An International Market Entry Strategy
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An international market entry strategy is defined as the planning and implementation of delivering goods or services to a new target international market. It often requires establishing and further managing contracts in a new foreign country. There can be various strategies to go international. A company may want to enter only one foreign market at a time or a number of markets simultaneously. Based on number of markets to be entered, the strategies could be either waterfall strategy or sprinkler strategy.
In a Waterfall strategy, the business is spread in international markets sequentially. First a firm enters a new market and establishes an identity in the same. Establishing an identity involves estimation of potential market size and revenue patterns, identification of target segment, creation of brand awareness, identification and creation of possible distribution channels and finally formulation and implementation of sales strategy. All these strategies at individual stage are dependent on the product type and the life cycle. Waterfall strategy allows the company to take time to understand a market and make appropriate adjustment to its marketing mix in order to satisfy the specific needs of each market. Managers can maximize the use of available resources; they can leverage their experience from the first market and make necessary improvements or changes to enter the next market.
The prime motive for the waterfall model is that adaptations of the marketing strategy for the host market can be very time-consuming. A phased rollout is also less demanding on the company resources. Other constraints such as the absence of good local partners may block a global rollout. Apple, for example, needed to negotiate partnership deals with local mobile phone service companies for the launch of its iPhone. These negotiations were not always successful. In China, for instance, Apple’s negotiations with China Mobile, China’s largest mobile service provider broke down, leading to a significant delay of the iPhone launch in that market.
On the other hand, staggered rollouts are not always acceptable. In many industries—especially business- to-business markets—consumers worldwide do not want to be left behind. They all want to have access to the latest generation. A good example is what happened with the iPhone. Long before its official launch outside the United States, many Asian and European customers eager to get Apple’s smart phone would buy an unauthorized iPhone that was ‘‘unlocked’’ by a third party for a fee. Further, a phased rollout gives competitors time to catch up.
Markets are approached simultaneously in the sprinkler strategy. While this is a more risky strategic framework for entering new markets, typically it is more suitable for products with a shorter life cycle (like Technology products) or is at the Introduction and Growth Stage of the Product Life Cycle. In such a strategic framework, markets are entered simultaneously and often a Skimming Product Pricing strategy is used to generate as much profits as possible from sales. Experiences from market responses are limited to individual markets and the same are not replicated in the other markets. For example, Gillette launched its Mach3 range of razors in 11 countries simultaneously. The problem with this approach is that it requires vast resources that managers at the home headquarters may be hesitant to provide; additionally companies may miss the opportunity to fully understand a market。