The ways of entering a new market
There are several ways of entering a new market. The success of each of these methods of entering the market vary from one business and market to another. The common methods available in the market are: exporting, licensing, joint venture and direct investment (Lymbersky, 2008).
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This method of entering a new market entails marketing and sale of domestically produced goods to a foreign market. It is a conventional way of entering new markets. In this case, big and small business can send goods into a foreign or new market for distribution (Lymbersky, 2008). Some of the limitating factors to exporting as a way of entering a new market include the high cost of transporting goods, having to deal with local customs, and infrastructure development. An example of exporting would be that of a UK based manufacturer or supply who sells home-manufactured goods to a foreign country like the United States.
Foreign Direct Investment
In Foreign Direct Investment (FDI), a business transfers its capital and technological knowhow to a different country. FDI may also involve the acquisition of a running business (Lymbersky, 2008). Disney is a good example of a business that entered the European market where it established the European theme park.
Also known as franchising, this method of entering a new market is popular with multinationals that wish to break even in foreign markets. Licensing entails having a presence in a new market. Licensing encompasses granting permission to a different business entity to produce and sell products of say, a multinational, based on the good brand name of the licensor (Lymbersky, 2008). McDonalds is an example of a company that has entered into different markets through licensing or franchising.
This is another common method that businesses use to enter a new market. Under this method, parties to an international joint venture share the costs and financial burden of operations. The parties involved in a joint venture also share profits equally (Lymbersky, 2008). The common objectives of a joint venture include: ensuring market entry, enabling sharing of technology, sharing of risks and rewards, facilitating conformance with government regulations and laws, and enabling joint product development (Lymbersky, 2008). Other business benefits associated with business ventures are political connections, and access to effective and established distribution channels.
A good example of a joint venture is when Sainsbury, a UK-based company, wants to expand its operations into China. In this case, Sainsbury would have to enter into a strategic alliance with a Chinese based business and a new business venture is established. Joint ventures more desirable when the size, market power and resources of the individual companies are not sufficient relative to those of the competitors.
Importance of making adjustments in market potential and market share figures
Market share and market potential are both important factors that have to be determined in a business. Calculating the market share of a business entity is important as it gives an estimate of the total market potential for such a business. In regards to adjustments made to the market share, these are often made by businesses in order to reflect the competitive strengths and weaknesses of a proposed business venture (Moore & Longenecke, 2008).
While conducting market research, the strengths and weaknesses of competitors need to be determined, and these are then compared with the proposed business. This provides a business with the necessary information for adjustments to ensure that the business is aware of the strengths and weaknesses of its competitors.
Market potential on the other hand is used to arrive at dollar or unit sales based on the total market. It is used to determine the feasibility of a business in case it enters into a new market. In regards to making adjustments to the market potential of a business, this is done to update the acquired market data using the actual revenue statistics for the market (Moore & Longenecke, 2008). Such adjustments provide the business with projected forecasted demands and market trend forecasts. Adjustments are necessary as they reveal the potential of a given business entity after all the potential market changes have been factored in. Such adjustments are important as they show the financial feasibility of a business opportunity.
Evaluating non-quantitative factors
Evaluating small or large business enterprise is necessary for the survival of a business entity. It also enables the business to compete effectively with the rest of the businesses in the market. According to Chiste (1996), non-qualitative information is vital in determining whether the set goals of a business have been achieved. On the issue of the content of work, this is evaluated by assessing the suitability of the working conditions in a business. For example, a small business owner may ask questions like, what type of work will the business entail or whether the business will involve physical activities, among others (Chiste, 1996).
With reference lifestyle, a small business owner can start by evaluating the kind of lifestyle that the business can allow, the hours and time of the day that the business will remain open, and whether family members will be part of the business. Experience determines the extent to which a business owner can operate or run a business. In regards to evaluating experience, a small business owner evaluates the skills and experience of the business owner. This is important as lack of experience or unbalanced experience can lead to business failure. Evaluating a business entails determining whether the business owner has the necessary experience and career goals required to start such kind of business (Chiste, 1996).
Chiste, K. B. (1996). Aboriginal small business and entrepreneurship in Canada. North York, ON: Captus Press.
Lymbersky, C. (2008). Market entry strategies: Text, cases and readings in market entry management. Hamburg: Management Laboratory Press.
Moore, C. W., & Longenecker, J. G. (2008). Managing small business: An entrepreneurial emphasis. Australia: South-Western/Cengage Learning.