Strategies for Entering New Markets

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Strategies for entering new markets

There are different strategies that different companies use when entering new markets. A strategy is defined as a set of deliberate action plans that are aimed at achieving a specific goal or objective. A company that intends to venture into a new market ought to have a clearly and excellently formulated market entry strategy that will ensure that it remains on course to achieve its mission and vision. Ensuing is a discussion of some of the strategies used when entering new markets.

Building strategic partnerships

This is a strategy that is used in the case of distant markets. Strategic partnerships involve engaging companies in the home market. This is usually done on order to take advantage of the existing market knowledge and also minimizing on capital expenses that the company could otherwise incur if it went into the new market solely. This strategy is also advisable when entering the new market to ‘test the waters’ and determine whether the market is viable and worth investing in or not.

Export of products

This is perhaps the most common form of new market entry strategy. A company exports its products that is manufactured in another country. The importance of this is that the company only incurs operational costs of importing and selling the products and avoids the huge capital outlay that is associated with investing and producing in the country of export.

It is also used as a testing ground so as to determine whether the market is viable for investing with a possibility of setting up full operation in that particular country.

Foreign direct investments

This is a strategy that is used when a company is introducing a new product in a new market. This is useful when a market is being prepared for a new product and the consumers have a not had a previous experience with the product. Therefore, it is used to help the company to have a first mover advantage and build loyalty among the customers.

Diversification strategies of Sony and GE

Diversification strategy is one that is aimed at looking for new products and new markets that are aimed at boosting a company’s growth and profits. General electric is one of the best examples of diversification. The company started as an electric generating company and has ever since expanded its operation to produce electrical materials such as generators, medical imaging equipment.

Its main diversification is seen in the fact that General Electric has ventured into unrelated markets such as introduction of the financial services that accounts for half its revenues. Its strategy is one aimed at increasing its revenue and also boosting its growth in the US. This is a strategy that has worked well since the company’s half sales stream from the financial services wing.

Diversification strategy of SONY

Sony is a Japanese company that initially specialized the production of VCRs. The emergence of global trends and changing consumer needs catapulted by advancement in technology posed a huge threat to the company’s survival and profitability. This led to the company engaging in related diversification through production of micro computers and office automation. This was aimed at matching the changing market needs. The company could no longer rely on production of VCRs.

Ever since its profit led diversification, the company has managed to get its 50% of sales from consumer electronics, 30% from professional products and about 20% from the component business. This has become a major boost to the profitability of the company since the introduction of the new products in the market.

Case study Questions

Reasons for an electronic company doing a joint venture with a mobile phone company

An electronic company would be interested to enter into a joint venture with a mobile phone company for several reasons. First it would be able to share the consumers since the reputation of both the mobile brand and the electronics brand would be marketed as one. This would increase the sales as the loyal consumers of the mobile phones would buy the electronics products as well. This would go a long way in boosting sales and also minimizing on some costs thus, increasing the gross margin from sales.

A mobile phone manufacturing company would also go into a joint venture with an electronic company so as to gain advantage of the electrical expertise and better provide products that are admirable to the customers. Such a merger would complement the research and development and the technology required to meet the mobile phones changing trends.

The Effects of this collaboration

The joint venture between Sweden’s Ericsson and Japan’s Sony has had tremendous results. The joint venture produced a camera and a music phone which became very popular to the target market and helped increase profits. Thus, this collaboration helps Sony Ericsson to effectively compete in the mobile phones market through attracting the younger generation and also increasing its sales by a huge amount.

This keeps the company in the business and helps it maintain its products’ marketability. Sony Ericsson has due to the merger produced 35 different phones that are modeled to address different consumer needs and this makes the Company to have a significant command in the mobile phone and consumer electronic market.

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