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Market Entry Strategy: Definition & Example

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  • 0:03 What Is Market Entry Strategy?
  • 0:56 Strategies for Market Entry
  • 4:48 Lesson Summary
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Lesson Transcript
Instructor: Allison Tanner
In this lesson, we'll learn about market entry strategy by investigating several methods an organization can use to enter a new market. We will look at exporting, licensing, franchising, joint ventures, and more.

What Is Market Entry Strategy?

Busy Tech is interested in entering a new market, so the company is going to work comparing market entry strategies. A market entry strategy is the method in which an organization enters a new market. Busy Tech quickly realizes that they have several options, each fit for a variety of business scenarios.

A first point of consideration is whether or not the organization is expanding domestically or internationally. Expansion within the same market will have different requirements than expansion into the global market. Among other factors that may impact how the company integrates into the new market, Busy Tech finds that when selecting a method of expansion, they must consider:

  • Type of industry
  • Agility of the products
  • Culture of the new market
  • Costs associated with entering a new market
  • Local and international laws of importation and exportation

Strategies for Market Entry

Exploring the various market entry strategies can help Busy Tech to better understand which strategies best fit their organization. Some of the most common strategies for market entry include:

  • Exporting
  • Licensing
  • Franchising
  • Partnering
  • Joint ventures
  • Turnkey projects
  • Greenfield investments

Let's take a look these strategies and how each one can be implemented. Exporting is used for international expansion and it is the process of sending goods to an international market. There are two methods of exporting.

  1. Direct exportation means that the organization takes charge of shipping goods to the international market.
  2. Indirect exportation takes place when the organization uses a middleman or intermediary to integrate the goods into the market.

In general, exporting is a good strategy if Busy Tech wants to quickly enter several foreign markets. This would be particularly useful if they were selling a commodity item, such as clothing or food. It is not the best option, though, for a company wishing to produce their technology internationally, because exporting only entails sending finished products overseas to a new market.

Licensing

Licensing is the process of giving another company the rights to produce or sell the organization's products or services. This would require Busy Tech to create an agreement with an organization who would then produce Busy Tech products and sell them in various markets.

In general, this can be risky for a tech firm because they will have to give the local company the knowledge of their technology. If they try licensing their products, they will need to be sure they develop a well-thought-out contract and agreement. Despite the risk, this can be a good option if the company Busy Tech works with has a large share of the prospective market.

Franchising

Franchising is, in essence, copying and pasting a concept into a new market. This is good option when there is a relatively small need for product and service adaptation. This entry method is most common among food chains because they make only minimal changes when operating in a new market. Franchising is optimal when the company brand is already well-known or in cases when the organization's concept is truly exceptional and unique.

Partnering

Partnering means that two or more people will work together to enter a new market. The partner may be from the desired market. Partnering can occur in any expansion but is most beneficial in the international market. In some cases, it may be required for international expansion and is especially valuable when there are large cultural differences.

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