decide it’s worth entering. If so, there are several different strategies you can employ, each with its pros and cons.

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Different market entry strategies

Direct exporting

Direct exporting is where you ship your products to the new market directly. You’ll have to handle all aspects of the process independently, from transport to payments to operations in the new market.

This method requires more resources and time compared to working with an intermediary. You’ll need to create an exporting infrastructure, train employees, and make and receive international payments, among many other challenging tasks.

On the plus side, this approach maximizes your profits as you don’t need to pay any third parties. You’ll also have complete control over your sales and marketing processes.

Indirect exporting

Indirectly exporting involves working with an intermediary. It has some advantages, such as:

Much lower risk. An experienced third party will take care of the exportation process, which minimizes the risk of failure.
You can focus on your own business and domestic markets without being occupied by your new ones.
Fewer resources are required on your part.

On the other hand

Profits are lower since you have to pay your intermediary.
You’ll be disconnected from your customer base, so you’ll miss out on important insights and lessons.
You’ll lose complete control over sales and marketing abroad.

There are several different options when it comes to indirect exporting. Here are some of the most common ones.

Indirect exporting with buying agents

Buying agents are representatives of foreign companies that want to buy your products. You’ll work through them when selling your products to your new market.

They’re usually paid by commission and will try to negotiate the lowest possible price. Sometimes, buying agents are government agencies.

Indirect exporting using distributors

You can sell your product directly to distributors or wholesalers, who will then distribute the product to retailers.

Indirect exporting through the management and trading companies

Export Management Companies (EMCs) exist to take care of all your export and sales processes in your new market.

It’s worth taking some time to research and find the correct EMC, as most specialize in a particular market and region. They’ll help you identify markets, find customers, handle all shipping and logistics, and more.

Indirect exporting through piggybacking

Piggybacking is where you allow another non-competing company to sell your product. This can work exceptionally well if the partner company already has a customer base and distribution infrastructure in your target market.

You’ll get immediate access to your new market but for a fee.

Producing products in the target market

Another option is to manufacture your products within the target market. This saves you the cost of transport and the many logistical challenges involved in exporting your product abroad.

However, you’ll also need to consider the many challenges in manufacturing your product abroad, legal issues, costs, possible risks, and more. Depending on your situation, this could be a good option.

(For more information on the most effective strategies for entering a new market, check out our top four marketing strategies article).

Franchising / Licensing

While franchising is often associated with fast food or quick-serve restaurants, it can successfully aid expansion in many different categories.

Franchising is where a semi-independent business owner (the franchisee) pays fees and royalties to the franchisor to use a company’s trademark and sell its products or services.

While franchising and licensing are both business agreements where certain aspects of the business are shared in exchange for a fee, a licensing agreement is typically more limited.

Entering a new market can be extremely rewarding and allow your business to move to the next level and achieve new growth. It’s essential to research all the options and ensure the export strategy you deploy is the safest and most effective for you. You’ll also need to thoroughly research the market to understand its potential and position your product for success, something we cover in our Ultimate Guide To Market Entry.

Kadence can help you do that. We have extensive experience assisting businesses by conducting game-changing research to create effective strategies for market entry. To find out more, learn about our market entry services or get in touch.

Market entry is the process of entering a new market, whether at home or abroad. There’s a lot to consider when taking this step, and it’s certainly not a simple process. In fact, for every successful market entry, about 4 will fail.

A new market doesn’t necessarily mean a new geographical area. It could mean selling your product or service in a new language or targeting an entirely new demographic of people. If you do choose to move into a new part of the world — especially if it’s abroad — this comes with its own unique set of challenges.

In this article, we’ll dive into a market entry and some of the challenges involved. We’ll also cover some steps you should take to maximize your chances of success in your new market.

Why enter a new market?

There are lots of good reasons why you should consider expanding beyond your current market. Some of the main ones are:

You want to gain more customers, grow your company, and increase your revenue. This is the most obvious reason — new markets represent untapped opportunities for growth and to make more money.

You’ve hit a ceiling in your current market. Perhaps you’re struggling to grow more where you currently are, which is an impetus to seek out new pastures.

There may be a legal requirement to offer your product in new markets. For example, you might be required to sell your product in different languages.

To keep up with competitors. If your competitors are expanding into new markets, you risk being left behind if you don’t do the same.

Domestic vs foreign market entry

Domestic markets will likely be quite similar to your existing markets, whereas international markets present some new challenges to overcome, such as differing cultures, laws, and languages.

However, foreign markets can also bring great benefits and the opportunity to become a truly global brand. If you decide you are ready to take the plunge and expand overseas, this will come with a whole host of brand new challenges.

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How to excel at market entry

Research the market

What is the size of the market? What is its growth rate? Where is the market heading and what are the key trends to watch? These questions can help organisations understand the potential return involved in entering a new market and are typically answered by a combination of desk research, interviews with industry experts and primary research.

Research your customers and what they want

This is important at any stage of business, but it’s especially crucial when entering a brand new market. The more different your new market is from your current one, the more important this step is.

How do you get to know your customers?

Focus groups
Online surveys (and other quantitative research methods)
In depth interviews (IDIs)
Telephone depth interviews (TDIs)
Online communities (and other online qualitative research methods)
Ask your sales team for their experiences of customers’ opinions
Spend time in that market. There’s a lot you can learn – from better understanding consumer behaviour to getting a grip on the competitive landscape

In your research, you’ll need to consider a few key questions, such as:

Will your product work in the target market? What works well in your current market might not take off at all somewhere else. Is there any real demand for what you’re offering, and does it justify the cost of entry?
Will you be dealing with different demographics of people? Will they have different pain points, goals, and budgets? How will you address these differences?
Will you need to adjust your marketing strategy or move to new channels? For example, if you’re trying to move to an older market, social media marketing might not be the best approach to take.

Research the competition

Who are your competitors in your new market and what are they doing? These will likely be different from the competitors in your original market, but this may not always be the case.

Entering a new market, you’ll immediately be at a disadvantage to established companies. You’ll need to overcome customers’ long-term brand loyalty and familiarity with other products, and you’ll be competing with brands that already know the landscape well.

You’ll need to work hard to beat your competitors while also fitting into the new market. As such, it’s worth spending time and resources so you can find out as much as possible about your competitors and learn from them. One advantage of being a new entrant is that you can avoid the mistakes other players have made in the past, helping you to optimise your strategy and get ahead.

Understand the culture

When moving overseas to a new market, the cultural differences can be vast. If you want to succeed, you’ll need to make sure your business is on the same cultural wavelength as your new market.

This means adapting to the culture and customs. The best way to do this is by working with people on the ground – or indeed by spending time there and getting a feel for a new place. We have offices across Asia, the US and Europe, so when we work with clients on market entry projects, we’ve already got a deep understanding of the culture of the market they want to target, which can be a huge advantage.

Understand the local laws and regulations

When moving into a new market, the last thing you want to do is run afoul of the local laws. For example, the EU’s GDPR regulation, built to protect the data privacy of EU citizens, applies strict rules for businesses. Failing to comply can result in a hefty fine.

It’s best to work with a local lawyer who can advise you about all the regulations you’ll need to be aware of and help you navigate this new legal landscape.

Have a clear future plan

When you enter a new market, it’s important to have a clear idea about where you’re going. How are you going to grow and scale? 65% of startups fail because of premature scaling — how will you make sure you grow at the right pace?

Take some time to put together a clear roadmap and market entry strategy that will ensure you develop and grow in your new market in exactly the right way.

Entering a new market is always fraught with challenges. It’s best to work with a team of experts who can help you formulate a strategy that works — guiding you through the complex and demanding process of making a move.

At Kadence, that’s our job. We’ve worked with countless companies, helping them lay the groundwork for a successful move into a new market. To find out how we can do the same for you, read more about market entry in our comprehensive guide, explore our market entry services or just get in touch today.

Many global economies are defined by stagnant growth, falling populations and saturated markets, making growth for brands a tricky proposition. In many ‘emerging markets’ there are still big opportunities grow… if you keep your eyes open.

Many businesses are looking to fast-growth, high-energy markets outside the so-called ‘developed’ economies to fuel their expansion. Unlike congested and sometimes shrinking economies in ‘the west’, many parts of the world are seeing rapid population growth, fast-rising incomes and are adopting transformative technologies without the burden of legacy investments. The result? Vibrant new opportunities for businesses.

But while entering any new market is a challenge for brands, moving into these more dynamic economies – often with very different cultures, business practices and consumer expectations – can be particularly tricky. Berlin isn’t the same as Birmingham, but many of the norms in both markets are recognisably similar. Head to Beijing or Bamako, and the assumptions you make about brand, product and business practices will be challenged.

Take a phased approach to understanding the opportunity afforded by new markets

The best way to understand your opportunity in different markets is to take the traditional phased approach to research. This involves the following considerations.

Which markets might we look at? Consider the number of consumers, the country’s income levels and the stability of its economic and political structures. You can also examine the maturity of business practices and think about geographic location, transport links and accessibility in-market.
What’s the macro environment like in a market we want to enter? Revisit all the above, in more detail. Focus on specifics – such as the transport and tech infrastructure; and business support networks (such as accounting firms or legal protections on IP) – and how the trends are evolving in those areas.
How does the competitive landscape affect its attractiveness? Pay attention to other outsider brands and how they’re doing; but also domestic rivals and potential competitors poised to move into adjacent markets.
What are the practical issues for market entry? In new markets further afield, transport links, language barriers, different cultural norms and local regulations can throw up roadblocks.
How do we adjust our product, service or messaging to optimise our offer there? As above, but remember that very different cultures and climates can challenge even the most basic assumptions about how a product will perform.

Step away from the generalisations

It’s vital to acknowledge that ‘emerging markets’ aren’t as uniform as the term suggests. Far from it. There are so many variations by region or category that talking about common features of ‘emerging markets’ is a dangerous over-simplification. And there are as many differences within countries as between them. This particularly true in countries where rapid urbanisation has seen a break with traditional cultures outside cities.

(That’s true for any generalisation, of course. Alcohol brands, for example, can’t even treat the US and Canada the same. North of the border, there are drinking-age laws set province-by-province, massively complicating online alcohol sales. They might look the same in terms of development and even geography and demographics. But they’re not.)

That’s not to say there are no rules that apply to entering markets that share particular attributes. The pace of economic or population growth, or the expansion of middle-class consumers with disposable income, might always be a feature of your selection process for target markets.

But in many categories, consumption is growing so quickly that only the real beneficiary of a ‘toe in the water’ market entry is likely to be knock-off brands and domestic substitutes able to adjust output more responsively to local conditions, especially where legal protections for intellectual property are less secure for global players.

All these caveats mean that in-depth research into new-market consumer appetites, infrastructure and competition is just as important in growth areas as it is in more mature markets.

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Assessing new markets – 5 key considerations

All that being said, knowing the likely biggest points of difference when entering markets with strikingly different fundamentals is still important. Five things to consider:

1. Affordability

In many emerging markets, disposable income may be much lower for large parts of the population. For global products, that means understanding the more affluent segments better and targeting marketing appropriately. For localised or commodity products, the question is cost. Can you use local manufacturing, logistics and even branding to deliver your product to a mass market?

2. Distribution

Getting product to consumers might be more challenging. For brands that rely on developed economy logistics partners, understanding infrastructure constraints, developing local contacts and ensuring quality of service is crucial. When Haagen-Dazs first entered China, it set up its own warehouse and delivery network to ensure the product reached consumers correctly.

3. Localised branding and marketing

What works well in Boston, may not succeed in Beijing. Cultural understanding is key to ensuring that your marketing and branding hit the spot further afield. Caveat: remember the urban/rural split. Many urban consumers are ‘world citizens’ and expect to be treated as such.

4. Watch for local rivals

The cachet of being a global brand can help enter emerging markets. But cost, customisation and the risk of ‘brand colonialism’ can make more assumptive Western brands seem out of touch and vulnerable to local alternatives.

5. Native teams

As a global market research agency, we benefit from having local teams in the markets we evaluate for clients. This means we understand the cultural context, consumer trends and broader macro situation. It is possible to enter emerging markets at arms’ length. But having local people in decision-making positions is the surest way to avoid clumsy cultural or operational missteps.

Look for leapfrog opportunities

There are plenty of upsides to emerging markets, too, beyond simply vast numbers of new customers. In some cases, our research will throw up opportunities that just aren’t available in mature markets at all.

Look at the way different platforms have developed to cater to the nuances of local markets, for example. In many fast-developing economies, traditional channels have been leap-frogged by the adoption of newer technologies. This often happens where older tech infrastructure has attained much less penetration, allowing a newer tech to fill a void.

In many African countries, for example, low population density and long distances between conurbations means traditional copper or fibre telecoms can be limited. But mobile telecoms are more practical and affordable. They offer a plethora of additional over-the-top services that have led to an e-finance and e-commerce boom. Entering those markets will require different thinking about distribution – as well as marketing and payments using creative local solutions.

Remember, e-commerce is not the same everywhere

The Philippines is another good example. In other countries, Facebook might be just part of your online marketing toolbox. But there, Facebook has attained an absolutely dominant position in e-commerce – for one simple reason. With lower average incomes, Facebook and local mobile companies realised their penetration was constrained by the cost of network data. So almost every plan has free Facebook data regardless of contract status. For market entry success in the Philippines, Facebook is going to play a big role.

But we need to distinguish between being available on those platforms on the one hand; and entering a market on the other – which involves boots on the ground. Yes, that’s more investment. But you’re also surrendering less of your margin to platform owners and logistics providers.

A staged approach to entering less well-understood markets, starting with the more popular local social networks or e-commerce platforms, allows you to refine the consumer profile. Companies also get time to get to grips with the legal and financial frameworks that might shape future involvement; and see how local fulfilment clarifies their operational options.

Don’t assume that tried and tested e-commerce strategies from the US and Europe will work everywhere in the world, however. Amazon, for example, simply doesn’t have a presence in some markets. In others, consumers can use the site, but limitations on distribution and other logistics mean delivery times, cost and availability are prohibitive. Local research about the best platforms for reach and fulfilment is a must.

Lazada, Shopee, Zalora and Carousel, are some of the top e-commerce sites in South East Asia. These names may not be familiar to firms outside the region. But they can play a crucial role for testing in these markets. Again, it’s worth working with people who understand how to optimise those platforms, as well as interpret the effectiveness of marketing on them; and what the results say about the potential for deeper market entry.

Understand the technicalities of new markets

Even online entry into a very unfamiliar market can be daunting. Moving in for formal distribution, licensing or agent agreements or even setting up locally or buying into a native business brings with it additional issues that need to be researched.

European companies with experience of entering new markets in the EU can find the regulatory and legal considerations in countries farther afield a challenge. Even in the US there are federal laws and individual state regulations over companies and property to contend with. This can make establishing a new business relatively tough. And that’s considered a ‘developed’ market.

In parts of South East Asia, many European companies report lengthy delays in registering businesses. Others discover that in some markets domestic firms have particular benefits. This could be a form of protected status, or reserved access to certain kinds of contract. This is worth exploring in due diligence especially if you plan to sell to government agencies that are often required to ‘buy local’.

Don’t make any assumptions

Most of the key factors for market entry will depend on exactly which market you’re looking to enter. There are very few hard and fast rules that apply across the generalisation ‘emerging markets’.

But there is a common theme from this guide that should frame your thinking: these markets change – fast. Before committing to entering any market – and especially ones evolving so rapidly – it really pays to research the opportunity fully. This is something that Kadence has helped many clients with, allowing companies to succeed in lucrative emerging markets. Find out more about our market entry services, or get in touch to discuss a project.

It makes sense to open up new markets for a successful product or service. But how do you know whether it’s worth the investment? What makes for a potential buyer in your home territory might not apply in a new location where the total addressable market could be much smaller or many times the size. Enter the market researchers. We explain how to calculate market potential.

Estimating sales can be a chore even when you have historical and well-honed market instincts to work with. But in a new market this is even harder. There’s no historical data to review and it’s challenging to estimate the kinds of expenses and risks that might crop up.

An inability to judge sales makes the decision of whether to enter a new market much harder. Without a decent estimate – of both sales and likely profits – it’s almost impossible to decide on how you might enter and what kind of investment to make there.

What’s the market really worth?

The starting point is to get a handle on the existing market for your brand or product in the new territory. A basic market analysis is a great starting point. Typically it breaks down into:

Market sizing (current and future)
Market trends
Market growth rate
Market profitability
Industry cost structure
Distribution channels
Key success factors

But within each category, there’s lots to research. A more superficial look at the data can be helpful for a ‘first cut’ look at which new markets you might want to enter. But a deeper dive into the numbers will be essential if you’re going to properly evaluate the strategy for what looks like a high-probability candidate.

That more sophisticated analysis could take the form of a total addressable market (TAM) analysis. This looks at both the TAM itself, as well as serviceable available market (SAM). This is the portion of TAM that your company’s products or services play inside; and serviceable obtainable market (SOM), the percentage of SAM which your might realistically reach.

Best guesses?

But getting to SOM for a brand new market isn’t a simple calculation. It’s not exactly easy in markets where you’re a known quantity and understand the competitive environment, either! For businesses in mature categories and with previous experience of being a new entrant to markets, it’s possible to make educated guesses. This can be refined with local research on factors that might shape consumer behaviour.

In some industries that data might be possible to obtain – from industry associations, for example, or government agencies. In others – and particularly in product segments that a relatively underdeveloped in the market you plan to enter – sales figures might be harder to come by.

Then there’s the difficulty of calculating market share. You will know what it might cost in contracts, infrastructure and marketing to build share in existing markets. But the assumptions may be way off-base for a brand new market.

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Talk to people

At this point there are two avenues:

Research sales results that have been achieved by other companies like yours. They don’t even need to be in precisely the same line of business. The lessons of other companies looking to sell into the new markets can reveal both the optimum routes in, the barriers to adoption and the appetite for new brands.

That might even mean contacting other businesses to ask their experience of making the adaptation to the new market – as well as learning about potentially important busy and slow seasons, noteworthy business practices and quirks of the system that might not have a direct bearing on the size of the opportunity, but will allow you to adjust your assumptions.

Talking to local partners, however, is probably the best way of calibrating your expectations. Even if you plan to enter a market by establishing a local entity and investing in your own facilities and marketing, you’ll still be working with many different counterparties. This can span everything from local professional services firms such as lawyers and accountants, to warehousing, distribution or media buying agencies.

They ought to be able to offer anecdotal evidence at the very least; at best, they’ll have insights into the size of the market and chances of capturing that crucial market share. And if the route to market entry is contracting with a local distributor, licensees or franchisees, their sense of the opportunity could be invaluable.

But above all, rigorous quantitative and qualitative market research will reveal a great deal about attitudes and appetites for your brand or product. The more you can contextualise the hard data on existing spend and potential market growth with consumer insight, the more realistic your evaluation will be.

Focusing on behaviour

One other way to address uncertainties about how a new market might embrace a product or service is to think not about that category, or even look at domestic rivals’ sales and strengths. It’s to create a strategy based on consumer behaviours.

If you can analyse why your brand, product or service is successful in its existing markets and break down the results into some key motivators or even behavioural traits of your consumers, it might be possible to assess where those traits are visible in a new market before you enter. In what situations is your product used? What type of people love it? What are those customers’ attitudes across different domains? What role does it play in their lives – and why?

That will require some pretty deep insight into the market you want to enter. Clearly it’s a more useful investment to make if there are other positive signals to encourage you in – fundamentals such as infrastructure, spending power or pre-existing local interest in your brand or product.

How good is your cost analysis?

Knowing your potential sales, market share and growth are all important. But the scale of the opportunity isn’t just sales – it’s profit. And even seasoned businesspeople can misstep when it comes to keeping costs under control in their market entry strategy. Here’s a brief list of costs that won’t affect domestic-only businesses:

Shipping costs – which can also fluctuate wildly, as we’re finding out during the COVID-19 pandemic. Consider, also, capacity. Shipping out of markets with a high balance of trade deficit (Europe, US, UK) to major exporters (China, for example) is much easier than going the other way.
Legal expenses – from registering a business in a new location, sorting out licensing, contracts, the right insurance cover… and complying with local regulations on everything from product labelling to anti-bribery laws.
Foreign taxes – and other local accounting quirks, which might be different depending on your headquarters domicile and the mode of entry into the market.
Translation services – for everything from contracts and technical specs, to instruction manuals and marketing.
Recruitment and HR – even a light-touch market entry will benefit from putting some employees into the new market to oversee set-up and manage local relationships.
Travel expenses – for the above, but also for ongoing check-ins with local teams or business partners.

What do you know about rivals?

Some lucky businesses will find an overseas market where there are few local rivals, legal and business structures that allow them to port across their defensive attributes from existing markets and a ready but as-yet-untapped consumer base. But those will be rare. So to properly understand the market potential, you’ll need competitor analysis. Our typical approach to this considers:

Who are your rivals in that market? Not just currently selling what you want to sell, but addressing your potential customers, too.
What is their range of products? How easily might they change?
How do they pitch their consumers? What messages are they using? Which channels?
What is their competitive advantage? What’s their cost base like? What could you replicate – and where can you out-compete them?
What’s their market share? How fragmented in the competition? What opportunities does that present either in terms of the industry cost-base or even acquiring smaller rivals?
What is their company structure? If they outsource (for supply or support) or license (to address the market), could those be vulnerabilities increasing your potential strength?

In summary

A lack of prior experience and knowledge can make it challenging for companies to assess the potential of new markets. We help lots of business overcome this – not just through the use of primary and secondary market research, but also by having people on the ground in many countries and regions to add specific local knowledge.

This creates a much more rounded view of the market potential – and the optimum ways to tap into it – than simply applying a cookie-cutter approach to market entry. The key steps:

Understand the demographic and economic drivers that underpin the total market for your products or services.
Think laterally about the broader factors – such as the types of consumer and cultural attitudes – that dictate market size.
Analyse existing market activity to deduce a TAM, SOM and SAM.
Conduct consumer research to evaluate your specific opportunity in the market.
Competitor intelligence will help you test assumptions about potential market share gains.
Rigorous local insights into costs and risks will reveal the profit potential – the ultimate rationale for market entry

Find out more about our market entry services, read our expert guide to market entry or get in touch with us to discuss a project with our team.

How you enter a market often dictates whether you’ll be successful there. Different approaches all have pros and cons – and deciding which to choose is as much about market insight as it is financial logic. So what are the four market entry strategies?

Export? Licensing? Franchising? Partnering? JVs? M&A? There are many ways to get into a new market. What situations typically suit each variety? What do you need to know about the market to select the most appropriate options? How do we assess the strengths and weaknesses – and their long-term effect on your business? Here’s our brief overview of your options for an entry strategy into a new market.

Early exposure: the passive way in

Online retail – and social media these days – mean brand exposure in new markets has become relatively easy. Social media shopping, for instance, is becoming an increasingly popular entry point for brands into new markets, particularly if they’re picked up by influencers. This could be by traditional media outlets (like fashionable magazines), web-based trend-setters (such as popular tech review channels on YouTube) or specialist social media influencers on global platforms such as Instagram and TikTok. Most markets have their own versions of these channels – and there are plenty of popular global options, too.

(Caveat: many global influencers, and those within markets, may need inducement to feature products or services. While ‘accidental’ market exposure is possible, you’re still likely to need some kind of strategy for this kind of introduction.)

But e-commerce can be a double-edged sword. Yes, consumers might get exposure to a brand online. But if it’s not available in their market, they can end up buying the next best thing that is available. Your brand could be doing an excellent category building job for local rivals.

It’s also worth looking out for platforms that are not global. In many markets, local e-commerce platforms have emerged. Any attempt to exploit the market will rely on having access to it. (We look into that further in our guide to entering emerging markets .)

In addition to working with local platforms, brands need to consider carefully how to fulfil orders and handle customer relations. Managing all these elements through third parties in a straight commercial relationship can work well. That said, there’s a massive gulf between entering a market virtually via e-commerce and getting ‘boots on the ground’.

That’s not just about commitment. Each of the third parties you work with is taking a chunk of your profit margin. And in some cases – particularly with perishable or heavyweight products, and especially services – the arm’s length approach just won’t work. To access that pool of consumers, you’re going to need a local presence. Here are some main routes in.

1. Structured exporting

The default form of market entry. Consumers and companies in other markets can easily buy your products wholesale, sort out logistics and handle local marketing. Increasingly, brands can ship internationally – riding the kind of passive market entry discussed above – but assigning a local trusted distributor to conduct transactions with your buyers, and even partnering directly with major wholesalers or retailers, is a perfectly good way in.

Working with the right partners can be a make-or-break decision. So thoroughly researching the key players, their terms of trade and their local reputations is vital. Even seemingly innocuous business practices can have a big effect on the way products are handled, sold and supported.

Having local agents doesn’t mean you can ignore the nuances of the local market. It still pays to get under the skin of local retail, for example, understanding any patterns of consumption and thinking about local tastes and behaviours that might shift how a product is presented. Even in an arms-length distribution agreement, it pays to tailor a product to local preferences. Chocolate brands, for example, must cater to both local biases on the flavour and texture of their product – but also the local climate. Getting under the skin of target consumers in new markets is something we’ve supported many businesses with as they’ve entered new territories.

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2. Licensing and franchising

Licensing is giving legal rights to in-market parties to use your company’s name and other intellectual property. Any licensee can produce and sell products under your name or offer services using your brand. In exchange, you get royalties or other payments. It can be an effective light-touch way of entering a market, especially if you’re a service business that needs a local workforce; or your products would benefit from local manufacturing.

But it’s not all plain sailing. How a licensee behaves towards customers, the quality of their output and the local spin they put on your product can affect the brand. That means thorough due diligence is needed on potential partners, and brands that come to the table with detailed research on their new market are much more likely to be able to tie down any important factors affecting those decisions into a contract.

Franchising is similar to licensing but requires a lot more heavy lifting up front. As well as researching any new market before entering it, brands should think about how they will structure any franchise agreement – which will require additional research into local legal structures and potential franchisees; working out what the franchise buys (for some businesses it’s little more than a licence; for others, it’s a suite of processes, marketing support materials and even hardware that come with the deal); and how they might be able to handle disputes with franchisees later.

3. Direct investment

For many companies, setting up a fully-fledged operation in the new market is a big commitment – but also brings huge advantages. This kind of ‘greenfield’ investment – ‘greenfield’ meaning the establishment of new facilities – means complete control over the operations in the new market. Many countries welcome foreign investment of this kind.

Some companies will choose only to enter new markets where this kind of investment is possible – for a variety of reasons. If the product is particularly sensitive to different kinds of handling, for example, or needs to be manufactured to particular tolerances, ownership provides a reassuring level of control.

If that’s the case, the legal and regulatory burden of different potential markets should be a factor in the due diligence process right at the outset. Having local legal and financial advice, in additional to in-market research expertise, is essential.

4. Buying a business

International M&A is still fraught with risks and paperwork, but even in a bad year – 2019 is the last we have figures for, and we might expect 2020 to be an outlier one way or another – cross-border acquisitions accounted for $1.2 trillion. (A ‘bad year’? That was a third lower than the US$1.8 trillion in deals in 2018.) The reason? Buying an existing business is a genuine fast-track for foreign companies to enter a new market.

Market research plays an even more important role in due diligence when you’re buying a business in unfamiliar territory. The traditional metrics you might assess – and even the gut feel of key decision-makers – have to be translated through completely different lenses of cultural and market norms. (Due diligence isn’t easy on domestic M&A deals; it’s much tougher abroad…)

That’s also true, to a lesser extent, with buying a minority stake in a business in your new market. This might mean less up-front investment albeit with less control, too. But in both cases, you’re also buying into local market expertise – which can be invaluable.

That’s also the big benefit of setting up a joint venture (JV) – a new partnership between your company and one or more parties where the ownership is shared. You get the benefits of a greenfield start-up; a lower investment than M&A or setting up on your own; local expertise baked in; and legal status as a native in the new market. Many businesses see a JV as a turnkey project: each party brings existing expertise and capabilities to bear for fast deployment.

But be warned: joint ventures only thrive when the contractual commitments of each partner and the beneficial ownership structures are crystal clear. And some big brands have come unstuck in joint ventures where the local partner’s vision for the product or service deviates from their own. Conflict resolution mechanisms are a must. Unsurprisingly, joint ventures are more common in time-limited projects where several contractors need a legal entity to collaborate on a very specific mission – and have clear terms for the joint venture’s dissolution.

Building your intelligence network

The choice of entry route will be dictated by many factors, then – consumer habits, culture, legal status, taxes and tariffs, local business practices, the transparency you can attain around potential partners and more. As a rule of thumb, the less exposure to cost and risk you have, the less control and margin you can secure.

Arms-length surveys and analysis can only tell you so much, however. Working with international agencies who have their own people on the ground in a new market not only means better access to the nuances of consumer behaviours and local trading rules – it also means dealing with people who have first-hand experience of running a business in that market. This approach has enabled to us to successfully support clients in entering new and lucrative markets.

You can learn more about our market entry expertise, or get in touch to discuss a potential project.

The market research industry in India is thriving, but it is not without its’ own challenges and complexities.

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Selecting an Indian Market Research Agency

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