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Market Entry Strategies for Saturated Markets

Challenges for the Consumer Goods Industry

Seminar Paper 2013 24 Pages

Business economics - Marketing, Corporate Communication, CRM, Market Research, Social Media

Excerpt

Table of Contents

Executive Summary

Table of Contents

List of Abbreviations

List of Figures

1 Introduction

2 Problem Definition

3 Objectives

4 Methodology

5 What is a saturated Market?

6 The Need for Market Entry Strategies

7 Preparing a Market Entry Strategy

8 Market Entry Strategies and their Challenges
8.1 Exporting
8.2 Licensing
8.3 Franchising
8.4 Joint Ventures
8.5 Direct Investment

9 Strategy Challenges for saturated Markets

10 Business Case - Adidas Group

11 Results & Conclusion

Bibliography

Online Sources

List of Abbreviations

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Executive Summary

This assignment occupies with the challenges of market entry strategies in saturated market, especially in the fashion industry. A new market entry needs a specific prepar-ing. Many environmental tasks of the investment have to be cleared before entering a new market. The right combination of market entry strategies help to succeed such a huge investment. Exporting, licensing, franchising, joint ventures and direct investments are some possibilities how a market entry strategy can look like but finding the right strategies for the given market situation is a difficult issue. Every strategy has ad-vantages and disadvantages which have to be considered if the investment should lead into a success. And as already mentioned, a saturated market is not a usual market, it has specific challenges which have to be managed. A market entry in a saturated market can only be successful if the company wins market shares from other competitors and the challenge is to find out how this can work. The Adidas Group showed how they could enter the US sports fashion market which is a saturated market, too. The company used a mix of the named strategies to win market shares in the host-country. And that is the way how to manage these challenges; every market entry in saturated markets has to be planned carefully and all influencing factors have to be considered. There is no general roadmap either every market entry needs its own map developed.

List of Tables

Table 1: Differences between Single Country and International Operations

List of Figures

Figure 1: Indicators of Market Potential

Figure 2: Classification of Market Entry Strategies

Figure 3: Market Entry Strategies used by the Adidas Group

1 Introduction

Globalization and improvement in technology allow markets to grow. The market place and market time are now nearly everywhere and at every time. Even on the moon Neal Armstrong could contact his insurance advisor to make a new life insurance contact via telecommunication system, to insurance possible problems on the way back home. This market expansion gives companies an opportunity to enlarge their business. For synergetic potentials and reasons of productivity companies are looking for possible investments like new market entries.[1] Firms can invest in new markets abroad or markets which are not to find in the domestic market industry (e.g. private weapon industry).[2] But a market entry is not only a good investment opportunity for companies; there are also risks and challenges which have to be mentioned. As a market entry is a huge investment for an organization the return on this investment is also very important. A good market analysis and the choice of a good market entry strategy depending on the market situation and the own corporate possibilities, is indispensable for a success in this issue. Entering new markets should not only be seen as investment possibilities, also a portfolio diversification with a risk reduction could be causes why a market entry could make sense and should be realized. As already mentioned the right strategy depends on the financial power and on the structural form of an organization. Exports, licenses, joint ventures, acquisitions or simply building production plants should only give a short overview of the instrumental spectrum of a new market entry.[3] Especially on saturated markets where the market shares are already divided, the right strategy choice differs over a success or a failure of the market entry.

2 Problem Definition

As already mentioned, the right market entry strategy can decide over a success or a failure of an investment. Therefore it is essential to know which strategies exist and which factors influence the strategy decision. In this case a market entry strategy should be analyzed how it can lead to a success in saturated markets. In a saturated market there are huge barriers or even limitations which have to be considered. The challenge here is to find the right strategy which finally leads to a success for the investing company. It can also be that there is no specific strategy which always leads to a benefit for the organization, because the success depends on many factors which have to be proved and considered.

3 Objectives

The objectives of this paper are to find market entry strategies for saturated markets, especially the fashion industry, to define their challenges and to value the best opportunity for a company. This paper will use a business case of the Adidas Group to show how a market entry could look like and to find out which strategies are helpful.

4 Methodology

The first part will define what a saturated market actually is. Afterwards, the needs for a market entry strategy will be described before the declaration of how to prepare a market entry strategy will start. The following chapter will occupy with some common market entry strategies like exporting, licensing, franchising, joint ventures and direct investments before explaining the strategy challenges for saturate markets followed by the business case with the Adidas Group. Last but not least the results and a short conclusion will be presented.

5 What is a saturated Market?

Saturated markets are markets where the demand is completely served and an additional demand cannot be generated or is satisfied by additional supply.[4] In this market situation companies can only grow by protecting its own customer pool and trying to win market shares from competitors. There are several strategies to challenge these goals. Innovation in product quality and acquisition of competitors are only a few examples for a market share winning strategy.[5]

6 The Need for Market Entry Strategies

The entry into a new market is a complicated and sophisticated matter, which has to be organized carefully. An investment in foreign markets is different than an investment in a domestic market, because more and often different questions and challenges have to be cleared.[6] But at least it does not matter where the investment should be made, the success depends on a good prepare and analysis of the new market. That is the reason why a strategic planning is necessary and should not be undervalued. These strategic decisions are typical management tasks, but the management board often installs specific departments which occupy with that issue or even take advice from consulting companies.[7] The need for a market entry strategy will be shown in the following text. For an international investment the company has to answer many questions which are important for a successful entry.

- How and where will the company produce the products and services?
- What products or services does the company want to sell?
- Where does the company wan to sell the products or services?
- How and where does the company want to get the necessary resources for the production process?
- How does the company want to compete with its competitors?
- What are the key success factors for the company and for the product or service?[8]

The listed questions are only some challenges which have to be taken for a successful entry in a new market or a foreign market. This paper occupies with the challenges of an entry strategy into a saturated market. First of all it has to be defined if it is a foreign or domestic market. The difference here is that a foreign market has more challenges which have to be handled with. The following table 1 should give a short overview of different challenges between a domestic and a foreign market entry.

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Table 1: Differences between Single Country and International Operations

Source: Lymbersky (2008), pp. 24 – 25.

Another reason why a strategy is so important is because the market entry strategy must fit into the whole business process of an organization. Synergetic potentials have to be analyzed and new projects have to be installed. A new market entry occupies all departments of an institution. The financial department is responsible for all financial matters and strategic controlling issues during the investment. The department of human resources has to check all tasks which touch the situation of the employees and almost cultural differences have to be noticed. The marketing department has to set up a strategy planning and to occupy with advertising challenges. These are only a few examples how the investment impacts all units and divisions of a single company and that is the point why a market entry strategy is so important. The company has to connect all these themes and develop a business chain where the whole organization gets a benefit. Elsewise the complex challenge will diffuse the divisions and the market entry will fail.[9]

[...]


[1] Deal & Kennedy (1999), pp. 111 – 117.

[2] Richter (2012), p. 229.

[3] Zentes et al. (2010), pp. 218 – 220.

[4] Koschnick (1995), p. 400.

[5] Aumayer (2009), p. 248.

[6] Kotler et al. (2008), pp. 940 – 941.

[7] Lymbersky (2008), pp. 23 – 25.

[8] Ibid., p. 23.

[9] Lymbersky (2008), pp. 24 – 25.

Details

Pages
24
Year
2013
ISBN (eBook)
9783656460466
ISBN (Book)
9783656460961
File size
633 KB
Language
English
Catalog Number
v230486
Institution / College
University of applied sciences, Nürnberg – IOM
Grade
1,3
Tags
market entry strategies saturated markets challenges consumer goods industry

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Title: Market Entry Strategies for Saturated Markets