Forany enterprise, venturing into foreign markets has always proven ahard nut to crack. The dynamics and logistics involved may see thecompany fail if proper arrangements are not made concerning theentry. Therefore, the international market entry requires preliminaryprocesses like market research. Market research is a definitive termfor any integrated attempt to garner information about the projectedmarkets or customers for an enterprise seeking to venture outside itshome market. It forms the most fundamental part of business strategy,which subsequently determines the level of success of the business inthe new market. Precisely, market research assists an enterprise togain and maintain a competitive edge over the existing competitors.The research proffers vital critical information to find, analyze andsatisfy the needs of the specific market as well as those of thebusiness environment. In some cases, the research takes intoconsideration the social and opinion research. Such market researchentails the systematic collection and analysis of the informationabout the organizations as well as the individuals with an aim ofmaking informed decisions. Market research involves both qualitativeand quantitative techniques. It is important to note that marketresearch is not only mandatory for international, but also localmarket entry. Depending on the specific type of entry, a marketresearch should follow a definite process. The following review aimsat describing how the market research should be conducted concerningthe international market entry. In that respect, the various marketresearch divisions and the techniques to be used will be examined indetail. The last part will expatiate on the application of the marketresearch vis-à-vis the creation of an entry mode strategy.
HowMarket Research Must Proceed When an Enterprise Enters a NewInternational Market
Divisionsof Marketing Research
Beforeembarking on the actual research, a variety of issues must beconsidered. The issues include promotion and advertising research,distribution, product, marketing environment, market or customer andsales research (Proctor, 2005). These issues are pertinent to themarket research process as they assist in easing the gathering ofinformation and the subsequent drafting of the report. Thepreliminaries of a market research may begin with the customerresearch. The study is the source of the required quantitativefactual representations of the specific market segments. Forinstance, how big the market is in the sense of value and unit sales.Similarly, it gives a range of vital facts about the customers. Thecustomer research reveals the location of the customers, theirpatterns of spending, creditworthiness as well as their approximaterange of income. The importance of this research also stems from thefact that it explains the customer brand preferences and theirprobable range of prices for any particular brand. Concerning theentry, successful completion of this research ensures the enterprisehas sufficient information regarding the summative market share ofall the firms in that market or segment. Aside from the market andcustomer research, the actual market research must also study theadvertising and promotion particulars of the intended market. Garyand Philip (2007) explain that this division deals with thequantification of the success of advertisement efforts in comparisonwith their set objectives. Furthermore, the advertising researchplays a core role in the determination of the most suitable mediumfor conducting the research on the target audience for anadvertisement campaign. Besides, it reveals the particular messagesthat may be more appealing to a particular group of the targetaudience given the fact that they may have varied preferences.
Productresearch is yet another imperative division and aspect of the marketresearch activity. Unlike its previous counterparts, product researchassists the enterprise in the identification of alternative uses forthe existing services and products as well as the potential ones. Inthe case of new product suggestions, the research facilitates thetesting out of the specific concept, thus, uncovering the informationabout the projected consumers and purchases. In this manner, itshapes the costly process of development of the product. In anotherinstance, it examines the weaknesses and strengths of a certainproduct or services to attain the necessary product differentiationrelative to those offered by the competitors (Proctor, 2005). In thesame breath, distribution research is necessary in the endeavor toidentify the most appropriate distribution channels for the productsor services that the enterprises aim to offer. In the case ofphysical distribution, this particular division points to the mostsuitable sites for the location of retail and warehouses. Research onthe sales is required for the assessment and quantification ofeffectiveness, efficacy and efficiency of the various techniques andmethods. Likewise, it details the appropriateness of the modes ofremuneration and the levels for the motivation of the sales staff.The sales research also focuses on the sales training. As such, itgives comprehensive feedback concerning the quality of thepresentations that the sales staff members make. The final yet vitalconcern is the marketing environment research. Of all the aspects,the environmental research is the most important one as it is thedirect determinant of how the company will enter the market. In thatregard, it undersees the economic, technological, political andsocial factors that are likely to affect the operations of theenterprise at the international and local level. Concerning thepolitical aspect, environmental change, especially in thegovernmental policies directly affects the trading factors andconditions. Thus, in an endeavor to enter an international market, anenterprise must be cognizant of the political aspects of the marketand formulate a corresponding strategy. The economic conditions ofthe market the business seeks to operate may momentarily orpermanently affect the operations of the enterprise. As such, detailsof the aspects are critical to the planning and strategy formulation.Overall, this research informs the corporation on the relevantfactors that are likely to underpin the activities of theorganization. A careful consideration of all these aspects, asevident, gives the enterprise a strong basis for entry into theforeign market and directly influences their success (Proctor, 2005DJS Research Ltd., 2010).
TheMarketing Research Technique
Followinga succinct definition of the aims of the market research process anda discussion of the divisions it covers, the various techniques andmethodologies involved in the research must be determined andexplained. In a bid to obtain the necessary data, a market researchemploys a variety of techniques. The efficacy of any of thetechniques is dependent on the effectiveness of the method intackling the problems associated with the market entry. Notably, allthe known methods either focus on qualitative or quantitative data.
Oneof the techniques involves quantitative research. The quantitativeresearch features the numerical examination of the phenomena.Therefore, it calls for attentiveness to the measurement of theparticular market aspect. Statistical analysis takes a greaterproportion of this market research technique. For instance, if theenterprise is a financial institution, it may ask its clients to ratesome of its services as very poor or excellent. The result of thestudy is a mixture of critical quantitative information that can beanalyzed statistically before making a decision. In line with therequirements of this technique, each respondent must have a similarstring of questions. The structural nature of this technique allowsit to accommodate several questionnaires or interviews. The specificquantitative technique applicable in this case is the ‘marketresearch survey.’ The survey comprises a list of projects aimed atcollecting data from more than one case, for instance, products orconsumers. While a questionnaire is the most popular data collectiontool, there exist other data collection tools whose suitabilitydepends on the nature of the market research (DJS Research Ltd.,2010). A market research must, in some cases, involve the use ofqualitative research techniques. Unlike its quantitative counterpart,qualitative market research attempts to explain the nature andfeatures of various market elements. For instance, it may attempt toexplain why the prices may be higher at the international level thanthe local level. After establishing the reason for the disparity, theenterprise can adjust its operations accordingly. For a marketresearch, the best qualitative technique is the focus group (marketresearch group discussions). The groups comprise six to eightmembers. Furthermore, there must be a research moderator to controlthe discussions and take note the results. The final market surveytechnique involves the analysis of the secondary data. In this case,the researcher uses other people’s data to draw conclusions aboutthe specific market. It is important to note that this techniqueinvolves a profound examination of several sources of information onthe specific phenomenon, making a comparison and eventually drawingconclusions (DJS Research Ltd., 2010).
TheMarket Research Process
Theactual market research must proceed in five steps. The procedurebegins with research planning. The planning starts from the point ofidentification of the particular market entry issue and stating ofthe objectives of the research. Even though the central issue is themarket entry, there should be particular objectives and aims. It isat this stage that the involved parties must describe the researchdecisions. Some of the critical aspects of the research that must bedefined alongside the decision include the sample type, size, surveymethods and controlling of the fieldwork. Likewise, a timetabledetailing the timelines of all the research activities must be set.Accuracy is key at this point since every decision made counts andaffects all the subsequent aspects of the market research. After theplanning comes the exploratory research or reconnaissance. This stageinvolves a field expedition to the market research area before thedata collection. Such an excursion helps the surveyors in gaining acomprehension of the market area to be researched and the kind ofprobable respondents. The main stage of the survey depends on thisstage. The exploration shapes the actual survey stage as it equipsthe researcher with beforehand information and dispels any existingprejudices. Pustovalova and Arkipova (2010) assert that the primaryaim of this stage is to prevent the researcher from the sins ofomission and admission, which entail the failure by the researcher tocarry out a thorough exploration of the research phenomenon. The sinof admission leads the researcher to gather irrelevant data that isunreflective of the theoretical basis of the research problem.
Thethird step in the process is the quantitative data collection stage.There exist two major classes of the quantitative data collection.The two types include the experimental and the descriptive research.In the sense of a market research, the descriptive research isnecessary to identify the preferences, beliefs, behavior andattitudes of the potential consumers. On the other hand, theexperimental research uncovers the cause and effect. This entails theestablishment of the control processes to separate the effect of aspecific market factor from a dependent variable. The primary designworks by eliminating the changes that may occur in the dependentvariable. To realize greater success with the experimental research,the researcher should apply random sampling. Even so, experimentalresearch, just like its descriptive counterpart, needs the use ofinterviews. Before the interview, the researcher has to make adecision on the sampling process, the design of the questionnaire aswell as specify the method of survey (Nigel, 2010). The fourth stepof this procedure involves the interpretation and analysis of thecollected data. The interpretation of the data from thequestionnaires may happen at a descriptive level of the marketresearch or on a basis of comparison. The descriptive level includesfrequency tables and means, while the comparative basis includest-tests and cross tabulations. Essentially, great caution is advisedwhen analyzing the data for a market research. The most commonfailure is the establishment of association only, which hinders theability to make inferences about the cause and effect. Similarly,attentiveness is mandatory in the interpretation of percentages andaverages. Since only a sample of the population is taken as therespondents, any percentage or average is an approximation thatshares the error in the sampling. The sampling error is the errorthat results from the fact that just a portion of the totalpopulation participates in the research rather than the entirepopulation. The final stage of the market research process is that ofreport writing followed by a presentation of the findings. For easeof implementation, the research must include several format aspectsin the final report. Some of the elements include a preface, overviewof the conclusions, recommendations, methods of research and thefindings, the relationships between the current market research andthe previous studies.
TheInternational Market Entry Strategies
Theresults from the market research find application in thedetermination of the entry strategy that the enterprise will adopt aswell as their possible entry business model. However, the enterpriseshould first employ a SWOT analysis to define its chief competitors.The information gathered from the SWOT analysis is critical in thedevelopment of the market entry strategy. Keller and Lane (2009)define a SWOT analysis as a marketing instrument employed in theevaluation of an enterprise’s strengths, weaknesses, opportunitiesand threats. On that note, it examines both the external and internalenvironments of the corporation. The details in the SWOT analysisoriginate from the strategic audit, which features both market andcompany analysis. The strategic audit comprises a variety of datawith varying relevance to the company. In the analysis, strengths andweaknesses make up the internal factors. They contextualize thecompany based on its products or services. On the contrary, theopportunities and the threats describe the external factors thatinfluence the company. The primary goal of conducting the analysis isto enable the company to define these factors so that it can exploitits strengths, overcome its weaknesses, grasp the opportunities andmanage the threats (Keller and Lane, 2009). An in-depth understandingof the necessary entry modes requires a similar understanding of theinternational marketing strategy. According to Gary and Philip(2007), a business strategy describes the choosing of a generaldirection for the company alongside the design, system, managementstyle and policies of the organization. An efficient adoption of theinternational marketing strategy calls for the creation of amarketing mix. An appropriate marketing mix considers vital decisionsregarding issues like market entry and segmentation among otherobjectives.
Afteran enterprise has conducted the market research and arrived at adecision to adopt an international strategy, it has to pick the rightmode of entry into its domain market. The choice of an entry modedepends on factors such as the enterprise’s resources, location andadministrative advantages. The most popular type of entry mode is theexportation of domestic products to an international market. Throughexportation, a firm can gradually penetrate the foreign marketwithout having to shoulder the associated risks. Besides, it has thebenefit of assisting the firm in the acquisition of the knowledgeabout the foreign market without having to invest or make any form ofsignificant venture into the market. While this mode of entry lookssimple and efficient, downsides like the susceptibility to tariffsand the expensiveness of the logistics discourage some of itsapplications. In other cases, licensing may be the most suitable modeof entry into an international market. The company leases itsintellectual property rights to a firm with established roots in theinternational market. This particular mode involves cheaper directcosts and fewer risks for the licensor. However, the license mayfeature certain technological process that may end up competing withthe licensor. Other firms prefer franchising as a mode of entry intoan international market (Nigel, 2010). It involves the licensing of aspecific product or service or even the business model tocollaborators for a certain fee. In return, the franchisor proffersthe operating systems, products and trademarks. Besides, it willprovide the quality assurance programs as well as specializedtraining on the various aspects of the market. In some cases,companies enter an international market through joint ventures.However, this entry mode is applicable in situations that a firmlacks the ability to examine and venture directly into the market.Joint ventures guard the enterprise against the possible economic andpolitical risks. As a result of the numerous benefits attached tothis mode of entry, it is becoming more popular in the contemporaryworld. For instance, joint ventures reduce the costs of logistics forboth parties and strengthen the supply chain. Besides, thepartnership ensures a governmental control on the business’sforeign ownership. At the same time, the international investorbenefits from the facilitation of the business process by the foreignpartner (Gary & Philip, 2007).
Additionally,a firm may choose the Greenfield venture as their preferred mode ofentry. In this case, the investing firm leases or purchases a land,build a facility, hire employees and a manager, and then, without anyhelp of any partner, launches an operation. Unlike the aforementionedmodes, a Greenfield venture allows the company to retain full controlof the operations. However, the company must ensure it has the fullsupport and control of its clients and can survive in the market. Thecompany risks failure stemming from the lack of proper knowledge.Alternatively, a company may adopt a manufacturing strategy when itis yet to attain an international orientation. This only happenswhen the company has completely broken even, and its growth cansustain the competition in the international market. It is the growththat motivates the company to expand its operations into theinternational market. In the face of the expansion, the company willneed to come up with its unique marketing and manufacturing system.This technique is cost saving, especially if the company looks to thecountries with cheaper labor for its manufacturing needs. It alsocomes with a tax deduction package that alleviates the company fromthe burden of high taxes and operational costs. The final entry modeis through contract management. Contract management is applicable incases where the enterprise lacks the requisite technical andmanagerial talents to accompany their international venture. As such,the foreign investor will need to sign a management contract with thelocal government or company. The partner will manage the firm’sassets while it works on acquiring the necessary competence to standalone. Contract management is mostly used by mega firms and isrelatively unpopular (Nigel, 2010).
Inconclusion, market research shares numerous similarities with thenormal research. However, the difference occurs in the motive. Marketresearch is specifically carried out to collect and analyzeinformation about a certain market or market segment to facilitate anenterprise’s entry into the market. The research can be a desk,field research or both, depending on the magnitude of the project andthe availability of resources. Desk market research involvessecondary analysis of existing literature while field researchentails collection of primary data in the field. Filed marketresearch employs quantitative or qualitative research methodologies.Regardless of the form the research pursues, it follows a particularprocess with clearly outlined steps as discussed. It is important tonote that the results of the market research are not the onlydeterminants of the entry mode that the firm will adopt. Otherfactors like the business model and structure of the company are justas crucial. Even so, the market research is meant to provide criticalinformation that would inform the decision on the most appropriateentry mode. In addition to outlaying how the market research shouldproceed, this discussion has also outlined some of the most commoninternational market entry modes. Nonetheless, the pertinence of amarket research is unrivaled.
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