HafeziCapital specializes in facilitating new market entries for companies, both domestically and internationally, through a structured approach designed to mitigate risks and maximize opportunities. Domestic and International expansion can be somewhat challenging but very profitable if done the correct way. The New Market Entry Consulting Team can help companies with new geographical market, such as a new city, state, or even a new country.  Or, it can be a material phenomenon when a company enters a new market by the introduction of a new product and/or service.  Each type of new market entry requires extensive research and strategies for the venture to succeed. A certain level of regional customization might have to be implemented for the product/service to succeed within the new market. New market entry may be accomplished in a number of ways, through exporting, offshoring, licensing, franchising, mergers and acquisitions, a joint venture(s), strategic alliances, Foreign Direct Investment (FDI), piggybacking or partnership(s). Each of these strategies has its own challenges, but can be very rewarding if done correctly and in a manner that complements the companies existing structure.

Why don’t small and medium business enter a new market?

One of the key elements with small and medium businesses is their lack of resources and awareness of foreign markets. How can you enter a new market when you do not what opportunities abound? To solve this major problem for our clients, HafeziCapital has developed a proprietary process for New Market Entry. Based on the current clientele basis, sales patterns and many other metrics, we analyze similar patterns in other geographies and develop a Top Five Market Entry recommendation list. Based on this data and client’s input we move to a more robust analytical process with detailed demographic studies, market entry strategies, legal limitations, and competitor analysis.

With this step-by-step approach, we help small and medium sized business understand the new market and become comfortable with the various challenges that such a market entry will possess. Furthermore, we develop a market entry model to ensure we correctly estimate the financial and human capital needs for such market entry. Moreover, this process allows companies to better understand their competitive advantage both in terms of domestic and international market entry. Ultimately, this process creates value by minimizing the risk premiums associated with the new market entry. This data points educate the client as to the challenges and prepares them to be pro-active to the cultural, legal and economic conditions within the new market.

What are the challenges of new market entry?

Entering a new market can lead companies to significant profits and growth but can also turn into catastrophic failures with heavy financial losses and brand dilution.  Therefore, it is important to develop a new market entry strategy and do ample research and analysis to determine the profitability of this new market opportunity.  A good example of a mismanaged market entry is that of Blockbuster in the 1990’s. The video rental retailer entered Japan through a Joint Venture with Fujita Den Trading with the notion that it was going to be a renter of “wholesome entertainment,” just as it did in the United States. This excluded, adult movies and extreme horror movies.   However, in Japan, a video store could not exist by itself without leasing adult movies, given that adult movie rental composed 35% of all video rentals. Blockbuster’s market entry strategy failed and losses mounted until. In 1999 Blockbuster was forced to sell its interests to its partner Fujita Den Trading and pull operations from Japan.

Why do companies enter new markets?

The reason most companies enter a new market is to expand their market share and to significantly increase their customer base by bringing new products or services to a new market. Before deciding to enter a new market, there are a number of things companies need to consider. Here are some examples of questions that need to be addressed in an empirical manner:

            1. What is the demand for the company’s product or service in the new market?
            2. Does there need to be a high demand to justify the cost of new market entry?
            3. Who are the local, national and international competitors?
            4. What is the demographical statistics of the new market?
            5. How big is the new market entry opportunity?
            6. What are the anticipated profits and costs?
            7. What methods should be used for new market entry?

When all the research is done and a determination has been made as to what market to enter, the next step will be to create a new marketing strategy to build brand awareness in the new market and promote the new product or service.  While a company may be a household name in a specific local market, people might have never heard of it in other areas so it is important to develop a strong marketing campaign and launch the product or service as a brand new item as if no one has heard of it before.

Even established companies with a great history of new make market entry can make mistakes such as the case of French cosmetics retailer Sephora (part of LVMH). The Japanese cosmetic market represented a $10 Billon (US Dollar) in annual sale. By other measures, the market size was the second most valuable (in term of volume) in the world after the United States. In 1999 when Sephora first entered the Japanese market, it did not attempt to learn how Japanese women shopped for cosmetics. For Sephora, it was solely an attempt to increase its economies of scale and scope, rather than understand the targeted clientele, Japanese consumer dynamics, and transference of product and services knowledge to end-users. In 2002, given the various pressures, Sephora left the market bruised and financially weakened.

New market entry can also be done on the international level by exporting your products or services into a new country or by establishing operations in that new country.  International market entry requires more efforts and capital than a domestic market entry and can pose a number of additional challenges based on the region selected.

Case Study 1: New Market Entry of Modern Furniture Manufacturing Company

HafeziCapital was engaged to conduct a comprehensive market expansion feasibility study for a modern furniture manufacturing company looking to expand its direct-to-consumer sales from Miami to across the United States. The primary objective was to evaluate the potential for nationwide expansion by analyzing market demand, competitive landscape, and the company’s operational capabilities. The study aimed to provide the client with a clear understanding of the most promising markets for entry, helping to formulate a strategic plan that maximizes growth and market penetration.

Approach: HafeziCapital’s approach involved developing key baseline metrics to assess the market position and identify high-potential markets. This began with an extensive market analysis, incorporating demographic trends, consumer preferences, and purchasing behavior in different regions. The team conducted detailed research, including market visits to gather first-hand insights and validate data. They also analyzed the competitive landscape to understand the strengths and weaknesses of existing players in the furniture market. By fully understanding the company’s production capabilities, supply chain logistics, and customer service framework, HafeziCapital was able to align market opportunities with the company’s strengths. This comprehensive analysis led to the development of a five-market recommendation based on targeted customer segments and regional potential.

Outcome: The feasibility study provided a strategic roadmap for the furniture company’s market expansion across the United States. HafeziCapital identified five key markets with the highest potential for success, considering factors such as consumer demand, competitive dynamics, and logistical feasibility. Financial projections indicated strong potential returns in these markets, supported by detailed cost estimates and revenue forecasts. The study also offered tailored recommendations for each market, including marketing strategies, distribution channels, and operational adjustments to meet local consumer needs. Armed with these insights, the client was well-positioned to execute a strategic market entry plan, leveraging HafeziCapital’s research to confidently expand their direct-to-consumer sales and establish a robust national presence.

Case Study 2: New Market Entry of Middle Eastern Coffee Concept

HafeziCapital was engaged to conduct a comprehensive market expansion feasibility study for a Middle Eastern coffee concept looking to expand its presence across the United States. The primary objective was to evaluate the potential for nationwide expansion by analyzing market demand, competitive landscape, and the company’s operational capabilities. The study aimed to provide the client with a clear understanding of the most promising markets for entry, helping to formulate a strategic plan that maximizes growth and market penetration while maintaining the brand’s unique cultural identity.

Approach: HafeziCapital’s approach involved developing key baseline metrics to assess the market position and identify high-potential markets. This began with an extensive market analysis, incorporating demographic trends, cultural affinity for Middle Eastern cuisine, and coffee consumption patterns in different regions. The team conducted detailed research, including market visits to gather first-hand insights and validate data. They also analyzed the competitive landscape to understand the strengths and weaknesses of existing coffee shops and niche market players. By fully understanding the company’s unique offerings, production capabilities, and supply chain logistics, HafeziCapital was able to align market opportunities with the company’s strengths. This comprehensive analysis led to the development of a ten-market recommendation based on targeted customer segments and regional potential.

Outcome: The feasibility study provided a strategic roadmap for the Middle Eastern coffee concept’s market expansion across the United States. HafeziCapital identified ten key markets with the highest potential for success, considering factors such as consumer demand, cultural fit, competitive dynamics, and logistical feasibility. Financial projections indicated strong potential returns in these markets, supported by detailed cost estimates and revenue forecasts. The study also offered tailored recommendations for each market, including marketing strategies, distribution channels, and operational adjustments to meet local consumer preferences. Armed with these insights, the client was well-positioned to execute a strategic market entry plan, leveraging HafeziCapital’s research to confidently expand their Middle Eastern coffee concept and establish a robust national presence.

Case Study 3: New Market Entry of Plumbing and Sprinkler Company

HafeziCapital was tasked with conducting a comprehensive market expansion feasibility study for a plumbing and sprinkler company aiming to extend its services across the United States. The primary objective was to evaluate the potential for nationwide expansion by analyzing market demand, competitive landscape, and the company’s operational capabilities. The study aimed to identify the most promising markets for entry, enabling the company to strategically position itself and maximize growth opportunities while optimizing resource allocation.

Approach: HafeziCapital’s approach began with the development of key baseline metrics to assess the company’s market position and identify high-potential regions. This involved an extensive market analysis, including demographic data, construction trends, and regional demand for plumbing and sprinkler services. The team conducted detailed research, including site visits to gather firsthand insights and validate data. They also analyzed the competitive landscape to understand market saturation and identify potential competitive advantages. By aligning market opportunities with the company’s operational strengths, service capabilities, and logistical considerations, HafeziCapital was able to recommend the most strategic markets for expansion. This approach ensured that the analysis was both thorough and tailored to the company’s specific needs.

Outcome: The feasibility study provided a strategic roadmap for the plumbing and sprinkler company’s expansion across the United States. HafeziCapital identified three key markets with the highest potential for success based on consumer demand, construction activity, and competitive dynamics. Financial projections for these markets demonstrated promising returns, supported by detailed cost estimates and revenue forecasts. The study also included tailored recommendations for market entry, such as targeted marketing strategies, local partnerships, and operational adjustments to effectively address regional needs. With these insights, the company was well-equipped to execute its expansion plan, leveraging HafeziCapital’s research to enter new markets with confidence and establish a strong national presence.

Contact us today to discuss your New Market Entry Study!

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