Expanding into new markets and establishing a presence is the natural and logical way of achieving business growth that has its challenging and risky side. Sometimes it works, and other times, a business stretches itself too much. Confidence is important but preparation is vital in order to create a strategy that will not fail.
There’s a way in which you approach the situation of expanding and I’ll try to outline a strategy we usually follow when trying to enter a market.
The basic supply vs demand setup
The initial understanding starts with the motivations that are entirely based on the supply and demand equation. It’s as basic as it gets and then evolves from this fundamental economic principle into a broader grasp of market movements. If I had to describe it in one sentence, I’d say it’s about keeping your ear to the ground, monitoring market developments, and reacting appropriately.
For ongoing activities, a large part of getting to know which market is susceptible for a meaningful entry depends on the continuing relationships with your partners. For example, let’s say we have a partner looking to promote an app or a product. They have a budget for the run-of-the-mill operations and KPI’s from a specific geolocation like the US. In order for us to broaden the scope, I need to hear from our partners if there’s an increasing demand or activity for certain geolocation. Without their input, we would be going blind, wasting time and resources that could be spent far better.
Hearing from our partners is crucial when entering an emerging market. A saturated market has a different dynamic to it and assumptions from such a developed market don’t necessarily transfer to emerging markets. Just as a saturated market is an indicator on its own there’s plenty of opportunity (because if entrepreneurs avoided them, there’d be far less options for the end users), so it’s important for us to be on the lookout for emerging markets when looking to diversify and provide an advantage to our partners.
High level of insight and understanding
There isn’t a single thing that needs to happen in order to dive in. Understanding which markets to enter is formed on what I like to call the whispers of the market (sounds almost like a fancy entrepreneur book). These can be anything. The most glaring and obvious example would be a group of investors from a different country coming to a local market or local companies getting investments from global VC companies. These correlations are the initial shapings of an approach to a new market.
The news is filled with relevant information, whether it’s startups receiving millions in funding as a sign of a growingly interesting market or a certain country passing investment-friendly legislation. For instance, a few years ago the UK prioritized outside investment, which boosted the relationship of the UK and Israel and saw a multitude of Israeli startups move there. You’re reading between the lines, starting to follow the leads. In essence, what you are doing is more of a shallow market research where you need to keep your eyes open all the time.
Then, the next step we take is to start to research what advantage we can bring to that market and ways on how we can help companies we work with enter this particular market. This is where you start to ask questions to get answers your entire venture will depend on. How much of your core expertise can you actually leverage? Who are the market leaders? What do they do? How do they operate?
Besides understanding the culture (a must), do a little digging and start to investigate: who do we know from our local market that is working with them? Are there any personal connections we can utilize? Did somebody live or work there, that can act as a liaison? Does it have a rousing startup niche we could use to good advantage? In a nutshell, the point is to differentiate if we can harness the growth element of this market.
To be positively received in a new market, a business also needs to dissect those “unglamorous” things. One of those is a thorough legal understanding. There are many legal aspects that need to be considered so understanding the laws that govern business in your new market is paramount. Taxes, employee laws, data protection and a whole range of issues are part of the equation you must solve. Don’t be shy to seek help from local experts.
The strength of the currency and market stability are also very important. If the basic economy is increasing, that’s obviously a good sign because the currency value fluctuation can cost you between when you negotiate a deal and once it’s finalized. These are all the things that can not only hint but ultimately decide if the local market is ready for your business.
Finally – keep an eye on competitors…
… all the time. You have companies whose part of the strategy when entering a new market is acquiring a stable company in a particular region. That’s a pretty good indicator of the approach they took so maybe you can do the same or, alternatively go a different route, depending on how many times they tried to enter that particular market before, and if they successfully navigated around obstacles.
That would be an overview of M51’s understanding of which markets are best suited for our entry. To make the best decision for your business, there’s no way around it – you need to do your homework. Some outside factors may affect the success of your market entry strategy but for the most part, following the outline should minimize, if not outright eliminate much of the risk.