Market Entry Strategy: a complete guide for UK businesses

Are you excited about the potential of expanding your business into new markets? That’s excellent news, but don’t let your excitement interfere with a well-planned process.

If you’re entering a new market, you need a market entry strategy to spell out the specifics of the process and outline your goals and expectations. Keep reading to delve deeper and learn how to choose and develop a strategy for your business.

Table of contents:
What is a market entry strategy? Domestic markets vs. international markets Why to develop a new market strategy? What are the risks of entering a new market? International market entry strategies What to consider when creating a market entry strategy Go global Wise Business

What is a market entry strategy?

If you’re wondering what is a market entry strategy, here is the right place. You’re about to uncover all the information and tips you need to choose a strategy for taking your business into a new market.

In basic terms, your market entry strategy¹ will provide you with an outline of how you’re going to enter a new market and what your expectations are. In it, you’ll cover aspects including products and services you’ll offer, which market you’ll choose, and how you’ll enter the market.

Domestic markets vs. international markets

Do you want to expand your business domestically or internationally? This is a basic question that you need to deal with as a starting point. Trades that operate in the domestic market include construction, hospitality, and car dealerships. Typically, entering a new domestic market is easier than starting to operate overseas. The main reason is that you already know about the UK cultural and business landscape.

The international market is the flip side of this. You have the chance to access vast customer potential, but this benefit comes with complications. You’ll be dealing with cultural and administrative differences and the challenge of international logistics in the foreign market.

Pros and cons for domestic market

Pros of the domestic market	Cons of the domestic market
A greater understanding of customer preferences.	A lower ceiling for business opportunities in a limited geographic market.
First-hand knowledge of the economic situation allowing the business to make financial decisions more easily.	Reduced target market size when compared with the international market.
Maintaining business maturity is easier in a market that you already have some understanding of.	Limited access to labour and materials when compared with sourcing internationally.
Managing a localised workforce is easier than managing remotely.	The full potential of products and services may never be known without going international.
Communication between workers is easier due to a shared language and culture.

Pros and cons for international market

Pros of the international market	Cons of the international market
Business growth opportunities are greater.	Invoicing is more complex due to international requirements.
Risk is spread across different geographic locations, so success in one location balances challenges in another.	Managing an internationally located workforce can be challenging.
Access to cheaper materials and a larger customer base increases potential profit.	There are risks of political and financial instability.
Technical knowledge may be more diverse and in-depth in other countries.	Cultural and language differences make communication difficult.
	Businesses must navigate local laws and taxes.
	Businesses must overcome currency exchange risks.

You can reduce the risk of money exchange by making sure your exchange rate is fair and simple. The best way to do this is to guarantee you get the real mid-market exchange rate Wise offers to businesses. Simply put, the mid-market rate is the midpoint between what bankers are willing to pay for a currency and what they are willing to accept when selling it.

Choose to receive international payments with Wise and get the mid-market exchange rate to limit your risks.

Why to develop a new market strategy?

Before you develop a new market strategy, you need to decide why you’re entering the market and if it’s the right step to take. There are many excellent reasons to go ahead with your plans, including:

• Growing your customer base gives you a chance to sell more products and increase your revenue.
• Diversifying into a separate domestic market or looking overseas could be the only way to grow the business you have.
• You reduce risk if you spread it across markets or locations, as good performance in one location offsets problems in another.

If you decide to progress your plans to enter a new market, you must always consider your risks.

What are the risks of entering a new market?

When you’re thinking of entering a new international market with your business, you can’t escape the fact that there are risks. They include:

• Potential political unrest or financial instability in the country.
• Cultural differences causing issues² with the local workforce or wider community.
• Unpredictable weather with the potential for natural disasters.
• Changes in currency exchange rates that can affect your bottom line.

Once you’ve considered the risks involved, your next step is choosing the right market entry strategy to reduce the risks for your business and achieve your goals.

International market entry strategies

When looking at international market entry strategies, you need to think about how you will market your products or services, your sourcing intentions, and what level of control you will have over your foreign operations. With these factors in mind, here are five common market entry strategies to consider using and developing.

1. Direct exporting

Choosing an exporting market entry strategy means exporting your products directly into a new market. You’re responsible for all aspects of the process, including creating infrastructure, transportation, and sending and receiving payments.

💡 Example:
A mobile phone case supplier mails products directly to customers in Europe, taking direct responsibility for shipping, marketing, and sales

To help with direct exporting, the UK Government provides advice for businesses about exporting³.

2. Indirect exporting with buying agents

The option of indirect exporting with a buying agent means collaborating with a representative of a foreign company. This representative normally works on commission and can be responsible for one or more aspects of the process, such as negotiating a price, arranging transportation, and providing translation services.

💡 Example:
A uniform manufacturer in the UK collaborates with a representative of several colleges in a European country to provide student uniforms for a negotiated price. The representative arranges for the transportation of the uniforms to the recipients and charges a commission.

3. Indirect exporting with distributors

Often businesses prefer to sell products to a distributor or wholesaler. Their services include identifying markets, finding customers, and handling shipping and logistics.

💡 Example:
A fashion business in the UK sells women’s dresses to a distributor in Canada. The distributor arranges for transportation of the dresses and clearance through customs. It then sells the dresses to its clients.

4. Indirect exporting with trading companies

Trading companies exist to help businesses with all their export needs. The services they carry out include identifying markets, finding customers and handling shipping and logistics.

💡 Example:
A luxury handbag designer in the UK uses a trading company to identify potential markets and customers. The trading company identifies a chain of luxury retailers in the Asian market and arranges for the sale and transportation of the products.

5. Indirect exporting with piggybacking

For any business that wants to sell its products in a foreign market without taking on direct export and sales risks, piggybacking to sell goods internationally could be a good idea. Piggybacking is when one business allows another non-competing business to sell products on its behalf in a foreign market.

💡 Example:
A hair accessory provider in the UK wants to sell its products in Europe but doesn’t want to take on the risks of selling abroad. Instead, it pays a fee to a shampoo and conditioner seller and allows this business to sell its hair accessories in the European market.

6. Producing in the target market

Another option for expansion is to produce in the target market. Choosing this option takes away the need for transport and other challenges of exporting. The downside is that businesses must address legal responsibilities, workforce concerns, and the cost of manufacturing in the foreign market.

💡 Example:

A UK manufacturer opens a select number of factories in India to produce household goods. Prototype, product design and engineering are taken care of at home, and only when the product is finalised does manufacturing take place in the factories. Working in this way helps the process to run smoothly, and the cost of operating the factories is less than it would be in the UK. There are also no export costs.

What to consider when creating a market entry strategy

Once you decide to enter a new international market, it’s essential for you to create a bespoke market entry strategy to give you a blueprint for your process and monitor your progress. Researching the market that you’re entering is a good place to start.

Research the new market

You can’t simply enter a market if you have no information about it. So, it’s a given that you need to do deep research on your target market. Listing vital topics stops you from missing any valuable insights. As a starting point, here are some questions to find the answers to:

• How big is the market you’re entering?
• What domestic and international competition do you face?
• What market segment are you targeting?
• Have you identified your Unique Selling Point (USP) in the market, and what is it?
• Are there regulatory, certification, trade, and other barriers to overcome?
• What are the consumer trends and perceptions regarding similar products in the market?
• Have you identified what an export licence is and whether you need one?

Doing this amount of research may seem daunting, but a lot of the information you need is available online. Plus, investing time and effort means your market entry strategy is more likely to succeed.

Choose the entry strategy

When you have the answers to your main research questions, it’s time to choose the international market entry strategy that gives you what you need. You can decide to use one of the entry strategies listed above and then delve deeper into how you will bring your products or services to market.

Think carefully about whether you want to sell directly to customers or use an intermediary and consider what help you may need during the process. You may decide to combine a series of different options, such as:

• Working with an agent in your target market.
• Buying an existing business that operates in the market.
• Selling goods online.
• Offering fast international payment options through an e-commerce site.
• Piggybacking your sales using another company.

⚠️ There isn't a generic solution that suits every business, so have your goals and expectations in mind when making decisions about your strategy.

Consider financing challenges and risks

As with any business decision, financing must be at the centre of your strategy for entering an international market. You must identify potential financial risks and plan how to mitigate them. As a starting point, you’ll want to consider several common risks.

• Scaling your business to meet market demands.
• Managing Compliance.
• Hiring talent from the local community.
• Problems raising capital.
• Issues with the foreign exchange rate.

Reducing these risks isn’t easy, but it can be done. For example, planning your scaling requirements in advance means you make sure you have the financing in place, so you don’t face any costly holdups in your process. You can also work with a local laws and regulations expert to make sure you don’t get any nasty compliance surprises.

When it comes to issues with capital, planning and forecasting based on reliable data gives you a better chance of securing the financing you need. You can also protect your financial fluidity by using Wise Multi-Currency Account to make it easier for you to complete financial transactions with foreign suppliers.

Wise Business also has a vital role to play in reducing your foreign exchange rate risks as it allows your business to hold money in local currencies and convert at the ideal moment. Having this ability protects you from making drastic losses if a currency loses its value.

Research insurance needs

Your insurance needs will vary depending on which market and country you’re trading in. So, carrying out research is a must. You don’t want to lose out financially because you have the wrong insurance provision or it isn’t comprehensive enough. Types of insurance you’ll want to consider include credit insurance in case a customer doesn’t pay and professional indemnity insurance to cover you in the case of certain product errors.

Document the strategy

Writing down your market entry strategy framework is a vital step to take. When you’re doing this, capture all aspects of the strategy, including steps to take and goals. This document is a living record of your market entry process, so it should include a record of your progress and findings.

Compiling your market entry strategy in writing isn’t just a guide and measure for you. When you’re applying for financing, you can present it as a relevant planning document to support your application. The document will also help to inform your export marketing plan.

Go global Wise Business

Entering a new international market and looking for a way to manage your finances more easily? Wise Business is an easy to use international business account that gives you access to features that simplify your entry into an international market. Opening this account means you can:

• Get local bank details and receive money in 10 currencies.
• Hold and convert money from more than 50 currencies.
• Spend with your account debit card.
• Easily manage employee expenses with expenses cards.

You’ll never have to struggle to manage your international finances, so you can concentrate on other aspects of your market entry that may be more complex.

Get Wise Business

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Taking the time to choose and shape the best market entry strategy for your business improves your chances of success. Consider which strategy is the best match for your goals, research your market, and decide how you’ll mitigate against associated risks. Most importantly, record your strategy in writing and use it as a living document to guide and review your actions before, during, and after the market entry process.

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Sources used in this article:

1. What is market entry strategy? | Entering a new market | Kadence
2. How does culture affect international business? | The ICG
3. Exporting and doing business abroad - GOV.UK

Sources checked on 24/10/2022