In today’s global economy, a business’s success often depends on how effectively it enters new markets. This means organisations must develop an appropriate market entry strategy. A well-planned and implemented approach is important to successfully establishing a product or service in a fresh market.

In this guide, you’ll learn about different methods of expansions and how to devise your own. We’ll also explain how German businesses can identify the right markets and address barriers to entry.

What’s in this article?

• What is a market entry strategy?
  
• How do German businesses find and select the right markets?
  
• How to develop a market entry strategy
  
• How can businesses overcome barriers to market entry?
  

What is a market entry strategy?

A market entry strategy is a business’s structured plan to broaden into a new field. It includes all the business’s decisions and actions to prepare, implement, and secure expansion into the desired sector. It encompasses choosing a market, distribution channels, pricing methodology, and, where necessary, adapting the products or services to local conditions.

"Market entry” refers to an organisation’s first commercial interactions in a new geographic or industry-specific area. This could involve introducing a fresh offering in a familiar environment or leveraging established solutions in an unexplored domain. Firms that expand aim to reach new groups of customers, increase sales, and strengthen their standing.

A market entry strategy is primarily designed to overcome barriers and minimise risks. It also provides a systematic basis for a structured, efficient, and cost-effective launch in a fresh territory.

How do German businesses find and select the right markets?

It’s important to determine the right markets for your venture to succeed in a new one. Owners and stakeholders must consider several factors when selecting a target sector.

Businesses need to analyse prospective segments carefully and ask themselves, among others, the following questions:

Does the target market have sufficient purchasing power for a successful launch?
A key element in choosing a field is the financial situation of potential customers. Businesses need to ensure that their intended audience can afford their products or services. A thorough analysis of the group’s purchasing power and economic conditions helps avoid misunderstandings.

Is the target group in the new market accessible?
You must also consider how straightforward it is for businesses to connect with customers in the chosen market. You need to be able to address your target customers directly – consider the availability of the proper sales channels and your intended audience’s communication preferences.

Is there real demand when entering the market?
A successful launch depends on whether there is a clear and convincing demand for the product or service. Research the target demographic’s needs or problems to gauge how your business’s offerings can solve them.

Are partnerships necessary when entering the market?
In many cases, involving local partners in market entry makes sense. Businesses need to consider whether they can rely on existing partnerships or need new ones to deliver complete products or services.

How strong is the competition?
Another key component is the existing competition in the selected market. A competitive analysis can reveal how well-established brands already serve this territory. It can also help realistically assess entry barriers and develop possible differentiation plans.

Does the market offer long-term growth potential?
Your launch should not focus solely on rapid success. Businesses must ensure their chosen market enables further growth by addressing additional customer groups or expanding geographically.

Does the market match the company’s values?
Lastly, the market must be consistent with the company’s values and long-term goals. For example, a business committed to sustainability could pursue locations that embrace transparent ESG (environmental, social, and governance) standards.

How to develop a market entry strategy

There are several steps to developing a promising market entry strategy. Below is an outline of the most important ones.

Market analysis

The first step is to analyse the target market. This includes assessing the market potential, defining the selected groups, and examining the purchasing power. Potential customers’ needs must also be identified. Research, surveys, and competitive analysis can help fully understand the chosen industry.

Environmental analysis

In this analysis, examine potential competitors and any external influencing aspects in the target market. Identify the main players and find ways to stand out. During this process, you’ll likely uncover obstacles to entry that could make field access more difficult.

Choose market access

The next step is to choose the best approach to establish yourself. Depending on the target market and resources, several models come into play: acquisitions, shares, subsidiaries, joint ventures, licensing, or a pure export plan. Our article on foreign expansion provides detailed information on this.

Conduct a pilot phase

Businesses need to first test the defined strategy on a small scale. For instance, a limited test area, such as a city, could be entered before a large-scale expansion. Firms can gather valuable feedback from customers and adjust their strategies accordingly. This reduces the risk of a broader launch.

Create a promotion and sales strategy

Building a targeted marketing and sales plan is key to actively promoting market entry and attracting initial customers. Suitable channels need to be carefully determined to reach the intended audience effectively. At the same time, developing a competitive yet profitable pricing model is important. This must meet industry demands while supporting organisational goals.

Monitor success and adapt

As soon as a business steps into a new sector, it must evaluate whether the launch is thriving. You’ll need to define apparent success factors, such as revenue, market share, or customer satisfaction. Using these metrics, businesses can measure whether the objectives set by the market entry strategy have been achieved.

If necessary, the approach must be adjusted in response to these metrics. Entering new markets rarely goes 100% smoothly, so monitoring and improving the process is key. Conditions in the target field can change at any time, so be prepared to make adjustments.

How can businesses overcome barriers to market entry?

Barriers to market entry can make it challenging – or, some cases, entirely impossible – to establish a presence. These can result from economic, legal, or structural circumstances and vary depending on the industry and region. Typical obstacles are:

• Political and economic instability
  
• Regulatory and legal hurdles
  
• Cultural barriers
  
• High capital requirements
  
• Strong competition
  
• Difficult access to distribution channels
  
• Technological challenges
  

Each obstacle calls for specific tactics and measures to surmount effectively. Our article on barriers to market entry covers more details. However, some solutions can assist businesses overcome various hurdles.

Gradual expansion

One strategy to overcome entry barriers is gradual expansion. Businesses can start in smaller submarkets before entering larger ones, reducing investment and risk. These smaller segments also provide an opportunity to gain valuable experience and adapt products or services to local conditions. After achieving some initial traction, you can broaden your reach based on the lessons learned.

Digital solutions

Digital solutions can help break down barriers to entry. Growing enterprises need to explore technical options to assist them build their presence. These range from supply chain management to automated processes or enhanced marketing and sales.

Digital platforms enable the resolution of logistical and administrative challenges and lower the barriers to entry into new domains. Partnering with other companies focused on technological solutions is worthwhile if you want to concentrate on your core activities.

For example, Stripe delivers versatile solutions to simplify, refine, and automate financial processes. With Stripe Payments, businesses can accept transactions worldwide and offer customers more than 100 payment options. Meanwhile, Stripe Tax, automatically collects taxes worldwide and provides access to all relevant documents. Additionally, Stripe Connect enables quick creation of a profitable, scalable payment operation. All Stripe solutions can easily be combined.

Collaboration

Collaboration is also recommended. Rather than competing, businesses entering unfamiliar territories can look to local brands as partners. Joint efforts or alliances allow for cost sharing, and firms can also benefit from the knowledge and expertise of local partners in new markets.