Market entry & International distribution channel strategy
If you want to start selling in a foreign market that is relatively unknown for you, you need a clear market entry strategy. This may be different from the strategies you have used so far, since the market structure or the competition is different.
Which country to select as your next export destination?
If you want to export to new markets, then you first need to select the right countries to do business in. This can be a country where you get enquiries from, but it is wise to look broader.
These are the three steps that I always recommend:
- find out what need drives your sales;
- find the country where that need is large and still growing;
- check the competition.
International market entry Strategy
The main challenges in market entry in a new country are:
- Cultural differences
- Legal and regulatory hurdles
- Establishing distribution networks
- (Unknown) competition
- Financial risks
- Communication barriers
Here I focus on the third point: establishing distribution networks, or the way how you will reach your customer. The options that you have depend on your product and your target group.
Get support from a consultant in the country where you want to do business
Indirect export: distributors, retailers or online
If you have a consumer product that you can’t sell directly from your home country to your end customer, you need at least one step in between. This can be a distributor (who also acts as wholesaler or importer), a big retailer directly, or it can be a large web shop. Let’s look at the pro’s and con’s of each option.
Distributors
- Distributors are used to import, store and physically distribute a product.
- They normally don’t invest in promoting your product to consumers.
- They are the best chance to get your product in the market so that you can gather sales data.
Large retailers
- Retailers are very risk averse, may ask for a listing fee before they put your product on the shelves.
- They can help you promote your product in their stores and in their magazines, but will also ask a fee for this.
- They are the quickest route to the mass market, if you can convince them.
Online
- Specialised web shops may have a greater interest in your product than general web shops.
- They can experiment more easily with pricing and ways of promoting.
- Volumes may be lower, but working with web shops is still a good way to collect reviews and get brand awareness.
Direct export for B2B products or customized offerings
For a B2B product that is not a commodity or for customized solutions the story is different. Here sales needs to be done in alignment with the department that actually delivers the service or that determines the price case by case. Also then you have three different options.
Agents
- Agents represent you in the country and have a limited negotiation room.
- They often sell not only for you, but also for other parties.
- A good agent already has a network in your target market and can start selling directly.
Local offices
- Local offices are a costly option, but give you full control on your sales.
- You have to send someone over and hire local staff and office facilities.
- This gives the opportunity to do local marketing and business development from within the country.
Distance selling
- If you product can easily be delivered and serviced from abroad (like software) this may be a good option.
- Video conferencing is more accepted now and can limit travel.
- Lead generation may be done with SEO, advertising and email marketing.
Where it all starts: select a target group
As counts for any country: you first have to define the target group that you want to sell to. If these are businesses, then you can reach out directly through emails and targeted advertisements, e.g. on LinkedIn. If this arouses interest and gives a sufficient response rate, then you may have found an easy way to get the market’s attention.
If your target group is more diffuse, or is a consumer group, then you have to rely more on advertising such as on Facebook or Instagram.
Do your first approach with instantly.ai
With the tooling of our partner Instantly.ai you can define your target group, whether it’s 50 or 50.000 people. Send them a sequence of emails, directly in their inbox, for typically under 10 dollarcents per persoon.
The business case for your exports
If you plan to expand you company abroad, you will also have to take into account the investments that go along with it. A new market entry may easily costs you 100,000 USD in investments, let alone the working capital.
How to determine how much money you need? And how quickly will your earn back that investment based on your revenue growth projections?
Read more of our articles
Frequently asked questions
A good export strategy does not only take the market opportunities into account, but also the barriers for a company to enter that market, such as distance, a different culture or strong local competition.
Market entry is the whole process of bringing your product or service to a new geographical market, and can include market reseach, positioning, setting up logistics, a launch, marketing communications and organising servicing or return streams.
A market entry strategy outlines how a company plans to deliver goods and establish a presence in a new market. This includes choosing the mode of entry—like exporting, licensing, franchising, or direct investment—and planning marketing, distribution, pricing, and compliance efforts to effectively reach and serve the target market.
This all depend on your product and the country that you want to introduce it in. In more general terms, first gather as much information as possible on the market structure and your chances in the market before investing a lot. Have interviews done with local players to learn whether they would buy or distribute your product and what you need to change in your approach.
- Exporting: Selling products directly to a new market, either by handling it yourself or using local distributors.
- Licensing and Franchising: Letting a local business use your brand or business model. Licensing is for products, franchising for business operations.
- Joint Ventures and Strategic Alliances: Partnering with a local company, sharing resources and risks. Joint ventures involve creating a new entity, while strategic alliances do not.
- Wholly Owned Subsidiaries and Greenfield Investments: Fully owning a new operation in the market, either by starting from scratch (Greenfield) or buying an existing local company.
- Piggybacking: Using another company’s distribution network for your products.
- Turnkey Projects: Building and transferring operational facilities to a local client.
- Acquisitions and Mergers: Combining with or purchasing a local company.
- E-commerce: Entering the market through online platforms, reducing upfront costs and reaching a broad audience.
International commercial due diligence is checking the viability of a product or company in markets abroad. We can do this scan in over 30 countries simultaniously.
International distribution is the full process of getting your products or services sold and delivered abroad. To get your products sold, you need international marketing, direct sales or distribution partners and ways to get paid. To get your products delivered, you need packaging, shipping, customs clearance and in case you deliver the wrong product, an organised return stream.
International distribution channels are the chains of companies like exporters, importers, wholesalers, distributors and retailers to get your product from your home country sold in countries abroad.
This differs per product or region. For cheap, bulky products it may be good to have both production and warehouses all around the world. For high tech products, the focus is more on getting them sold in the right environment than how to physically get them there.
