Market entry strategies Trade Related Technical Assistance for SRE Peter Bennett Trade Development Consultant

Mexico: SREMarket Entry Strategies2.2. Routes to market - Characteristics Characteristic of the market Not a characteristic of the product Do not assume commonality between markets Several distribution channels for same product Some channels may be accessible Other channels will not be accessible Must know characteristics of your market before advising an exporter

Mexico: SREMarket Entry Strategies3.3. Routes to market - Options 1.Use of a distributor / s 2.Formation of a sales subsidiary 3.Direct selling 4.Acquisition 5.Use an agent / s 6.Licensing and franchising 7.Joint venture In an large market may use more than one option.

Mexico: SREMarket Entry Strategies4.4. Decision based on Characteristic of market Local legislation, regulatory standards and practice Requirement for after sales service 24hr. Delivery Spare parts Financial resources Local expertise – it may not be available Relevant in high-tech industries

Mexico: SREMarket Entry Strategies5.5. Most used option 1.Distributors Used by majority of exporters 2.Sales subsidiary Usually a second option. Used in absence of distribution Large companies. Costs money! 3.Direct selling Common where there are a limited no. of customers Very common. Very problematic 4.Agents Associated with specific industries. Increasingly uncommon 5.Acquisitions / JVs/ Licensing Large companies

Mexico: SREMarket Entry Strategies6.6. Identification of distributors / buyers The most valuable service of a TPO 1.Identification of potential distributors / buyers – specific to the exporter 2.Setting up a series of meetings for exporter 3.Success is based on the selection, appointment, support, motivation of the distributor and meeting buyers needs

Mexico: SREMarket Entry Strategies7.7. Distributors – What do they do? 1.Import and pay the exporter. Distributor owns goods. 2.Warehousing, and local transportation 3.Sales and local distribution 4.After-sales service, spare parts, technical support 5.The distributor is the exporters customer 6.Local market knowledge and selling skills 7.Provide market coverage at low cost and low risk

Mexico: SREMarket Entry Strategies8.8. Ingredients of success A successful relationship is based on: 1.Trust 2.Clearly defined understanding between parties 3.Support. Market visits to help sales force. 4.Frequent contact 5.Joint decision making 6.Genuine effort to understand distributors needs Key task - Advising exporters how to develop this relationship.

Mexico: SREMarket Entry Strategies9.9. Background information 1.Geographical area / market segment 2.Current range / what products or services? 3.Customers 4.Size (T/O, no employed) 5.Sales force 6.Warehouse / storage / showroom 7.Measurement of performance 8.Very theoretical! Nice to have.

Mexico: SREMarket Entry Strategies10. Exporters Expectations What is the exporter expecting from the distributor? Is it realistic? Do you agree?

Mexico: SREMarket Entry Strategies11. Are distributors easy to find? Good ones always work with competitors Why is this?

Mexico: SREMarket Entry Strategies12. Characteristics of distributors Small family owned businesses Less growth oriented than exporter Loyalties will be with their customers Serve multiple suppliers Exporter must compete for distributors time Finance may be short May lack management and marketing skills Hi-Tech: Will need training and support

Mexico: SREMarket Entry Strategies13. Disadvantages Exporters experience of market is limited Exporter may have no relationship with end customers Exporter has no permanent presence in market Limited control over distributors marketing strategy If Private Label there is no control

Mexico: SREMarket Entry Strategies14. Identifying distributors Observe competitors and approach competitors distributors (Most cases will not work! Also dangers.) Trade fairs / trade fair catalogues Unsolicited contacts! C of C and trade associations – take you chances Trade magazines – rich source of information Referrals from major customers, buyers, end users – same names will keep coming up.

Mexico: SREMarket Entry Strategies15. Selection criteria Large company not always best choice Small to medium sized – best Limited number of products / specialised Avoid competing products. However … Co who supplies 2 or 3 major customers is the prime target Attach a high premium to referrals from buyers Attach a high premium to market knowledge, technical capability and enthusiasm

Mexico: SREMarket Entry Strategies16. What are distributors worried about? Lack of support and commitment Arrangement discontinued when sales reach a certain level Direct supply Not been listened to!

Mexico: SREMarket Entry Strategies17. Distributor support programmes Communication / listening Establishing trust Trade literature and support material Web site – links and referrals Market visits Pricing Keeping distributor informed / partnership Asking for advice – listening Training Visits from the distributor

Mexico: SREMarket Entry Strategies18. Sales subsidiary Only in principle or main market Potential sales large enough to cover costs Where exporter cannot locate a distributor You should have info on costs associated with establishing a sales subsidiary

Mexico: SREMarket Entry Strategies19. Direct selling Common in Engineering industries Sub-contractors and sub-supply Software and IT Services Major retail / department store chains Exporter has small no. of customers Vendor audits are common

Mexico: SREMarket Entry Strategies20. Acquisitions and franchising Unlikely to be involved Refer to specialists

Mexico: SREMarket Entry Strategies21. Agents Less and less common Associated with specific industries

Mexico: SREMarket Entry Strategies22. Joint venture Partner search similar to distributor search Must get a very specific brief from exporter Draw up a short list of candidates Set up meetings