What Entrepreneurs Must Know Before Entering New Markets
Conventional wisdom says location plays a critical role in whether enterprises succeed. But, choosing where to grow a company is only half the battle, because expanding into new markets is a tricky affair: Entrepreneurs must simultaneously cultivate their niche and adapt to a new consumer base (or bases).
Fast-paced globalization and rapidly evolving markets, moreover, are factors that demand greater agility from entrepreneurs than they’ve needed to create in the past. With growing opportunities in emerging and frontier economies -- and countries like Iran and Cuba -- a current news headline, given President Obama's visit there -- opening up for business, adapting to diverse locations will prove key in the global business landscape.
Related: How to Take Your Company Global
Entrepreneurs should take the following steps to ensure success in these new markets:
1. Optimize the digital dividend.
The proliferation of cell phones and ecommerce has disrupted traditional delivery services in markets around the world, particularly in emerging and frontier economies. Across the world, more than half of global consumers say they would use the Internet to buy groceries. And this trend is taking root: In Uruguay, 70 percent of Internet users surveyed said they already purchase goods online.
These numbers illustrate the opportunities created by the fusion between throbbing consumerism and fast-paced technological trends.
Indeed, the digital dividend creates a favorable platform through which businesses can expand their reach to potential consumers. The disruption caused by Uber and other companies in markets such as Kenya and South Africa demonstrates this point: The digital dividend can be a potent force when companies harness it correctly.
We’ve only begun to see the possibilities inherent in big data manipulation, and businesses should act now to avoid missing the action. The coming decade holds opportunities we haven’t even envisioned for aggregating, analyzing and deploying consumer intelligence in established and emerging markets.
2. Understand the competition.
Overlooking the competition -- in both formal and, more importantly, informal economic sectors -- is a chief reason why ventures fail in new locations. Business leaders must identify direct and indirect competitors and assess the market for gaps they can fill.
When considering frontier markets, businesses should never underestimate the competition from these economies’ informal sectors. So, make an incisive SWOT (strengths, weaknesses, opportunities and threats) assessment of key competitors; this will put the landscape you face into perspective and enable your business to evaluate its position.
In fact, SWOT assessments provide value for businesses in any market, from smaller companies, such as finance blogs or tech consultants, to the top of the Fortune 100. Formalizing these discussions can provide a road map for maneuvering past the competition in key areas before entering a foreign market.
Many enterprises also make the mistake of competing on price points instead of building a consumer-centric culture. The latter strategy, however, allows a business to develop a strong bond with its clients and leverage that relationship as a marketing tool.
3. Build resourceful networks.
Business communities thrive on resourceful, mutually beneficial exchanges of information. Entrepreneurs starting out in new locations should unearth potential networks as early as possible; these connections will help them identify the best service providers, budding market opportunities and partnerships that will enhance their competitiveness.
In-country contacts can provide valuable information about compliance issues, local markets and other essential details for a successful expansion. Waygo founder Ryan Rogowski learned this while expanding his business into Beijing: He began a correspondence with business leaders in the area before his actual move, to ensure that he had a support system in place for navigating uncharted territory.
Building business ecosystems in places such as China actually creates a buffer against cultural and infrastructure challenges that hamper entrepreneurs. Opportunities may abound, but ventures will still fail without the right connections.
Overall, enterprise mobility will accelerate in the next decade as globalization tears down geographical barriers. Agility and preparedness will be essential attributes as entrepreneurs scout for opportunities in nontraditional settings.