Market entry strategies


Selling know-how / products on the U.S. market
 

 

How to develop a strategy?

1. Understand the market and its competitive environment
 

  • How is the market segmented (total market, accessible market, target market)
  • Which are the driving forces in the market place (demand side, supply side)
  • What is the overall business system (from supplier to customer)

2. Focus on key factors of success (KFS)
 

  • Which are the economics of the business (own approach, competitive approach)
  • What are the customer's needs and why (in general and in respect to products / services)
  • How does the product compare with the competitive offering?
  • Which differences regarding KFS exist between the U.S.A. and Europe?

            

Definition of target segment
 

  • size / growth

  • attractiveness to company

Definition of own position
 

  •  position with respect to key success factors
  •  potential differentiation
  •  potential alternatives in respect to 1) channels, 2) products and 3) pricing

3. Define resources needed
 

  • What is our own position in respect to key factors of success
  • How much does the adaption of the product / service to U.S. needs cost? (R&D)
  • How many marketing resources are necessary to introduce the product / service in a given time? Marketing cost to reach the critical mass?
  • What are the organizational prerequisites to comply with the customer's expectations? In particular in view of service?

 

Licensing own technology / know-how

Typical cases
 

  • Intellectual property which can be protected by patents/copyrights/special know-how, e.g. software/process development/product developments/franchising concepts, etc 

Pros: 
 

  • Income without direct investment, limited marketing costs

Cons: 
 

  • Limited income, dependent on aggressiveness of licensee
  • Creation of potential competitor

Special skills
 

  • Excellent negotiation skills
  • High level innovation
  • Good technical support

 

Exporting products directly

Typical cases
 

  • Products which have a small and well-defined potential customer base / high-level technical support needed
  • Highly specialized equipment for the producing and servicing industry

Pros: 
 

  • Possibility to focus on attractive customers without high marketing costs (cherry picking)

Cons: 
 

  • Limited sales potential
  • Risk of high sales fluctuations

Special skills
 

  • few, but highly skilled sales force
  • international logistics, including know-how of relevant U.S. standards
  • fast international service response

 

Selling products by own sales force

Typical cases
 

  • Products with large sales potential and/or clearly defined customer base needing a well-defined sophisticated marketing program, e.g. drugs, machine tools, durable goods, specialty products.

Pros:
 

  • Direct control of marketing and sales activities
  • Direct contact with customer

Cons:
 

  • Fixed cost organization
  • Risk of critical mass / high sales cost especially in start-up phase

Special skills
 

  • Sales force management, i.e. hiring, training, control of sales productivity
  • Marketing skills, segmentation of customer base, positioning of products
  • Servicing the product from a U.S. base

 

Selling products by an independent Rep organization

Typical cases
 

  • Products which have a large potential customer base and/or which cover a very specific industry, e.g. tooling products, motors, gears, technical tissues.

Pros:
 

  • Easy to start, assuming product advantage
  • Good use of reps customer know-how / visit costs
  • Variabilization of selling costs

Cons:
 

  • Limited control of reps marketing/sales exposure for own products
  • Necessity of financing inventory in the U.S. to offer a high service level.
  • Limited identification of rep with products of limited success

Special skills
 

  • Selecting, hiring and training of reps
  • Understanding local logistics, including financing needs of inventory
  • Marketing control

 

Setting up a fully-fledged own organization

Typical cases
 

  • Products with high potential and local low cost sourcing of material. services and skills, e.g. products with high logistics and service costs such as tools, OEM products, etc.

Pros:
 

  • Image as U.S. supplier
  • High service level, low sourcing costs
  • Better access to local personnel market

Cons:
 

  • High start-up costs
  • Risk of subcritical mass, especially in the start-up phase
  • Different facility management philosophy

Special skills:
 

  • Human resource management, i.e. hiring, training, incentive schemes, etc.
  • General management, marketing, production, administration
  • Transferring technology / know-how

 

Acquiring a company

Typical cases
 

  • Any company giving access to market and distribution and/or specific U.S. producsts and/or specific skills necessary to control the key factors of sucess

Pros:
 

  • Image as U.S. supplier, i.e. commitment/service/customer relations
  • Immediate position on the market
  • Better, faster control of key factors of sucess

Cons:
 

  • High acquisiton costs (premium, due diligencse, tough negotiations, legal costs)
  • Risk of losing management
  • High loss potential if due diligence too superficial (management/strategy/financial/special skills/legal/environmental)

Special skills:
 

  • Selecting, binding professional U.S. management
  • Negotiation/communication in the beginning of the venture
  • Transferring technology / know-how

 

Authored by:

Ludwig & Partner AG
Morgental 35
8135 Zumikon
www.ludwig.ch

 

 

October 2001