MARKETING MANAGEMENT TERM PAPER

ENTERING INTO A NEW MARKET"

INTRODUCTION From a modest beginning in 1972 as a small factory in Ghaziabad (near Delhi) to a center of engineering excellence, with over 3,600 skilled employees and an annual turnover of Rupees 5.34 Billion (approximately US $ 133 Million), the history of SPRL is a story of grit and determination. It is a story of marching ahead despite the odds, against all adversity. Today, SPRL is Indias largest integrated manufacturer of Pistons, Piston Rings, Gudgeon Pins and Engine Valves. The Companys products are marketed under the brand names USHA and SPR; names that have become synonymous with quality and reliability. At SPRL, we are driven by a clear and consistent set of values. These have stood us in good stead over the years. Total Customer Satisfaction through Quality Management has seen us grow from strength to strength. For the past several years, SPRL has been investing a substantial part of its retained earnings in upgrading quality systems and modernizing plant and equipment so as to offer concurrent technology products and technology to its customers. SPRL is committed to provide world class Pistons, Piston Rings, Gudgeon Pins and Engine Valves in terms of delivery, safety, quality, cost, development and management. I have chosen this company and this title for a particular reason that I have involved myself in marketing the products of this company through various techniques and have seen entering this company in my own business area, where we together have attained a leader position with market share of more than 65% in overall range and in some products we have even achieved a more than 85% of market share. As automobile parts are fitted by mechanics, they are the major drivers of the product sales, because the mechanic is the one who demands a particular brand to be fitted so that he can deliver best service to the customer. Apart international standards in production and providing the best quality there are certain factors which tend to drive a mechanics demand such as their own benefits and interests. So this brings the challenges in entering into a totally new market or a market with a high potential but low share. In such a condition, where no mechanic no customer knows the brand name is even difficult than the one where people have at least heard about the product company. Still both ways the marketer has to put up a lot of efforts so as to get a place into the market. The major competitors before USHA entered into my business area that is a district of Rajasthan namely Sri Ganganagar were Goetze Rings Pvt Ltd., Mehla Ltd., PC Rings Ltd. and Eicher OE Parts Ltd.

Sales
2% 4% 18% 28%

Goetze PC Mehla Eicher OE USHA

48%

So USHA had a little part of market share of mere 2% and this was because of the loyal customers of USHA, who already knew it. That time to enter into market we strategize and workout the plan of action to get best results. And for that firstly we did market survey and analyzed what exactly are the key challenges, modes of entry, principles and drivers and steps for successful entry.

NEW MARKET ENTRY

Executives constantly look at new market entry opportunities as a way of generating rapid growth, diversifying their portfolios, and secretly satisfying their entrepreneurial spirit. New market entry strategies enable companies to improve their revenue base by entering into new geographies, to solidify relationships with existing customers by extending their product offerings, and to diversify their customer base by targeting different customer segments. Measuring the risks and potential returns of these ventures can be a daunting task for valid reasons. There is no shortage of tales of flawed business cases and execution failures, but, by the same token, many organizations have enjoyed remarkable success by turning new market entry into the cornerstone of their growth strategies. Identifying and pursuing new markets requires you to explore and play outside your traditional business boundaries. It calls for learning and decision-making about how to address new

competitors, consumers, customers, partners, suppliers and other market dynamics - at high speed, and in unfamiliar territory. Entering a new market with an existing product or service is hard enough - but introducing a new innovation into a new market is an even greater strategic challenge. Whatever the "white space", success depends on understanding the specific opportunities that lie at the intersection of consumer/customer needs, industry trends, and your ability to deliver. Questions that matter the most while expanding: Where are the most exciting areas for growth, and how should we participate? How can we create new rules and change the basis of competition? What are the requirements to play in the new market and what strategies will help us create strategic differentiation and competitive advantage? What kind of technological innovations will open up new markets to drive growth?

New market entry poses a more complex, high stakes set of challenges. Businesses must target a new set of customers, deal with new competitors and new channels. Frequently a company will hit an economic or psychological road block because its market entry strategy is off target ... negatively impacting the companys ability to build sales momentum. We define a new market entry problem as any marketing scenario where the buyer types and / or buyer organizations are new. From our experience, unfocused segmentation, inadequate value proposition and channel strategy are common roadblocks impeding a companys ability to successfully enter new markets. Costly mistakes can be avoided with better, up-front, fact-based new market entry strategy planning. To unlock the full potential of new market entry opportunities, executives must be aware of common pitfalls, which include: Chasing transitory trends as opposed to pursuing lasting and sustainable market opportunities; Building business cases based on overly optimistic assumptions; Developing unrealistic views of the size of the opportunity, which clouds judgment and prevents a candid assessment of the capabilities required to enter a new market successfully; Impetus to leverage internal capabilities to penetrate a new market without understanding whether demand exists to substantiate necessary investments (corporate narcissism); Failure to recognize the possible negative impact of new market entry actions (e.g., diversion of support away from core businesses, cannibalization of existing product lines). Bridge adopts a fact-based, market-driven approach to help companies manage the challenges and exploit the potential of new market entry. Over the years, we have helped

clients across a broad range of industries to address multiple strategic market entry questions, including: What is the true size of a specific market entry opportunity? How fast is the market growing? Where is it in its lifecycle? How intensive is competition? How profitable can this market be? What are the key determining factors of successful market entry? What investments are required? What other barriers would we need to overcome? How attractive is this opportunity given our goals, capabilities, constraints and other available investment options?

In the struggle to move beyond cost-cutting to growth, organizations must look to totally new sources of top-line product revenue. To drive new revenue, companies are increasingly exploring how to best identify and enter new markets.

Key Challenges In Entering Into A New Market

And while executives recognize the value in leveraging existing product offerings, technologies and intellectual property by mapping these offerings to new markets or tapping an unmet need of their existing customer base - the reality is: entering new markets is risky business. So to successfully enter new markets, companies first need to address the following key challenges:

Lack of Market Insights. Rushed for time and overwhelmed by too much raw data, product designers often lack sufficient insights into a markets current technology trends and their future evolutionary potential. Valuable sources of these insights, such as patent databases and trade journals are under-utilized because its just too difficult and time-consuming to extract useful concepts and trends. Designers are forced to proceed without a comprehensive understanding of the competitive landscape and the state of the target markets technologies. Emerging competitors, blocking Intellectual Property, or advances in new technologies are easily overlooked. Such oversights, if not fatal, will at least result in costly rework and time-to-market delays if not discovered early in the project life cycle. Inability to Conceive a Market-Taking Product. Caught in the inertia of being too close to the problem, engineers have difficulty envisioning out-of-box design strategies that will establish competitive differentiation by breaking through historical constraints and design assumptions. The process of determining the optimal insertion points for introducing new functionality frequently lacks an objective set of criteria, and the ad

hoc nature of brainstorming sessions often means that past experience or personal bias will dominate the outcomes to the extent that the future winds up looking too much like the past. Lack of Fresh Ideas on How to Implement an Innovative Product Design. When it comes to implementing the new design, engineers are again limited to the techniques and resources of their past experience and current know-how. By definition, this domain expertise taps only a small spectrum of the worlds intellectual and scientific knowledge. Yet, an analysis of the patent literature shows that innovation often occurs when technical challenges are overcome by applying science from completely different domains. Simply put: engineers lack the means to quickly and effectively identify, research and validate such ideas in the limited time available to them.

Modes Of Entry
The mode of entry is a fundamental decision a firm makes when it enters a new market because the choice of entry automatically constrains the marketing and production strategy of the firm. The mode of entry also affects how a firm faces the challenges of entering a new country and deploying new skills to successfully market its product (Gillespie, Jeannet and Hennessy, (2007). A firm entering foreign markets faces an array of choices to serve the market. In an exhaustive survey of the different modes of market entry, Root (1994) identified 15 different forms of market entry. Following Root we categorize them into the following five main classes, listed in order of increasing control: Export a firms sales of goods/services produced in the home market and sold in the host nation through an entity in the host nation. License and Franchise A formal permission or right offered to a firm or agent located in a host nation to use a home firms proprietary technology or other knowledge resources in return for payment. Alliance Agreement and collaboration between a firm in the home market with a firm located in a host nation to share activities in the host nation. Joint Venture Shared ownership of an entity located in a host nation by two partners-one located in the home nation and the other located in the host nation. Wholly Owned Subsidiary Complete ownership of an entity located in a host nation by a firm located in the home nation to manufacture or perform value addition or sell goods/services in the host nation.

A firm can choose any of the above entry modes or some combination of them to enter a host nation. The key attribute that distinguishes the different modes of entry is the degree of control it gives a firm over its key marketing resources (Anderson and Gatignon 1986). At one end of the spectrum is export of goods, which has the lowest degree of control. Licenses, franchises, and various forms of joint venture provide progressively increasing degree of control for the firm till we reach the other end of the spectrum with highest control: ownership based entries such as wholly owned subsidiaries.

Principles To Enter Into A New Market

Every new market is a new venture. Whether a company is going international or finding a new vertical market, every new customer group presents requires planning and execution to deal with the unique challenges of that market. New market entry is the process of finding and capturing new customers. Many of the tactics that companies use are unproductive. Typically, companies take huge risks without realizing it, and consciously avoid risks that could pay off enormously. There are times when it pays to plan and times where it makes sense to dive in and make mistakes. Executives need to take what I call a challenge-based approach: Each new market has a specific set of challenges and your approach has to be tailored to those challenges. There are several principles of this challenged-based approach. Some of these principles sound counterintuitive, but they help companies from early stage to large plan aggressively and win in spite of the unexpected. 1. Avoid new market panic Resources are scarce, and there is not enough money for effective marketing or research The company won't survive unless the new market succeeds Executives demand quick results while employees believe that success is impossible Energy and risk-taking evaporate because people are afraid to fail

Growing from a shrinking base can be done, but it defies the laws of physics. Available cash and a will to win are among the most important assets in new market success. Starting from weakness means that both are scarce. Sometimes there is no option to entering a new market from a low revenue base. If your company is approaching panic, think about these options: Before you enter a new market, generate growth in your current market. Find a partner whose products or services you can resell in your current base Add a new channel Put incentives in place that increase cross-selling to current customers

2. Gut feel works - if you get the facts Most companies enter new markets for reasons that have nothing to do with rational or financial analysis: "This just feels like the right market." "My friend George is CEO at Company X so he will open the door." "We've sold one project to a hospital so let's go into the medical market" "Our largest stockholder thinks we should sell to banks."

While upfront market research is the best way to decide which market to pursue, even illogical choices can turn out successfully. The biggest determinants of new market success are whether a business has good information about their chosen market and whether they use it. Research can provide a wide variety of information for the growing company 3. Succeed by making mistakes Just get out there and do it. There is no way to ensure that a new market will develop in the way that you expect. Helmuth Karl Bernhard von Moltke, Prussian army chief of staff in the late 1800s, understood market entry better than many market planners. His approach is summarized in two statements: "No battle plan survives contact with the enemy" and "War is a matter of expedients". He instructed his troops to make plans for all the possible alternatives for how a battle might develop. He did not imagine that every possible development could be forecast, or that every battle would go in his favor. But he understood that an army that knew how to respond to a wide range of events could, in the face of the unexpected, do the expedient thing and learn from the experience. In the same way, a business can plan its market entry so that each step is designed for the biggest possible win and the smallest possible cost. 4. Bet big but stay focused In marketing, the price to pay for thinking small is higher than the price to pay for thinking big. Given the investment required in entering a new market, a company should aim for the biggest market that it can reasonably expect to master. Paradoxically, aiming high minimizes your risk. A small target market puts a cap on your maximum revenue and profit. A large target market means that this strategy can yield the highest revenue possible. Another requirement is that these markets have a clear definition and boundaries. A focused market means that the company can develop one market strategy that covers the entire market. These two characteristics big and focused ensure that the smallest possible investment will yield the largest possible new market payoff. There is one caution about the choice of a big, focused market. No matter how big the target market, the cost of entering it must not sink the company. EuroDisney was a struggle and an embarrassing failure for the Disney Company, but never came close to shutting the company down. Even small companies can create a buffer against failed new market ventures if they keep costs from outrunning the company's ability to support the venture.

5. Invest in your stakeholders Leaders who keep stakeholders informed and inspired have the best chance of succeeding at new market entry. Every new venture needs supportive employees and owners as it develops. Mature businesses in the company must be willing to fund new market campaigns particularly important when new revenue comes more slowly than planned. An aggressive approach to new markets will lead to failures as well as successes. But leaders who do a good job planning and positioning build the confidence of stockholders, employees and others, and inspire them to protect the new venture while it develops. One critical stakeholder group is existing product lines in the company. These must be positioned to provide cash for the developing market and to stretch for higher growth if new revenue is slow in coming. For this reason, the best new market entry is designed to bring benefits to the entire organization for example, new channels, increased stock price or customer excitement that make it easier to sell the whole portfolio. The secret of successful new market entry is taking a challenge-based approach. A company that knows the challenges presented by its target market, and prepares for the unforeseen, achieves the highest growth from its new market investment. The bottom line of new market entry is informed risk. Both are equally important. Companies should take the biggest risks they can afford, with the best information they can gather. Then you can tailor your plan and your execution to the specific challenges of the market.

The Drivers Of Entry Success

Researchers have not yet developed a single coherent theory of the drivers of success or failure of entry in emerging markets. This section reviews the prior literature on international market entry to identify the drivers of success or failure to market entry. The factors that affect the success or failure of market entry can be grouped as follows: Firm-level factors: such as the mode of entry, entry timing, and firm size. Country-level factors of the host nation and home nation, such as economic distance, cultural distance, and country openness. 1. Entry Timing Besides the entry mode, timing of market entry plays a critical role in emerging markets. However, the direction of the effect is not clear. The literature suggests reasons for why early entry into international markets could favor or hurt success. On the one hand, early entry has many advantages. First, the early entrant can lock-up access to key resources such as distribution channels and suppliers. Second, early entrants also have the opportunity to set the pattern of consumer that may disadvantage later entrants. Third, early entrants can benefit from being the

first to exploit governmental concessions and incentives which governments often offer to attract such entrants. In addition, early entrants can also time their entry to exploit the strategic window of an expanding market and observe and learn market attributes for a longer time. In the international context, pioneers may fail for several reasons. First, firms that rush in first may not be aware of the pitfalls of the newly opened emerging market. Second, returns to the early entrants might be too low compared to their investments, especially because infrastructure is not yet fully developed. Third, latter entrants also have a flatter learning curve as they can learn from the errors of the early entrants. These three factors may be responsible for the failure of many early entrants in some markets. 2. Firm Size New trade theories developed by Krugman (1980) and Porter (1990) suggest that firm specific advantages play an important role in international trade. Although small firms (with less than 500 employees) today account for 30% of US exports, larger US firms have been generally able to participate more in global markets than smaller firms due to their financial and managerial resources. The literature is not unanimous about the role of size in the success of firms, with some researchers asserting that large size helps whereas others asserting that it hurts success. There are several reasons why large firms might have greater success than smaller firms. First, larger firms have recourse to greater resources or can commandeer greater resources than smaller firms. For example, Coke was able to purchase the leading Cola brand in India, Thums Up, to open its entry into India. Second, larger firms are also more likely to possess greater wealth of product-specific and marketing specific knowledge than smaller firms. Third, larger firms are also more capable of sustaining periods of negative performance upon entry into a host nation, than smaller firms. On the other hand, the experience of many large firms shows that size is no guarantee for success. Large size diminishes organizational flexibility because of increasing bureaucracy. This bureaucratic effect also impairs innovative ability. In line with this finding, Cooper and Kleinschmidt (1985) show that export success is negatively correlated to firm size in the high-tech electronic industry. 3. Economic Distance Economic distance is a measure of economic disparity between two nations. Firms find it easy to deal with host countries that are close in economic distance from their home country for several reasons. First, countries close in economic development have similar market segments that can afford to consume similar types of goods and services. Thus knowledge about market demand transfers easily from home to host country. Second, countries close in economic development have similar physical infrastructure, such as airports, roadways, railways, and sea ports. Thus, firms serving a host country with very similar infrastructure as its home nation will enjoy efficiencies in its operations thereby lowering its costs. Third, firms develop competencies or knowledge-based resources which are related to the markets they serve. These resources can be best leveraged in nations that are similar in economic development because the skills learnt in

one market can be replicated or adapted to the new markets. Firms entering nations that are widely different economically from their home nation will need to adjust to the new market conditions thus reducing their likelihood of success. 4. Cultural Distance Consumers are not driven by economic considerations alone. The underlying cultural dimensions of a society affect its consumption pattern beyond what economic laws predict. Culture is usually defined as shared values and meanings of the members of a society. It not only affects underlying behavior of customers in a market but also the execution and implementation of marketing and management strategies. For example cultural distance affects how well partners in a joint venture interact over the cultural divide. Thus, cultural distance directly impacts the effectiveness of the entry. Evidence of failures caused by insensitivity to cultural differences abound The tendency of firms to start their international marketing activities in countries similar to their own is another example of how culture influences market entry. Several studies have shown that the sequential path of internationalization is determined by cultural distance to enhance the chances of successful entry . Firms usually start internationalizing by entering countries culturally close to them. 5. Openness The term openness refers to the lack of regulatory and other obstacles to entry of foreign firms. Openness could either increase or decrease entry success. On the one hand, openness could increase success for three reasons. First, it stimulates demand by increasing the variety of products offered for sale in the market. Second, it increases competition on quality and thus improves the level of quality supplied. Third, as the economy opens up, competition increases efficiency and lowers prices, resulting in further increases in demand. The liberalization of the Indian telecom industry with the resulting boom in sales of cell-phones is another example of how openness spurred growth in demand.

Steps To Success
To successfully enter a new market, product design must overcome three challenges to avoid delivering functionality that fails to create sustainable competitive differentiation. The three risk points are: lack of adequate market insight, inability to conceive a market-taking innovative product configuration, and lack of fresh ideas on how to implement that configuration.

Assuming you have identified a potentially attractive market space, you can overcome these challenges by automating the following innovation tasks to expedite a thorough and highly creative strategy for new market entrance. Here are five steps to successful market entry: 1. Map the competitive landscape

Without competition there would be no market to enter. So by definition, there is already an established set of functionality fulfilling a spectrum of client needs. The challenge is to determine the best place to insert your specific capabilities into that spectrum. This requires an understanding of current and emerging solutions in a way that yields insights relative to functional differentiation and sustainability. Traditional market and technology analyses will identify the obvious competitors and their respective offerings, but can easily miss new entrants and early trends in evolving technology. Both need to be proactively identified. The next generation of competitors may be visible only through obscure patent filings in unexpected categories. And future directions in technology maturation can be hard to discern without guidance on probable patterns of system evolution. 2. Understand required functionality and functionality that is vulnerable

To enter a market that is already populated with a commercially viable product, it is necessary to create a version that improves on existing functions, reduces cost, or eliminates causes of failure. Often, the strategy will involve re-configuring one of your own flagship products to meet the new market requirements. And, in some instances, you will want to design a new hybrid product that combines the best features of both your own and competitors products. In each case, to formulate an effective solution strategy you need a thorough understanding of the behavior of the targeted products, their underlying attributes and the interactions of their components. Such analyses are conventionally flawed by ad hoc brainstorming sessions that fail to produce the needed level of understanding due to constraints of time, psychological inertia and lack of readily available subject matter expertise. The resulting unchallenged bias and assumptions constitute major risk-factors and common causes of new market failure. 3. Identify top opportunities for replacing current functions

Using proven innovation methods, including TRIZ and Value Engineering, review each function or a product both current and desired. Then, explore alternate product configurations that resolve constraints, reduce system complexity and/or deliver the desired functionality. Often, these new configurations are unconventional and offer breakthrough new concepts. Psychological inertia is broken and innovative thinking is accelerated.

4.

Generate and discover concepts

Increasing job specialization compounded by the explosion of digital information make it ever more difficult for engineers to draw upon knowledge from outside their areas of expertise. Idea generation from outside the box is further impeded by corporate history and culture. And project-oriented data silos make it difficult to find and reuse expertise acquired in other areas of the company. Meanwhile, local corporate knowledge is vanishing as the graying workforce reaches retirement age. In short, there is a critical need for effective methods to extract ideas from worldwide intellectual resources. 5. Validate concept novelty and feasibility

Once the most promising idea has been identified, the next step is to validate its feasibility. Is there evidence of previous physical implementations, and what do they tell us about the ideas utility? Is the idea obsolete in the light of more recent technical developments? Is it novel enough to be patented, and can such a patent be defended? If the ideas use is already blocked by existing patents then are there alternative work-around to such IP constraints? Answering these questions early in the product development process avoids costly missteps and ensures that R&D dollars are used most expeditiously. The reality is that most new market entrants are doomed to fail because of systematic errors, induced by biases in thinking and in the way that information is filtered and digested during innovation processes. By following the steps above, companies can overcome the obstacles to new market entry.

Execution of the Plan

With all extensive study of the facts and techniques related to the particular market we devised a plan. We followed one to one marketing strategy in starting due to the technical nature of the product. And sooner we started van campaigning and get together for the mechanics. We noticed that both quality of the product and a personal interest attracts more mechanics towards the product. So we launched a coupon scheme, in which we started providing a coupon in the packaging of the product itself which the mechanic can get exchanged for money anytime. This scheme really helped us to get recognition and we started with good sales from the fourth month after entering into market. Soon we were a good player in the market and we had a respectable share in the market which was growing at a good rate. And with time now we have the leader position in market with 65% of share where all other have a low share.

Sales
9%

Goetze 19% PC Mehla 65% 5% 2% Eicher OE USHA

And after all this we learned that marketing is a ongoing continuous process and retaining your market share is as equally important a task as gaining a share is.

References: Product Innovation Detail <http://www.innovation-point.com/approach.htm >accessed on 12/09/11 New Market Entry Information<http://www.bridgestrategy.com/topics/new_market_entry> accessed on 12/09/11 Details Of the challenges faced<http://inventionmachine.com/the-SustainableInnovation-Blog/bid/51703/Three-Key-Challenges-to-Entering-New-Markets> accessed on 11/09/11 Topic Insights<http://www.nextlevelinternational.com/pdfs/SecretsNewMarketEntry.pdf> accessed on 14/09/11