Posts Tagged ‘enter’

LeisureEurope Case Study: In entering a new market, first decide “where to compete “, then “how to compete”.

Friday, July 20th, 2012

“LeisureEurope” is a major boat manufacturer that had been developed a leadership position in Europe for different types of recreational boats. In a period when the overall size of the boat market in Europe was quickly shrinking the company believed the best way to position itself was to enter the USA market.

Unfortunately the resources and the investments “LeisureEurope” made for several years to enter the USA market were not providing the results the CEO was looking for. Why did this happen?
The CEO asked Thinking Dimensions to indentify the main causes for the poor results and to support the company in implementation of a plan to properly enter the market.

The poor results were due to the following causes:

  1. LeisureEurope started launching products for the USA market without having a clear understanding of the customer needs and of the competition offerings
  2. The USA market was different from European markets:
  • The size and the complexity of the USA market was much higher
  • For the type of products offered by “LeisureEurope”, the concept of “leisure boat” as intended by the final user was very different
  • Certain types of recreational boats that practically didn’t exist in Europe, represented an important quota of the total market in the USA
  • The criteria adopted by the customers (i.e. the retailers) to select their suppliers of boats were different from the one adopted by the European dealers

In the first 2 months after the first meeting with the CE0, Thinking Dimensions helped “LeisureEurope” answer the following questions:

  • Which are the main competitors in the USA market?
  • Which distinctive capabilities or product characteristics could “LeisureEurope” offer relatively to the competition?
  • Which customer segment were actually willing to pay a premium price for these distinctive capabilities or products?

The results of the first phase of the project were very surprising for the CEO: it showed “LeisureEurope” was competitive in a specific market segment that has not been even considered for the USA.

In the second phase of the project Thinking Dimensions worked with “LeisureEurope” to implement the market entry plan focusing specifically on the market segment that had been identified.

5 months after the first meeting with the CEO the company was already generating a volume of sales (and margins) far above the expectations of the CEO and the management team

 

This blog post was authored by Diego Miglioranzi, Partner, Thinking Dimensions

Feel free to contact the author directly for questions about this subject.

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Posted in New Market Entry, Strategy |

When you believe “there is a market there”, first test your assumptions- then enter

Friday, July 20th, 2012

Many companies combine “feeling” with the evidence that a “bunch of their competitors are already in the market” and make the fateful decision “we need to go chasing the opportunity, too”! As a second step, they start looking for agents, distributors, or other local parties that can assist in the new market.

We call this an opportunistic approach, meaning that  you are making decisions based on gut feeling without really knowing what opportunities and risks are out there in new markets for your company. Maybe it goes well, maybe not.

We believe that a company rarely has the luxury of understanding this only afterwards.

Our experience shows us that companies that successfully enter new markets adopt an analytical and structured approach to identify whether there is an opportunity in the new market for their specific company and whether the projected result justifies the efforts and the investments to get there.

In order to be able to measure the success of the initiative, for instance, you, together with your team, First need to define what would make the new market entry a successful project at least in terms of level of sales, minimum margin, level of investment.

Secondly, you want to understand what type of opportunity (if any) is there in the new market.

To be able to understand this you need to answer 3 sets of questions::

Who are our potential clients?

  • What are the segment of clients present in the market?
  • What is their size?
  • Where are they geographically located?
  • What are their buying criteria? And are those any different from those of the home market?

 

Who are our competitors?

  • Who are our competitors for each of the identified segments? (those are usually different)
  • What sort of products do they supply the market with and at what price?

 

How does our product position in the new market?

  • Can we differentiate from our competitors? And if so, how does the new market perceive us? Is the market willing to pay us a premium?
  • Will our  products be accepted  by the market or would those need to be changed in some way? Is it going to be a big change or a minor one?
  • What certifications/labels are necessary to be able of selling products?

 

Only at this point , going back to the goals that you and your team set at the beginning,  will you be able to say whether there is an interesting opportunity for your company in the new market or not.

What we have seen in our experience is through using a systematic process based market approach companies know clearly what to do, where to start from, and where to go to acheive their “share” of the market thus avoiding expensive and risky opportunistic trials.

   This blog post was authored by Laura Rainati, Thinking Dimensions

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Posted in New Market Entry, Strategy |

Strategic and Operational Decisions on Entering a “fast growing market”

Wednesday, July 18th, 2012

While the growth rates in developed economies are still projected to be sluggish in the next few years, emerging markets are booming and can provide lucrative opportunities for many companies.

For example, certain automotive companies are focusing primarily on Brazil, Russia, India and China (BRIC) as they see these nations as the most important sources of future business growth. China is frequently considered one of the most interesting countries at the moment, given that the China is already one of the largest vehicle markets in the world and is progressively trending upwards even now.

What are companies looking for in new markets?

Market opportunities, natural resources, talents or tax and investment advantages are all reasons for companies to enter new markets and each of these requires different approaches and different capabilities and competencies. A strategic reason to enter a new market is certainly sales and production capabilities of the firm that can be leveraged in that specific market. One big mistake companies sometimes make is in attempting to enter a new market with their current products and services portfolio convinced they can easily apply the same winning business model used in countries already served. Often this “opportunistic” approach leads to a failure in the new market entry initiative putting and risks placing the parent company in a difficult position to explain to shareholders.

What should we consider when entering a new market?

Average disposable income in emerging and early stage markets is usually lower than in developed countries, however, the number of people that are moving towards a higher budget are rapidly increasing. Even if it is true that a lot of people are out of the target reach in emerging markets, it is also true that an enormous number of people will be requesting standard lifestyle products.

 

Product offering, approach and business models need to be adjusted to target the right offering for the new “local” consumer.   An interesting example is the new Disney park in Shanghai, PRC, which will open in 2015 and with a total investment of USD 3.84 billion- Disney has spent several years studying closely the needs and desires of their target customers and adapted the world renowned Disney brand and formula to best attempt to fit the exacting requirements of the market (see article here).  Entering a new market means knowing which products, what price, and what distribution channel(s) need to be used. Partnering with local companies (e.g. distributors) can be a good way to enter a new market, develop knowledge, and share new market entry risk.

 

A company we assisted in entering a new market recently set the first step in place developing a collaboration with a local distributor. In a few months (less than one year) the company was able to identify which formula of competitive advantage was mostly valuable in that market, which sales distribution channels were more appropriate and have a clear understanding on both the local buying criteria and the (different) process. As a second step, the company moved to a proprietary distribution channel having all the necessary capabilities and competencies available and confidence from the board that the ROI would meet targets.

 

Emerging and early stage markets are indeed enticing- completing thorough research systematically and setting place the right capability investments together with the best emphasis products and channels will increase the risk of success- something all shareholders want to hear and can trust in.

Luca Girotto This post was authored by Luca Girotto, Consultant, Thinking Dimensions.

Luca is currently based in the Italy offices of Thinking Dimensions and has worked on series of projects related to APEC, North Africa, and Latin America.

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Posted in Implementation, New Market Entry, Operations, Strategy |

Entering emerging and early stage markets- why strategic assumptions matter

Monday, July 16th, 2012

As “traditional” economies for many companies are stalling for growth a common theme for many organizations is to look towards emerging and early stage markets. The allure of emerging and early stage markets are the potential for “double and triple” digit growth with seemingly strong demand for years to come. Further enticement comes frequently from executives who visit the target countries and witness strong business to business and end consumer demand at price levels which at first glance can seem more lucrative than home based markets. The last step which leads many organizations to choose to emphasize emerging/early stage markets for entry are frequently statistics about GDP growth and disposable income trends (increasing)- which are indeed very interesting.

A number of our clients have achieved considerable success in both emerging and early stage markets- and while implementation challenges and resources demands are not easy to resolve- the proper initial screening at the strategic level can mitigate some risks and allow the company to focus on a few target areas where they have a higher probability to achieve bold growth.

One of the first steps in creating a portfolio strategy for entering emerging and early stage markets is to create strategic assumptions (if you have not already done so a good step in understanding what we mean by this is to read the blog post by my colleague Tim Lewko here).

The error we see many organizations make is to assume that general level growth (i.e. GDP, disposable income) will naturally translate into demand for the products and services they would like to sell in that particular market. Assumptions about demand are not frequently made visible and even more rarely are they validated with real current data. The error is even further compounded by not making clear the implications of the assumptions- and testing them in the target market.

The risk of error can be reduced by 3 steps:

1) Distilling down to the few critical strategic assumptions which really matter for your business. The growth of GDP is not good enough. The number of housing starts are not good enough. Disposable income is not an acceptable indicator. Push yourself and your team to really find the assumption and the data to validate or invalidate the assumption which will lead you to a reasonable implication that you can use to make decisions.

2) Validate and re-validate the data. Buying reports are not the only answer- and certainly cannot be relied on. Put people on the ground in the market, and have them use a structured process together with local support to gather, sort, organize, analyze, and verify information you and your executive team will use to take the most effective actions. Do not rely only on a local distributor or agency- even if you are considering an exclusive with them in the market- you need hard, objective, third party data.

3) Review on a regular basis and be ruthlessly honest in your reviews. Emerging and early stage markets are experiencing a rate of change at a far higher velocity than what we are used to in business. Be prepared to change and adjust your course based on the new information that becomes available. Do not allow this information to hide from the leadership team, or permit your leadership team to deny intellectually what is going on in the market.

 

Entering emerging and early stage markets are both exciting and challenging- there can also be a premimum valuation attached to your company or comapnies if you are good at it. The use of structured processes and systematic tools together with both your current team and local expertise will help you in outperforming your competitors and the market.

 

 

This blog post was authored by Scott Newton, Partner, Thinking Dimensions

 

 

 

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Posted in Implementation, New Market Entry, Operations, Strategy |

New Market Entry Requires Specific Capabilities to Succeed (Read which specifically here)

Monday, July 9th, 2012

New Market entry is a strategic choice that must be deliberately made. It is the most natural path for growth because it intuitively asks ‘if we are having success with our products where else can we sell them? This is the normal path for every startup or legacy strategy – find a need – serve it and build capabilities to support it. As companies grow over time there reaches a point for many where they have had success but run into growth barriers including:

  • High Market Share – they have a sufficient share and are succeeding in home markets – but its getting tougher to sustain growth e.g. think of Coca Cola and Pepsi in North America – with a population growth that is relatively flat – there is only so much room for more people to drink more colas. The chart below indicates the flatness of the market in North America – where new growth through existing products is like squeezing blood from a stone.

  • Mature Markets- the market is maturing i.e. reshaping market needs requiring a change in product or face obsolesce. Chart 1: Comparative Regional & U.S. Workforce Growth 2000 to 2020 clearly shows that the type of needs in the US are much different than Asia – as the workforce or consumer is in a different stage of the lifecycle.

 

  • Emerging Markets – global markets become more attractive because opportunity is driven through size, proximity, scale or changing trade barriers and dynamics. If you are a company serving North America or Western Europe this chart clearly underscores what you already know – to sustain growth you must be prepared to look outside your traditional region.

 

 

To overcome these barriers and find growth for your company this deliberate choice is to enter new markets or another way to say it is to move to a “Products Offered” growth strategy. In a recent client example our client wanted to find new growth and formalize their path for growth in Latin America – looking to bring their proven product and service platforms to both Columbia and Peru.

 

With this deliberate choice for growth based on sound analytics and matched to their strategic assumptions they now are preparing the required capabilities for this choice. This is where many companies “fall down” on their growth adventures – they believe they can take exactly the same products and processes and replicate them in new markets. The reality is –although the fundamental needs may be basically the same –the new market development requires clear investments in skills, people, capabilities and processes to accomplish strategic goals and targets.

 

The following four capabilities are essential for success when seeking to enter new segments (emerging markets).

 

1. Product development capability for the modification of current products – whether “language” instructions, imperial to metric size changes, certifications by country and region, or even simply what colors and names “work” for the market.

 

2. Market research capability for identifying segments with the same needs the company’s current products satisfy. – this business intelligence must be gathered and factored into the decision making process – it cannot be only a gut feel that says “ I believe there is a market there”.

 

3. Marketing capability for entering new markets with the company’s products. How the product is promoted to one country does not translate to another necessarily.

 

4. Sales capability for convincing new markets to accept their products. This many times requires new hires in the locations and a patience for realizing profits in the bank – as the norms for selling and getting paid ( or even getting your money out of the country are different).

 

As I noted at the start – the majority of global trends and opportunities that support the drive to enter emerging markets are sound – but your strategic decision making process must be deliberate and based on data as you invest in your future. There may be gold in the hills next door to you ….but you must be prepared for the climb.

This blog was authored by Tim Lewko, Partner, Thinking Dimensions

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Posted in New Market Entry, Strategy |

What is New Market Entry and how do companies win?

Tuesday, July 3rd, 2012

Welcome to our latest blog theme for July, and thank you from all the Partners and Employees at Thinking Dimensions- especially to all of you who have taken the time to write in and comment on what information you are looking for and what has been particularly helpful.

In July, our focus theme is

New Markets: How to Drive Global Growth and Predictability of Earnings Despite Periods of Economic Instability

This topic is on the top of mind for many of our clients as they work to ensure shareholder performance even if they are operating in markets which are turbulent and difficult to predict.

Today we will look at “What is New Market Entry and how do companies win?”.

New Market entry frequently involves taking a company’s current products and/or services and offering them in a new market- whether that be a channel, geographic area, or new market segment.

Why enter New Markets?  Companies typically enter new markets for one of four reasons:

1) A customer or customers are asking for support in a new market (very common theme within B2B suppliers)

2)Growth in current markets has reached saturation level and/or margins are declining

3)A large scale opportunity has been identified relative to the strategic direction for growth

4)Competitors are entering a market and presence is required for global presence/positioning (the least valid reason of the 4)

While entering new markets is both exciting and taxing for the organization, there are a brief series of criteria which should be met for a company to proceed:

  • How well is the planned new market to enter aligned with our company strategy?
  • How will the competitive advantage we enjoy in our current markets transfer to the new market?  Impact?
  • Which resources (and capabilities) are required for successful entry into the new market? Are they available?
  • What are time, cost, and performance characteristics of the new market entry project?
  • What barriers to entry and risks need to be addressed prior to entering the new market?
  • What is the ROI (or similar measures in each company)?  How predictable is it?

In working with clients entering new markets we have seen some excellent success stories including:

  1. A global automotive supplier who were able to significantly increase both their revenues and net income by opening a large-scale manufacturing, engineering, and service presence in SE Asia (previously just offering manufacturing)
  2. A European manufacturer who entered into the North American markets and was able to command both price and margin premiums for high quality niche products
  3. A North American B2B supplier who through acquisitions were able to provide superior offerings in the EMEA region

 

While there are many examples, they all share a few characteristics in common including:

A) A clearly articulated strategy which identified the areas of growth, included competitive intelligence, and a few select priorities

B) Realistic understanding of their competitive advantages and the relative value in the new markets

c) Support for investment including the board, President, and CEO/COO to ensure the opportunity was maximized

d)A development of the required capabilities and resources to create sustainable success

New Market Entry is not easy- there are many examples of not only success however also failure- if your leadership teams start by answering the questions raised in this short blog today in an objective format- this will be the first step to performing as well outside your “home” market segments as you do within.

 This blog post was authored by Scott B. Newton, Partner, Thinking Dimensions

 

 

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Posted in Implementation, M&A, New Market Entry, Strategy |

Why Acquire at all?

Friday, May 18th, 2012

One area we are asked about frequently is acquisitions- yes or no?

Why to acquire?

The decision for an acquisition is not easy- it is one alternative to developing capabilities organically however can be costly and also difficult to integrate.

So what are the steps required to approve an acquisition?

1- Know your strategy and specifically your competitive advantage.

2- Understand how the target will assist you in meeting your highest priority strategic emphasis goals

3- Test and validate the real NPV of the acquisition and measure its sustainability

4- Calculate the costs of integration in terms of not only money but also the internal resources required to achieve objectives

5- Recheck steps one through four

Once an acquisition has been approved- still be prepared to say no and walk away.  Your decision was based on a series of assumptions relative to the corporate strategy you have developed- if those assumptions cannot be verified it is always an alternative to close down the negotiation.  The costly acquisitions we have observed which do not work are typically due to a desire to proceed forward even though the DD was not validated- a perfect example of sunk costs considered as going concerns.

This post was authored by Scott Newton, Partner, Thinking Dimensions

 

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Posted in M&A |

Can a clear market entry strategy plan make the difference?

Tuesday, April 17th, 2012

Leading companies come to a point where they have to expand geographically and enter new markets. However not all the companies are successful in doing this. What are the distinctions between the companies that are successful in entering new markets and the ones that fail? There are a myriad of factors that potentially can explain this difference and the simple answer does not exist.

However, looking at companies that have successfully entered new markets, we can see that in most cases they are the ones that have a clear view of what their entry strategy is.

Many companies have invested most of their resources to improve manufacturing capabilities and develop innovative products. Is this enough to succeed in a global economy? Can a company remain competitive in the future by just investing in their upstream capabilities?

We think the answer to this question is “No”. In the global economy, leading companies need to be effective in making proper new market entry decisions and then effectively implement them.

Think for a second of the company that in the minds of many people built their incredible success on superior technological capabilities- Apple. At what level and extent do you think this success can be explained with their technological or commercial capabilities?

So, what are the guidelines that a leading company follows when entering a new market. We don’t want to be exhaustive, however I’m reporting below some answers to this question that come from the experience we developed by working with our clients:

  1. Ensure you understand the customer point of view before making any decisions
  2. Don’t assume or think that entering a new market is a “sales project”
  3. Start from the assumptions that your current products doesn’t fit with the market needs
  4. Handle the relationship with a partner that potentially could manage your business on the new market, as if it is a Joint Venture
  5. Ensure the decisions are coherent with your long term strategy

Our questions and thought provocations for the readers are:

  1. Did you consider your past market entry plan successful?
  2. Is you company investing or improving their ability to make new market decisions?
  3. If your company improved the way it approaches new markets, what could be the impact on the bottom line?

This blog was authored by Diego Miglioranzi, Partner, Thinking Dimensions

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Posted in New Market Entry, Strategy |