Timing Of Entry Into Foreign Markets

Carnot Sylvestre, MS

When companies desire to introduce new products into foreign markets, they must address the issue of timing of entry. Indeed they have to carefully research their markets to determine if their products will actually serve the needs of consumers, that they will be adopted in a reasonable of amount time and that conditions in the prospective markets are favorable for the products to be introduced.

Timing of entry is very important as it will directly affect the outcome of a company’s ventures in a foreign market. Launched products, specially those in a new category, which are adopted at an early stage will reap considerable advantages for the companies that introduced them, while competing products that follow will find more difficulties in getting acceptance. Once consumers adopt and gain familiarity with a company’s product that complements their lifestyle, they tend to be loyal to the brand and cannot easily be persuaded to switch their allegiance to other competing products. Managers should diligently research their foreign markets and decide on a timing of entry for their companies either as first movers, early followers or late entrants.

Companies considered as first movers are pioneers in introducing new products or services. They tend to benefit from brand loyalty and technological leadership and often capture a dominant share of their markets. Their early entry allows them to acquire preferable locations and distribution channels as well as establish valuable relationships with key partners. Their managers must however be aware of the high costs associated with being first movers such as R&D, marketing, etc...Companies must also be willing to be patient and dedicate necessary resources to facilitate adoption of their products by consumers. Studies show that companies that are first movers typically have a high rate of failure but that should not deter first movers that have done adequate research from anticipating trends in the marketplace and generating creative products that will satisfy the needs of consumers. Ultimately, first movers with a sound marketing plan and innovative products tend to reap the benefits of brand loyalty on the part of consumers.

Early followers are those companies that are early to enter markets but are not first; they are often referred to as early leaders. Opinions vary as to whether it is better for companies to be first movers or early followers. Some studies have shown that first movers tend to have higher returns and survival rates while others suggest that first movers tend to be first to fail leaving the markets to the benefits of early followers.

Late entrants are those companies that choose to wait to enter markets until products similar to theirs begin to penetrate markets on a large scale. While these companies find it less costly to enter markets because they don’t have to incur the huge expenses associated with R&D and marketing, quite often they find that the markets are already saturated and that they have to aggressively compete to establish their brands and grab market share.

The choice for a timing of entry is quite complex and depends on a number of factors that vary from markets to markets. Companies must look at the stage of development of supplier networks, distribution channels, level of technological maturity, availability and access to complementary resources in each market before making a decision to become first movers, early followers or late entrants. Ultimately companies must remember that they are in business to make money; they must make sure that the profit margins they might obtain from a particular foreign market are not only worth their efforts but that they also far outweigh the costs and risks associated with their ventures.