Market entry strategy for Global Expansion
Choosing the right market entry strategy is a key success factor of your expansion on foreign markets. Selecting which market and how many markets to go for is a core element of your International Business Development plans.
Waterfall or Sprinkler strategy
Once established on their domestic market, growing firms are targeting global expansions. Born global firms are speeding the process with their strong digital capabilities. Tech and SaaS companies have to rapidly scale as it is critical to maintain a competitive advantage on globalized markets. Fintech, Biotech, Cleantech, Healthtech, Insurtech, Deeptech companies are racing for growth and internationalization. Scaling is often the primary objective of Venture Capital funded start-ups.
In periods of global expansion, the choice of market entry mode is critical. The question of scaling concerns Time to market, Risks and Investment objectives
Two distinct strategies offer a path to new markets
A waterfall strategy is a sequential landing in different markets, whereas the sprinkler strategy is the simultaneous engagement in multiple international markets
How many foreign markets to target?
Should you go for a deployment on multiple markets, or a concentrated expansion on 1 or 2 markets?
In fact if you spread your business across too many countries, will you have a lower impact? Instead, should we focus on the most important markets?It is certainly the best way to ensure a much greater and faster success?
But common sense shall drive your decision making: it depends on your competitive environment, technological edge, available capital and human resources. It is also dependent on the level of pressure from the market and shareholders.
The Race for Growth
A common behavior of funded startups (especially those in hyper-growth mode) is that they have limited patience in their drive to grow.
Organic growth or Build up growth will fuel the scaling of your operations. The time has come, and the urgency is contagious, competition does not wait in growing or disrupted markets.
The thirst for globalization is strong, but it can sometimes be misdirected. Most business leaders find it difficult to take a step back, to catch their breath. They really need to do their homework to figure out which markets are best for them.
Market entry strategy: How to choose the entry mode ?
Business leaders often sense the potential of a market after single signals or inputs rather than a 360° view of risks and potentials.This feeling is reinforced when you know that there is a strong demand for what you sell all over the world. The right approach is rather to combine guts and data.
The market entry strategy is always wrong when there is a lack of time, resources or hindsight to investigate the different landing scenarios.
But while the international prospects you envision may seem limitless, there are often hidden thorns. Thorns that you won’t even be able to see until these markets start to bloom. Gathering relevant data on each market, but also taking stock of your company, its resources and skills is essential.
Top 5 for a good market entry strategy
Here are the five best reasons not to rush into to many international markets at the same time :
Do not dilute your brand awareness efforts.
Creating brand awareness for your business is essential. Unfortunately, this has to be done one country at a time. Do not limit the marketing impact on targeted markets that speak the same language. Long-term success requires dedicated and focused efforts in every country.
Focus your investments.
Even if it’s just by assigning a unique salesperson to that market, it is an investment and a potential litigation risk.
In the case of an international expansion, these first decisions often end up affecting your bottom line and your cash flow. The mistake is to spread your investments too thinly across too many markets. You will probably later have to struggle with divesting some of them.
Gaining ground in each of these markets takes time, energy and money. Don’t waste your resources, even if you have plenty after raising funds.
Engage your teams.
If you launch into too many markets at once, you will end up forcing your internal teams to compete for resources. At some point, you will have to make decisions about how to expand your presence. To a certain extent your decisions may have a financial impact that will damage your team’s engagement. Spreading financial resources and focus from corporate teams is harming their motivation.You will literally not be able to support all markets in the same way.
Reduce operational complexity.
Going global is the least perceived risk of many early-stage companies, but one of the most harmful.
When you start targeting new markets, it’s easy to forget the complexity you will add for your less visible teams (HR, Finance, CIO…). But the more countries you add at once, the faster the complexity of your business will multiply. Of course, you can manage many of these things through third parties and outsourcing. But someone in your company needs to manage these relationships, and ideally someone who has worked with these markets before. At the beginning, you will probably not recruit teams with in-depth and specialized international knowledge in your company but rather generalists for the function.
Adopt a Market Differentiation Strategy
You can absolutely target more countries in order to grow your business faster. The question is how to adapt your go to market approach to the country specifics. Adjusting your Marketing and Sales to the local requirements is often the key element for a successful market penetration.
To create minimal long-term risk, it is recommended to build country tiers. By defining common market factors you should be able to determine how and where you will invest. The pace of investments on new international markets can then be differentiated.
Efficient market penetration
The market conquest is more effective, after having correctly determined the company Product Market Fit. The product market fit may vary from a country to another.
We have reviewed the best practices, methods and resources for setting the right product market fit . This includes the several steps to go through and the work out of your minimum Viable Product with the support of the Grind process. In order to measure the effectiveness of your Product Market fit , we have documented how to run the Net Promoter Score and the Ellis Test.
This marketing approach is described in our Product Market Fit article.
so Waterfall or Sprinkler?
Waterfall or Waves development model? Of course the sector in which you operate will deeply influence the choice of expansion model.
For a software publisher, a SaaS company, rapid growth simultaneously in many markets is possible. To do this you need to have a mature organization with strong capabilities to localize. This including ability to external growth with a Build up model or talent sourcing as did a company like Sisence
But investing more heavily in the markets that matter strategically will increase your brand awareness. You then continue to grow the teams that support those markets and avoid unnecessary operational complexity. That doesn’t mean you can’t support other markets at all. It just means you’ll have to target them differently.
Clarify what you hope to achieve. Put numbers on it! Next, create your country strategy to serve your overall goals. A Strong Communication process is key to align your team around these goals and engage them.
In the end, do you want your company to be a challenger in dozens of countries around the world?
Or do you prefer to be a dominant leader in a smaller number of key markets of strategic importance to your business?
My advice: focus on a small number of countries from the start. It will be tempting to grab every opportunity that comes your way. If you do, you will only distract yourself and your teams.
Save scenarios of greater international complexity for later. Gather experience and successes in a limited number of countries first, then build a book of success stories and customer references. You can take advantage of this experience and these playbooks. It is then possible to adapt them to other markets.