Internationalization strategies New market entry

Q1. Internationalization strategies New market entry

Internationalization strategies New market entry

Companies entering a foreign market have to choose an approach. A new entry can be accomplished by entering new or established markets with new or existing goods or services. According to Root, New entry is the act of launching a new venture, either by a start-up firm, through an existing business, or via internal corporate venturing.

The new market entry has three key questions which include: When to internationalize? The decision between being a first mover or late mover to the new market and how to internationalize?  It is also a question of whether to enter in large scale or small scale. It all depends on the firm’s resource and commitment. It is also crucial to identify where to internationalize the business. Research has to be done before the enterprise decides to get into the firm to establish which market is more attractive seeking a balance between benefits, costs, risk.

According to Root (1994) there are three different rules: The Naive rule where a Company uses the same entry mode for all foreign markets, the Pragmatic rule where a Company uses a workable entry method for each market which is usually low-risk and Strategy rules where Alternative entry modes are compared and evaluated before a decision is made.

The Firm needs to establish themselves in a new market as an Early entrant, Late entrant or Both first entrant and late entrant has its pros and cons. The Early entrant is The first player in the market with a new product and first to break into a particular market segment or geographical areas. First entrant status is not an end in itself but rather the beginning of a long complex strategy in which the initial advantage has to be defended against followers to stay ahead in the competition. The Early entrant with a distinctive presence in the marketplace needs to be in a position to react or even better anticipate potential entrants and increase barriers to late entrants. For example, early entrant may be in a position to reduce its price and decrease the value of the business for a late entrant, or it can block entrance entirely by controlling key distribution channel.

They tend to have a new monopoly status. They also have a competitive edge since they introduce a product or service in a new market. They also have an opportunity to grab the best marketplace, Technological leadership, Chance to build brand loyalty, Scope to create barriers to entry, enhance their reputation and gets the advantage of setting up a Scope for other to follow.

The disadvantages of being an Early entrant is incurring the cost of pioneering which is at times very high this is because there are things such as establishing distribution channel and marketing know-how. They also risk high losses in case of failure in the market. The loyalty of first-time buyers is often weak, and Innovators products are primitive and might not live up to expectation. There is also Rapid technological change allows follows to take advantage. Additionally, Skills and know-how of early entrants are easily imitated.


The late entrant, on the other hand, is given the opportunity to compete more effectively and efficiently against the early entrant. They are Usually the second players in entering into the market with improved product & service or by imitating the early entrant. A Late entrant is often able to capture a significant market share despite following the early entrant by learning from the mistakes done by them. Late entrants work well if the firm has superior marketing or enough resource to complete. Weaker late entrant may find themselves continually following the early entrant.

They often Have Lower R&D costs and can learn from the mistakes of the early entrant. They, therefore have lowering marketing costs as the public have already been educated about the new type of product. They are also able to focus on making a superior product and to dominate the market. They can polish the design and capture a significant market share and Can occupy a previously unoccupied niche in the market. They mostly have Lower risks and a greater chance of returns from investment.