Strategies For Entering Foreign Markets: Waterfall And Sprinkler

Carnot Sylvestre, MS

After conducting adequate market research and appropriate cross-cultural analysis, managers can choose between two strategies to implement a company’s entry into foreign markets: waterfall and sprinkler.

Waterfall strategy is used by a company to introduce a product sequentially in different markets. The company first enters one market, then another and then another, etc…

Sprinkler strategy is used when a company chooses to introduce a product simultaneously in multiple markets. The sprinkler strategy works particularly well for a company that wants to be a first mover or one that wants to preempt moves by competitors. The problem with this approach is that it requires vast resources that managers at the home headquarters may be hesitant to provide; additionally companies may miss the opportunity to fully understand a market, thereby neglecting to take adequate steps to assure success.

Waterfall strategy is preferable because it allows the company to take time to understand a market and make appropriate adjustment to its marketing mix in order to satisfy the specific needs of each market. Managers can maximize the use of available resources; they can leverage their experience from the first market and make necessary improvements or changes to enter the next market. The waterfall strategy allows a company to transfer managerial and technological skills from one market to another.

For the waterfall strategy to be successful, ideally the first market should be one that presents characteristics closely similar to those found in the company’s home market. Other factors such as geographic proximity, a nation’s attitude toward foreign goods, tariff and currency policies that will affect commercial transactions must be given serious consideration because they will directly affect a company’s operations and the outcome of its foreign ventures.