Whether it’s a completely 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 and mitigate, and hurdles to overcome. No business will manage to avoid every potential pitfall, so some degree of complication has to be expected. 

Businesses that can minimize these risks and challenges can reap serious rewards. In this article, we’ll take a look at 5 of the biggest risks and barriers that 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 there’s always the possibility for problems.

We can break down the risks of market entry into 3 main categories — internal, external, and legal. Let’s start with internal risks.

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. When you enter a new market, however, those drawbacks can become painfully obvious.

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. Make sure your goals are not just clearly established, but also communicated to everyone on the team.
  • Sudden staff changes. When a new member joins the team to replace someone else, it’s crucial they have all the information and direction necessary. Failing to do this can result in communication failures and major setbacks when entering your new market.
  • Lack of coordination. When working in a new market — especially one located far away from your home market — working together effectively is critical. It’s essential that your team members are on the same wavelength, up-to-date with current processes, and in regular, clear communication with each other and leadership.

Human error

Human error is one of those risks that we can’t really control. Mistakes happen, in business as well as life, and while we can’t predict them very accurately, we can say for certain 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 be the end of the world, but a series of minor errors can add up.

That could involve something like failing to convert currency accurately, using the wrong type of 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, problems with transport and delivery, and other challenges related to logistics and infrastructure can be significant roadblocks for businesses when entering a new market.

These kinds of hurdles are especially relevant when expanding into developing countries and regions. Here, infrastructure and technology is 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 are sometimes characterized by more manual processes, a greater need to work closely with local people on the ground, 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 big risk for market entry involves technology failing to get the job done effectively in a new market.

One example is the Industrial Internet of Things devices, which can be powerful assets for businesses when it comes to monitoring conditions and optimizing processes like manufacturing. However, if your devices or networks fail, it could set your plans back significantly.

If you’re looking to enter a developing country, it’s worth bearing in mind that technological infrastructure can be very different to 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 less issues with moving away  from legacy systems.  

Cash flow problems

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

External risks for market entry

As well as risks that come from within your organization, businesses also have to contend with a plethora of external risk factors. 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 example here is Europe’s GDPR law which requires anyone doing business with European customers, or any business 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 not familiar with the landscape. 

The cost of failing to keep up with regulations can be high — the maximum fine for GDPR violations is either €20 million or 4% of your annual global turnover. 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 in stable regions businesses can be fairly confident that radical changes won’t disrupt their market entry efforts.

However, in less stable parts of the world, all bets are off. Revolutions, wars, and sudden and significant new legal changes are just some of the political risks that you have to 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.

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

Major non-violent social movements and trends can also impact your business. If you fail to show solidarity or are perceived as being insensitive to a certain public sentiment, this could cause reputational damage that you may never recover from.

Cultural differences

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

There will be different customs and cultural nuances to be aware of. This will impact how your products and services will be received. It’s easy to get excited about new market entry 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. 

You’ll also need to think about how culture will impact the way your marketing  will be received by your new customers. A commercial that is beloved in Western cultures might be perceived as grossly insensitive in more conservative cultures.

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 major source of risk when establishing a presence in certain parts of the world.

Hurricanes, earthquakes, floods, droughts, and many other disasters can quickly put a stop to any market entry effort. They can destroy property, interrupt shipping, and close down entire economies in a matter of 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 a number of external risks around 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 take into account when entering a new market, and this type of risk encompasses both internal and external activities.

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

Among the legal risks to consider are lawsuits, patent rights, and data privacy regulations. To make sure you stay on the right side of the law it’s essential to work with local lawyers in your target market. A major legal setback like a big lawsuit could end your market entry campaign, so make sure you’re staying on the right side of the law.

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Barriers

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

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

Costs

Entering a new market is not a cheap 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 an older domestic demographic with your product is much more financially workable than trying to establish 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 any other kind of alternative. This is something you might have to do 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 already 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 here encompass things like 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 a wide range of costs.

It’s important to clearly 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 in order to make your voice heard and your product known in your new market. You need to immediately start connecting with your target customers across a range of channels and establish your brand as an option.

This comes with a range of challenges. We already covered cost 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? If there isn’t an existing demand for what you’re offering, your marketing campaign is going to be an uphill struggle. 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, and it can be hard 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 harder than simply attracting a new customer to your brand. You need to stand out, offer something extra, and clearly communicate this. 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, it might not be a good idea to invest heavily in influencer marketing. 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. This is one area where it definitely pays to work with people on the ground who understand the culture intimately.

Marketing is always tough to get right, and this 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 you can 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 huge amount of risks and challenges. No business in the world can escape this, not even those with a global presence. 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. But if 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 simply get in touch today.

How do you enter a new potential market?

Expanding your business to new markets allows you to reach potentially vast numbers of new customers and grow your revenue massively. However, the process can be difficult 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 when expanding your company, the differences between domestic and international markets, and some strategies you can use.

Why move to a new market?

Now, let’s delve into the reasons why entering a new market is a strategic move worth considering. Although it can be demanding and entail significant expenses, the following factors make it a worthwhile endeavor:

  1. Expanding customer base and boosting revenue: The primary motivation behind entering new markets is to expand your customer reach and increase profitability. By accessing untapped customer segments, you can sell more products or services and achieve higher revenue streams.
  2. Exhausting growth opportunities in the domestic market: If your business has reached its maximum revenue potential in the local market, exploring new markets becomes imperative for sustained growth. Expanding into new territories allows you to tap into fresh customer segments and unlock additional sources of revenue.
  3. Diversifying business and reducing risk: When you venture into multiple markets, you decrease the risk associated with relying solely on one market. By diversifying your operations across different markets, you can mitigate the impact of market fluctuations, economic downturns, or unforeseen circumstances that may adversely affect one market but not others.
  4. Leveraging competitive advantages: Entering new markets provides an opportunity to capitalize on your competitive advantages. These advantages can include unique product features, technological expertise, brand recognition, or operational efficiencies that give you an edge over competitors. Expanding into new markets allows you to showcase and leverage these strengths to attract customers and gain market share.
  5. Accessing new resources and talent: Expanding into new markets can grant you access to valuable resources, such as raw materials, production facilities, or distribution networks that may not be readily available in your current market. Additionally, entering new markets may enable you to tap into a diverse pool of talent, fostering innovation and driving business growth.

What are the signs that it might be time for your brand to enter a new market?

Timing is everything when it comes to expanding your brand’s reach into a new market. But how do you know if the time is right to expand? The list below is just some signs that your brand might be ready for this move:

  1. Strong demand: The brand has received positive feedback from customers in other markets and has a solid reputation.
  2. Market saturation: The brand has reached its maximum potential in its current market and is looking for new growth opportunities.
  3. Positive market trends: The market you are considering is experiencing growth and presents a favorable economic environment for the brand.
  4. Competitive advantage: The brand has a unique selling proposition or advantage over competitors in this market.
  5. Resource availability: The brand has the financial and human resources needed to enter and succeed in the new market.
  6. Market fit: The brand’s products and services align well with the needs and preferences of the target audience in this market.
  7. Appropriate market entry strategy: The brand has a clear plan for entering the market, including a tailored marketing strategy and an established network of partners and suppliers.

What are the different frameworks for entering a new market?

  1. Market development: This involves expanding the brand’s presence in existing markets by offering new products or services. Pros include leveraging existing customer relationships and brand recognition and being less risky than entering completely new markets. Cons include potentially limited growth potential in existing markets and increased competition.
  2. Market penetration: This involves increasing the brand’s market share in existing markets through promotions, advertising, and other marketing efforts. Pros include leveraging existing infrastructure and relationships and being relatively low risk. Cons include limited growth potential and increased competition.
  3. Market diversification: This involves entering markets with existing products or services or developing new products to meet the demands of the new market. Pros include reducing dependence on a single market and product line and increasing growth potential. Cons include increased risk and the need for significant investment in product development and market research.
  4. Product development: This involves introducing new products into existing markets to replace existing products or meet new customer demands. Pros include the potential for increased sales and revenue and the ability to remain competitive in existing markets. Cons include the need for significant investment in product development and the potential for failure if the new product does not meet customer demands.
  5. Geographic expansion: This involves expanding the brand’s presence into new geographic regions through exports or new operations in the target market. Pros include access to new customers, increased market share, and the ability to diversify revenue streams. Cons include increased cultural and regulatory challenges and the need for significant investment in infrastructure and relationships.
  6. Mergers and acquisitions: This involves acquiring or merging with another brand or company to gain a foothold in the new market. Pros include the ability to enter quickly and access to established customer relationships and market share. Cons include potential cultural and operational challenges and the risk of overpaying for the acquisition.
  7. Joint ventures: This involves partnering with a local company or brand to enter and succeed. Pros include access to local expertise and resources and reduced risk and investment compared to going it alone. Cons include potential disputes over control and revenue sharing and the need to find a compatible partner.

Each framework has its advantages and disadvantages, and the choice of which one to use depends on the brand’s goals, resources, and the characteristics of the market you are entering.

The choice of the framework will depend on various factors, such as:

  1. Company goals and resources: The brand’s overall goals and the resources it has available, such as financial resources and human capital, will play a significant role in determining the best framework.
  2. Market characteristics: The size, growth potential, competition, and regulatory environment of this market will also be important considerations.
  3. Industry factors: The state of the industry, including trends and technological advancements, will also play a role in determining the best framework.
  4. Company strengths and weaknesses: The brand’s strengths and weaknesses, including its existing infrastructure, brand recognition, and reputation, will be important factors in choosing the most appropriate framework.
  5. Customer preferences and needs: Understanding the target audience and their preferences and needs will help the brand determine which framework best suits them.

By considering these factors, a brand can determine which framework best suits its goals, resources, and the characteristics of the new market. It is also necessary to adjust the framework over time as the brand gains more experience and insight.

Questions to ask when considering entering a new market?

  1. Is there a strong demand for the brand’s products or services in the target market?
  2. Is the target market growing and presenting a favorable economic environment for the brand?
  3. Does the brand have a competitive advantage over other brands in the target market?
  4. Does the brand have the financial and human resources needed to enter and succeed in the desired market?
  5. Is the brand’s product or service offering a good fit for the target market and its customers’ needs and preferences?
  6. Does the brand have a clear and well-defined market entry strategy?
  7. Has the brand conducted thorough market research and competitor analysis in the target market?
  8. Does the brand have the necessary local partners and suppliers to succeed?
  9. Does the brand have the necessary infrastructure, including distribution and customer support, to support its entry into this market?
  10. Does the brand need support from key stakeholders, including employees, investors, and board members?

10 questions a brand should ask itself when considering the feasibility of entering a new market or “can I enter?”

  1. Are there any regulatory barriers to entry in the target market?
  2. What is the level of competition in the target market, and does the brand have a competitive advantage?
  3. What is the cost of entry into the target market, including setting up operations, marketing and advertising expenses, and distribution costs?
  4. Does the brand have the financial resources and funding to enter and succeed?
  5. Does the brand have the necessary human resources and expertise to support its entry into the new market?
  6. Does the brand have the necessary distribution channels and partnerships to reach customers in the target market effectively?
  7. Does the brand have the necessary marketing and advertising capabilities to promote its products or services in the target market effectively?
  8. Is the brand’s product or service a good fit for the target market and its customers’ needs and preferences?
  9. Does the brand clearly understand the target market’s cultural and language differences, and is it prepared to accommodate these differences?
  10. Does the brand clearly understand the target market’s economic and political landscape, and is it prepared to navigate any potential challenges?

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 probably be geographically closer, and things will likely be very similar to your existing markets.

International markets

This is where things become more complicated. You’ll have to factor in a number of differences compared to 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 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.

Steps to consider when entering a new market

  1. Conduct market research: Determine the size and growth potential of the market, as well as the cultural and legal factors that may affect the brand’s success.
  2. Identify target customers: Define the demographic and psychographic characteristics of the target audience.
  3. Analyze the competition: Evaluate the strengths and weaknesses of competitors in the market and determine how to differentiate the brand.
  4. Develop a tailored marketing strategy: Based on the research findings, create a marketing strategy specific to this market and addresses the target audience’s unique needs.
  5. Establish partnerships and networks: Build relationships with local suppliers, distributors, and other partners to help the brand enter and succeed.
  6. Plan for cultural adaptation: Take into account cultural differences in the market you are considering and make necessary adjustments to products, marketing materials, and other business practices.
  7. Prepare for any regulatory requirements: Research and understand any legal or regulatory requirements that may impact the brand’s operations.

Risks of entering new markets

There are also numerous risks involved in expanding, 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 drastically, could seriously affect your bottom line
  • Cultural risk, which essentially means the possibility of your new business venture running into challenges due to major 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 desired market and weighed the potential risks, you may decide it’s worth entering. If so, there are a number of different strategies you can employ, each with its own pros and cons.

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Different market entry strategies

Direct exporting

This is where you export your products into the new market directly. You’ll have to handle all the aspects of the process independently, from transport to payments to operations.

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 a number of advantages, such as:

  • Much lower risk. An experienced third party will take care of the exportation process, minimizing 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 full control over sales and marketing abroad

There are a number of 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.

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 take care of distributing the product to retailers.

Indirect exporting through management and trading companies

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

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

Indirect exporting through piggybacking

Piggybacking is where you allow another, non-competing company to sell your product. This can work extremely well if your target market already has an existing customer base and distribution infrastructure.

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

Producing products in the target market

Another option is to manufacture your products in 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 an unexplored market, check out our top four marketing strategies article).

Entering an unknown market can be extremely rewarding and can allow your business to move to the next level and achieve new growth. It’s important 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 helping businesses carry out research and 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 organizations 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 behavior 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 optimize 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 recognizably 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.

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. How do we adjust our product, service or messaging to optimize 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 generalizations

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 urbanization has seen a break with traditional cultures outside cities.

(That’s true for any generalization, 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 localized 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. Localized 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, customization 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 fiber 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 realized 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 optimize 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 generalization ‘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.

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

Export? Licensing? Franchising? Partnering? Joint Venture? Merger or Acquisition? 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

E-commerce and social media 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 social media influencers jump on board. 

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

Early exposure could also be by traditional media outlets (like fashionable magazines) or web-based trendsetters (such as popular tech review channels on YouTube). Most markets have local versions of social media channels, with popular global channels like Instagram, Twitter, or Facebook being prominent.

But online retail can be a double-edged sword. Yes, consumers might get exposure to your brand online. But they might buy the next best thing available if it’s unavailable locally. Your brand could be doing an excellent job building the category 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 take a closer look in our guide to entering emerging markets).

In addition to working with local platforms, brands must carefully consider how to fulfill orders and handle customer relations. Managing all these elements through third parties in a commercial relationship can work well. 

That said, there’s a massive gulf between entering a market virtually via e-commerce with third-party fulfillment services and having ‘boots on the ground’. This is not only about visibility and commitment. Each third party you work with is taking a chunk of your profit margin. And in some cases – particularly with perishable or heavyweight products, and especially with services – the arm’s length approach won’t work. 

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To access that pool of consumers, you will need a local presence. Here are some main routes.

Direct exporting

Direct exporting is often considered the default choice for new market entry. Direct exporters often sell directly to a consumer (B2C), a business (B2B), or a distributor in a foreign country. Direct exporting allows consumers or businesses in new markets to easily buy your products wholesale, where you handle the shipping logistics. Or if using a distributor in a foreign country, they will typically take care of fulfillment and local marketing. 

International shipping has become increasingly easy for most products, allowing brands a passive market entry strategy. But assigning a local trusted distributor to conduct transactions with your buyers, and better still, partnering directly with major wholesalers or retailers, is an equally promising strategy to capture new markets.

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 greatly affect how 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 consumption patterns and thinking about local tastes and behaviors 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 local preferences on their product’s flavor and texture – and the local climate. We’ve supported many businesses with getting under the skin of target consumers in new markets as they’ve entered new territories.

Licensing and franchising

Licensing gives in-market parties legal rights 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.

Franchising is similar to licensing but requires much more heavy lifting upfront. In addition to researching any new market before entry, brands looking to franchise should think about how they will structure their franchise agreement. This will require additional research into legal structures, potential franchisee audiences, competitor brands, and franchise fee structures. Working out what the franchisee gets for their investment (for some business models, it’s little more than a license; for others, it’s a suite of processes, marketing support, and even hardware that come with the deal).

But it’s not all plain sailing. How a licensee or franchisee 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 on potential partners and brands with detailed research on their new market are much more likely to tie down any important factors affecting those decisions into a contract.

Direct investment

For many companies, setting up a fully-fledged operation in a new market is a big commitment – but it also brings enormous 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 and incentivize 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. Direct investment provides a reassuring level of control if the product is sensitive to different handling or needs to be manufactured to particular tolerances or standards.

If a direct investment is the preferred method for new market entry, the legal and regulatory burden of different potential markets should be a factor in the due diligence process right at the outset. In addition to in-market research expertise, local legal and financial advice is essential.

Buying a business

Buying an existing business is a genuine fast track for foreign companies to enter a new market. According to Statista, in 2021, global Mergers and Acquisitions (M&A) deal value reached approximately 5.9 trillion U.S. dollars, with over 63,000 deals completed.

Market research is even more critical in the due diligence required when buying a business in unfamiliar territory. Due diligence is challenging on domestic M&A deals; it’s much tougher abroad. The traditional metrics you might assess – and even the gut feel of key decision-makers – must be translated through entirely different cultural and market norms lenses. 

There can also be a benefit in setting up a joint venture­ (J.V.) – 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 J.V. as a turnkey project: each party brings existing knowledge and capabilities 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 specific mission – and have precise terms for the joint venture’s dissolution.

Building your intelligence network

The choice of entry route will be dictated by many factors, including 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 you have to cost and risk, 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 behaviors 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 us to successfully support clients entering new and lucrative markets.

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

Entering a new market can lead to a massive boost to sales, brand strength and long-term profits. But there’s more to a market entry strategy than great products or services. Understanding the local market – its distribution channels, culture, economic and social trends – through a market research-driven due diligence process is crucial. And sometimes the most valuable insight is the hidden reason why you shouldn’t proceed…

The art and science of market entry

Over the past 40 years globalization has redefined what it is to be an international brand. For decades, a handful of dominant players in markets such as food and drink (driven by marketing prowess) or automotive (reliant on economies of scale) had been able to enter new markets in ways that most businesses simply couldn’t imagine.

The rapid growth of global trade capacity, and particularly the ubiquity of the internet, has levelled the playing field. Today, a business in Bolton has myriad options for selling in Beijing; an Australian specialist retailer has lots of ways into the Austrian market.

But the process of choosing which markets to enter, how and why remains fraught with danger. The rewards of opening up a new market are potentially great. On the other hand, the cost can be significant, and the list of powerful global brands that have failed to successfully enter new markets is a long.

The factors to consider are varied: there are economic and social dimensions, competition from local companies, the quirks of regional distribution channels, cultural mismatches… and much more. That means undertaking a market-research-driven due diligence project before entering a new market is a must.

Why look elsewhere? The reasons for market entry

What motivates companies to investigate entering a new market? Every organization will have its own reasons. Exploring them in detail is a useful first step in defining the later market entry strategy.

Brand growth 

A huge proportion of value in modern enterprises is wrapped up in intangibles. That means increasing enterprise value requires diversification of the brand. Some very strong domestic brands can move into adjacent markets (Dyson, for example, can leverage its reputation for air-moving engineering from vacuums, to hand-dryers, to room fans and even hair straighteners). A select few can jump into non-adjacent categories (Virgin, for example). But opening up a whole new geographic market can establish a brand with many more consumers, boosting its value.

Saturation of existing markets

Once you have gained significant market share and consumer penetration domestically, it’s easy to see growth stall. Launching new products to address existing customers is costly and high risk. But taking proven products or services to a new market can create fresh upside for growing brands.

Optimizing overhead costs

As businesses grow, they build up overheads – around head office functions, for example. They also build up niche skills and experience – in fields such as logistics, legal or financial. These scale well: the more times you can put your experts to work in a new market, the more productive they are. And the more markets you have, the lower the amount each one pays to meet head office costs.

Strategic partnership

Globalization has meant businesses can easily work with partners in new markets – creating new opportunities for blended products and services. Local distributors, for example, might be pathfinders for a brand into a new market – demonstrating the potential for a more structured entry into that market.

There are plenty of other motivations, often overlapping. Knowing which is driving the decision to explore new markets will help frame the strategy for successfully entering one.

A phased approach to market entry

There are different phases to a market entry project. You need to size the opportunity to judge whether it’s worth entering a new market. There ought to be concept testing, especially for new categories or innovations in that market. Many clients focus on competitor analysis when they’re dealing with less well-known rivals.

Market entry has many dimensions – and no business is too big to skip them.

We work with a number of high-profile Japanese brands, global names that are already present in different countries in some form of another. But they still need to tailor particular products or brands to the local markets they’re looking to exploit; and understand the specific needs of consumers in those categories.

Market entry projects usually involve a series of questions, and typically each of these is a discrete engagement.

Key questions for any market entry project

  1. Which markets might we look at?
  2. What is the macro environment like in a market we want to enter?
  3. How does the competitive landscape affect its attractiveness?
  4. What is the best way to enter the market in practical terms?
  5. How do we adjust our product, service or messaging to optimize our offer there?

While market entry studies are a vital tool in successfully growing a brand somewhere new, sometimes their value comes from showing that entering a new market will not be successful. Around 50% of these projects results in a recommendation not to go ahead as planned. That finding can emerge at any one of the stages above. Far from being bad news, it’s often the most valuable insight a brand can get. Market entry can be costly and complex – not doing so when the conditions aren’t right can save massive amounts of money and time.

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The world is your oyster. But where’s the pearl?

A crucial first step in investigating markets for entry is to analyze why a brand, product or service is successful in its existing markets. How is it used? Who are the type of people that love it? What are those customers’ attitudes across different domains? What role does it play in their lives – and why?

The next step is to look for markets where groups like this already exist. A good starting point can be detailed desk research – using tools like the CIA World Factbook for demographic information, or understanding cultural similarities to your home market through cultural awareness studies like the Hofstede Insights Culture Compass. But ultimately, it’s approaches developed precisely for the brand or product that will reveal good matches. Narrowing down the high-probability markets is hugely valuable for brands that don’t have other clues to go on.

Sometimes brands do have a clear idea from the outset which markets they want to enter. We worked with a company producing ceramics which had a light-touch arrangement with an international distributor. They started to notice a significant uptick in orders from Korea – which was obviously a strong signal that entering that market could pay dividends.

But that also meant understanding why was key to a successful market entry. Closer research revealed that an increase in purchasing power among the country’s middle class had made the designs more attractive; plus online shopping had taken hold and made previously hard-to-get products more visible.

Target acquired. Now what? Next steps in a market entry project

Specific country research starts with fundamental market insight and competitor intelligence work. Initially, that’s secondary research, analyzing available insights for the particular category in question. After that, we might move on to interviewing people whose knowledge of the market will provide more nuanced insights.

Companies usually see this as their feasibility study, helping them understand who else is operating in their category, what regulations might be applicable, what the domestic distribution and supply chain infrastructure is like, and what investment they’re likely to need to make under different scenarios.

That industry analysis and expert insight helps generate a strategic overview of the market tailored to the client. Often that’s enough to substantiate the decision on whether and how to enter a market, especially if it’s a close match with the brand’s existing markets.

A good example is some work we did with an electronics brand looking to launch a new product in the US. The group already has a huge presence in America – but not for its new product, a battery system for domestic renewable electricity.

Our project involved interviewing a range of potential stakeholders – such as real estate developers, housing associations, planning authorities and environmental regulators – to get a holistic view of how that market might evolve. That enabled the client to take a realistic view of both the existing appetite for the product and current regulations; and how the landscape might change as they developed the product.

It’s not uncommon for a company to walk away at this point – there might be competitive, regulatory or infrastructure barriers that no mode of entry can overcome cost-effectively.

Frameworks to assess a new market

A structured framework can be valuable in assessing a new market. You might see great consumer interest – but if the regulatory stance is hostile, you have to think twice. One way of conducting a thorough overview of a market to pick up all those factors is to analyze the environment through different PESTLE lenses:

PESTLE

  • Political – how stable is the country? What’s the prevailing ideology? What biases – intervention in markets, say, or taxation – do politicians have?
  • Economic – how rich is the country? How is wealth distributed? What’s growth like, and where is it likely to continue?
  • Social – what’s the culture in the country? What are the typical social structures – family, work, community? What about religious norms? Education levels?
  • Technological – what’s the infrastructure like? How wired is the country? How lumpy is technology penetration? What about population ‘techiness’?
  • Legal – what rules are there about business ownership? How about liability laws? What recourse do overseas businesses have in the courts?
  • Environmental – how might the local climate affect the product or service? What about use of resources? Or end-of-life disposal of products?

Porter’s Five Forces

The next step is to get a grip on the competitive landscape, and that’s where tools such as Porter’s Five Forces come in. Michael Porter worked at Harvard University, and in 1979 he published a paper aiming to describe the ‘microenvironment’ for the attractiveness of any given industry – or, in this case, a new market.

There are three forces from ‘horizontal’ competition:

  • The threat of substitute products or services – what’s the alternative to your own offering that people might use? How are they achieving the same goals now, and what might shift their views?
  • The threat of established rivals – bearing in mind that in a new market for you, there will be lots of players who know how to operate there better than you do.
  • The threat of new entrants – being a new entrant to a market doesn’t mean others won’t follow, too. And if you’re establishing a new category in a market, that might tempt others in, or prompt local businesses to muscle in.

Two forces come from ‘vertical’ competition:

  • The bargaining power of suppliers – opening up a new market might help you gain economies of scale from higher sales volumes. But it also makes you more reliant on suppliers – especially around issues such as logistics.
  • The bargaining power of customers – understanding the broader competitive landscape will help you see what choices customers have; but, especially in the initial phases, they might need to be tempted to switch brands or try a new category.

Digging into the nuances

Those kinds of analytical tools mean companies can enter a new market with their eyes wide open. But they’ll still need to develop a sophisticated view of customers, competitors and regulations – the kind of insights that will tell them how they might enter a market, not just whether it’s a good idea.

That’s when they’ll commission more in depth market research and run projects like a market segmentation analysis to dig deeper into nuances they can exploit later to optimize their market entry.

At this point, they’ll be starting to research more detail on potential partners; exactly how they would use infrastructure to import, manufacture and distribute in that market; what specific customer niches exist; and even financial planning to take into account the kind of regulatory and cost-of-trade analysis they revealed in the feasibility study.

But above all they need to understand how their brand might be received. It’s not a given that you can simply transplant over your image or core messages.

Culture and behavior: getting the key variables right

Cultural fit is hugely important. In this phase of the project, we would drill down into the local factors that might help a brand; or create barriers for its acceptance. This is typically a traditional market research exercise, exploring the behavioral aspects of consumers in the new market.

For example, we worked with a Japanese food manufacturer looking to expand into new Asian markets. But in the Philippines, it quickly became clear that there was no appetite for the more subtle flavorings and preservatives in the Japanese product. It was the perfect case of a potentially costly market entry being avoided through strong research findings.

That’s a lesson Pret a Manger learned in Japan, where it opened 14 sandwich shops across greater Tokyo in 2003. Just 18 months later, the company withdrew after its local partner, McDonald’s Japan, pulled out citing heavy losses. Superficial research indicated that Japanese people would love the convenience and novelty of eating-on-the-go sandwiches. But once the novelty wore off, sales dipped quickly. That combination of financial and cultural barriers hadn’t been picked up.

Speaking the language

As well as deciding whether the consumer will use the product, it’s important to explore the way in which it’s marketed. This is particularly important for brand with an established global image – the logos, slogans and even color palettes that they’ve invested in heavily to define themselves – because those might have unexpected connotations in a new culture. Take, for example, the beauty treatment marketed in Japan as “for clear skin” – which translated elsewhere in Asia as “ghostliness”.

There have been plenty of cases of companies that didn’t do their market research with disastrous consequences:

  • Clairol’s ‘Mist Stick’ curling iron flopped in Germany: ‘Mist’ is slang for manure.
  • Coors’s slogan ‘Turn It Loose’ translated into Spanish is slang for diarrhoea.
  • KFC is known globally for being ‘finger-licking good’ – which translated as ‘eat your fingers off’ in China.
  • Also in China, ‘Pepsi Brings You Back to Life’ was interpreted as ‘Pepsi Brings You Back from the Grave.’

But rival Coca Cola entered the China market much more deftly. Initially, signs produced by local distributors for ‘ko-ka-ko-la’ (using symbols for the closest phonetic translation) were translated as ‘bite the wax tadpole’. But the company was developing its own local brand positioning, and settled on the symbols ‘K’o-K’ou-K’o-lê’ – which means ‘to allow the mouth to be able to rejoice,’ a far more apt trademark that it registered in 1928.

The money question – how to approach pricing

The other marketing fundamental that research can steer is pricing – a factor every market entry project needs to examine. Where is the competitive price point for consumers in the new market? What volumes and margins might you expect, based on the market opportunity? How does the new market stack up cost-wise – are you importing or manufacturing locally, for example – and what does that do to your opportunity to flex prices?

More broadly, the profitability of different business models often dictates whether and how to enter a new market at all. For some businesses there’s relatively little financial penalty to operating exclusively through local distributors. But at a certain point, issues such as volume of sales, cost of distribution, tariff levels, changes to local taxes and so on will shift the financial rationale. For example, we’ve already seen many UK businesses enter EU markets directly as a mean of offsetting post-Brexit tariffs, staffing, distribution and other costs.

The financial calculations can also dictate the viable means of getting into a market. At one level, that’s purely a ‘treasury’ consideration. How will profits be repatriated? What are the currency risks associated with the new market? How does banking and taxation work there? But how much you can control the brand locally – rather than relying on local agents – is also a factor. (We’ll look at the different modes for entering new markets in more detail in a separate guide.)

Know when to hold… and when to fold

All these factors are a reminder that even strong and established global brands don’t always have an easy time expanding into a new market. They might have some leverage with their global brand name. They have the resources to invest in market penetration. But to do so effectively – and without incurring higher opportunity costs elsewhere – they need data and insights to ensure their entry is tailored.

Even brands that take precautions to adapt to local culture can miss valuable clues as to their viability in a new market. Starbucks famously waited 47 years to open its first branch in Italy – wary of the very particular approach to coffee there. In 2018, its first shop opened in Milan. But the brand has struggled in the country. Limited research into new markets had affected the brand before, with its Australian business failing to meet the demands of local coffee-lovers; its Israeli operation closed in 2003 within two years of launch.

Granular, holistic research is the key

To gain the right insight to inform your market entry strategies, you’ll need to work with external agencies. For some very fast-growing and global brands, there might be a case for building an in-house team with the kind of expertise and experience needed to evaluate new markets in sequence. But when it comes to local research expertise and cultural understanding, the insights can often be two-dimensional.

McDonald’s Japan is a great example of using local insight to tailor what is, on the face of it, a universal brand. Every country has their tiny variations in the McDonald’s menu. But visitors to Tokyo will find radical departures such as Ebi Filet-o (a burger with breaded shrimp); Teriyaki McBurger; and even chocolate fries.

For many businesses – and business models – international expansion is likely to be a multi-year project with long pauses. That means bringing agencies to advise and evaluate each market entry is the only practical solution – especially if they bring specific knowledge on particular markets to bear.

At Kadence, with offices spanning Europe, the US and Asia Pacific, we are well positioned to support brands with market entry research. Find out more about our market entry services or get in touch to discuss a potential project.