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

Market entry strategiesMarket entry strategies

Trade Related Technical Assistance for SRE

Peter BennettTrade Development Consultant

Mexico: SRE Market Entry Strategies 2.

Routes to market - CharacteristicsRoutes 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


Routes to market - OptionsRoutes 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.


Decision based onDecision 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


Most used optionMost 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


Identification of distributors / buyersIdentification 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 buyer’s needs


Distributors – What do they do?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 exporter’s customer

6. Local market knowledge and selling skills

7. Provide market coverage at low cost and low risk


Ingredients of successIngredients 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 distributor’s needs

Key task - Advising exporters how to develop this relationship.


Background informationBackground 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.


Exporter’s ExpectationsExporter’s Expectations

• What is the exporter expecting from the distributor?

• Is it realistic?

• Do you agree?


Are distributors easy to find?Are distributors easy to find?

• Good ones always work with competitors

• Why is this?


Characteristics of distributorsCharacteristics of distributors

• Small family owned businesses• Less growth oriented than exporter• Loyalties will be with their customers• Serve multiple suppliers• Exporter must compete for distributor’s time• Finance may be short• May lack management and marketing skills• Hi-Tech: Will need training and support


DisadvantagesDisadvantages

• Exporter’s experience of market is limited• Exporter may have no relationship with end

customers• Exporter has no permanent presence in

market• Limited control over distributor’s marketing

strategy• If “Private Label” there is no control


Identifying distributorsIdentifying distributors

• Observe competitors and approach competitor’s 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.


Selection criteriaSelection 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


What are distributors worried What are distributors worried about?about?

• Lack of support and commitment

• Arrangement discontinued when sales reach a certain level

• Direct supply

• Not been listened to!


Distributor support programmesDistributor 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


Sales subsidiarySales 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


Direct sellingDirect 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


Acquisitions and franchisingAcquisitions and franchising

• Unlikely to be involved

• Refer to specialists


AgentsAgents

• Less and less common

• Associated with specific industries


Joint ventureJoint 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

Documents

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