Entry Strategies
- 2. A market entry strategy is the planned method of delivering goods or services to a new target market and distributing them there. When importing or exporting services, it refers to establishing and managing contracts in a foreign country. Types of Entry Strategies: 1) New Product 2) Franchising 3) Sponsorship 4) Acquisition
- 3. 1} New Product: With a well-considered new product development (NPD) strategy, you can avoid wasting time, money and business resources. An NPD strategy will help you organise your product planning and research, capture your customers' views and expectations, and accurately plan and resource your NPD project. Your strategy will also help you avoid: • overestimating and misreading your target market • launching a poorly designed product, or a product that doesn't meet the needs of your target customers • incorrectly pricing products • spending resources you don't have on higher-than-anticipated development costs • exposing your business to risks and threats from unexpected competition. There are several important steps you will need to plan into your NPD strategy: a) Define your product b) Identify market needs c) Establish time frames d) Identify key issues and approaches
- 4. a) Define your product: • An accurate description of the product you are planning will help keep you and your team focused and avoid NPD pitfalls such as developing too many products at once, or running out of resources to develop the product. b) Identify market needs • Successful NPD requires a thorough knowledge of your target market and its needs and wants. A targeted, strategic and purposeful approach to NPD will ensure your products fit your market. Ask yourself: i. What is the target market for the product I am proposing? ii. What does that market need? iii. What is the benefit of my proposed new product? iv. What are the market's frustrations of existing products of its type? v. How will the product fit into the current market? vi. What sets this product apart from its competition? • Draw on your existing market research. You may need to undertake additional research to test your new product proposal with your customers. For example, you could set up focus groups or a customer survey.
- 5. c) Establish time frames: • You need to allow adequate time to develop and implement your new products. • Your objectives for developing new products will inform your time frames and your deadlines for implementation. • Be thoughtful and realistic. • Some objectives might overlap but others will be mutually exclusive. • Your objective to race against your competition will require efficiency from your team. • Your aim to achieve a specific launch date will be influenced by demand for seasonal products and calendar events. • Your aim to be responsive to your customers' needs and demands will require time for research to ensure you develop the right products at the right time. • Your objective to stick to business as usual and maintain other schedules will affect the resources you make available for NPD.
- 6. d) Identify key issues and approaches: • There are many tasks involved in developing a product that is appropriate for your customers. • The nature of your business and your idea will determine how many of these steps you need to take. You may be able to skip or duplicate certain stages, or start some of them simultaneously. • Key tasks include: a) generating and screening ideas b) developing and screening concepts c) testing concepts d) analysing market and business strategy e) developing and market testing products f) implementing and commercialising products.
- 7. 2} Franchising: • Franchising is a long term partnership and companies who wish to be successful must recognise the true nature of the relationship, and the responsibilities on each partner. • Typically a franchisee will pay a franchisor: a license or purchase fee. a percentage of the sales or profits. an annual fee. • Franchising is one of three business strategies a company may use in capturing market share. • The others are company owned units or a combination of company owned and franchised units. • Franchising is a business strategy for getting and keeping customers. • It is a marketing system for creating an image in the minds of current and future customers about how the company's products and services can help them. • It is a method for distributing products and services that satisfy customer needs. • Franchising is a network of interdependent business relationships that allows a number of people to share: • A brand identification • A successful method of doing business • A proven marketing and distribution system • In short, franchising is a strategic alliance between groups of people who have specific relationships and responsibilities with a common goal to dominate markets, i.e., to get and keep more customers than their competitors.
- 8. 3} Sponsorship: • To sponsor something is to support an event, activity, person, or organization financially or through the provision of products or services. • A sponsor is the individual or group that provides the support, similar to a benefactor. • Sponsorship is a cash and/or in-kind fee paid to a property (typically in sports, arts, entertainment or causes) in return for access to the exploitable commercial potential associated with that property. • While the sponsoree (property being sponsored) may be non-profit, unlike philanthropy, sponsorship is done with the expectation of a commercial return. • While sponsorship can deliver increased awareness, brand building and propensity to purchase, it is different from advertising. • Unlike advertising, sponsorship can not communicate specific product attributes. Nor can it stand alone, as sponsorship requires support elements. • All sponsorship should be based on contractual obligations between the sponsor and the sponsored party. Sponsors and sponsored parties should set out clear terms and conditions with all other partners involved, to define their expectations regarding all aspects of the sponsorship deal. Sponsorship should be recognisable as such. • The terms and conduct of sponsorship should be based upon the principle of good faith between all parties to the sponsorship. There should be clarity regarding the specific rights being sold and confirmation that these are available for sponsorship from the rights holder. Sponsored parties should have the absolute right to decide on the value of the sponsorship rights that they are offering and the appropriateness of the sponsor with whom they contract.
- 9. Categories of Sponsorship: Title sponsor is highest status of sponsorship. It characterizes the most significant contribution to a company in organizing and hosting an event. Often the name of such sponsor is placed next to the name of competition, teams, individual athletes and is associated with it (for example, the logo of a title sponsor is placed on a uniform of football club teams). The status of a title sponsor also allows to have a decisive voice on the issue of presence among sponsors other companies operating in the same business, the priority right to use players and coaches for conducting joint promotions, right of presence at all official events dedicated to a sports event, mandatory mentioning in all activities conducted on behalf of the team, highlighting the name of title sponsor in film credits, television programs which were created with its financial support, placement of logos and banners. In case of title sponsor's presence the general sponsor position may remain free.
- 10. General sponsor is a sponsor that makes one of the largest contributions (in absence of a title sponsor - usually more than 50% of all sponsorship funds raised) and that receives for it the right to use the image of competition as well as extensive media coverage. If necessary, the status of the general sponsor may be supplemented by the general sponsors for certain categories, as well as the main sponsor. Official sponsor is a sponsor that makes a certain part of raised funds (within 20-25%). Typically, the given status may be granted by category ("official insurance partner", "official automotive partner", etc.). Technical sponsor is a sponsor which promotes organization of sporting events through the partial or full payment of goods and services (e.g., medical equipment, fitness, organization of transportation and lodging). Participating sponsor is a company, the sponsorship fee size of which usually does not exceed 10% of total raised funds. Informational sponsor is an organization that provides informational support through media coverage, conducting PR-actions, joint actions, etc.
- 11. 4} Acquisition: • An acquisition is a corporate action in which a company buys most, if not all, of another firm's ownership stakes to assume control of it. • An acquisition occurs when a buying company obtains more than 50% ownership in a target company. • As part of the exchange, the acquiring company often purchases the target company's stock and other assets, which allows the acquiring company to make decisions regarding the newly acquired assets without the approval of the target company’s shareholders. • Acquisitions can be paid for in cash, in the acquiring company's stock or a combination of both.
- 12. Why Make an Acquisition? 1. Companies perform acquisitions for various reasons. 2. They may be seeking to achieve economies of scale, greater market share, increased synergy, cost reductions, or new niche offerings. 3. If they wish to expand their operations to another country, buying an existing company may be the only viable way to enter a foreign market, or at least the easiest way: 4. The purchased business will already have its own personnel (both labor and management), a brand name and other intangible assets, ensuring that the acquiring company will start off with a good customer base. 5. Acquisitions are often made as part of a company's growth strategy when it is more beneficial to take over an existing firm's operations than it is to expanding on its own. 6. Large companies eventually find it difficult to keep growing without losing efficiency. 7. Whether because the company is becoming too bureaucratic or it runs into physical or logistical resource constraints, eventually its marginal productivity peaks. 8. To find higher growth and new profits, the large firm may look for promising young companies to acquire and incorporate into its revenue stream.
- 13. 9. When an industry attracts too many competitor firms or when the supply from existing firms ramps up too much, companies may look to acquisitions as a way to reduce excess capacity, eliminate the competition, or focus on the most productive providers. 10. If a new technology emerges that could increase productivity, a company may decide that it is most cost-efficient to purchase a competitor that already has the technology. 11. Research and development may be too difficult or take too much time, so the company offers to buy the existing assets of a company that has already gone through that process.