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Managing Market Entry Risk |
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Problems with Direct Entry
Direct market entry is favored by large and medium-size companies who
want more control over their brand, expect a higher return in the
market per dollar invested, and have more startup resources. The risks
associated with directly entering a market are no less frightening, and
revolve around directly operating in the new market. Direct entry means
opening an office or factory and the associated investment levels are
much higher.
In direct entry finding good information, training, or intelligence on
basic and fundamental issues like law enforcement, economic system,
political uncertainty, labor union militancy, and workforce capability
come into play. Any one of which can derail what would have otherwise
been a great market opportunity. Due diligence is just as important
here as it was in indirect entry. Performing due diligence checks on
landlords, lenders, partners, channels, and suppliers is a must. Due
Diligence doesn’t just mean financial due diligence, it often means
finding out if the factory exists at all, if it is owned by the people
who say they own it, and if it has the capabilities it is supposed to
have. It means actually checking out the bullet points in the
presentation, and all the claims made in emails.
Performing pre-employment vetting on new hires at all levels is
important to ensuring the company is hiring who it thinks it is hiring.
Performing a needs assessment and making a crisis management plan up
front will ensure the design of your offices and manufacturing
facilities is done in a proper way before the cement goes down. Finding
reliable companies to provide facilities guards, security training, and
executive environmental acclimatization are key to ensuring the new
organization doesn't fall prey to theft, fraud, or even violence.
Get Help Early and Often
The moral of the market entry story is that companies must exercise
diligence and foresight in addressing market entry risks before they
spiral into full-blown problems. In doing so, companies should not
attempt to go it alone. Knowledge of the local market and security
environment is invaluable.
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