Market entry strategies of European businesses follow the classic approach of testing, establishing, and expanding.
I had been trying to wrestle with the problem of reaching out to non-English-speaking European companies in early 2000. Many European countries have great technology and skills, but we in the English-speaking world could not break into the market. Was language the barrier that was tough to crack? Perhaps there was another challenge. The inability of the Europeans to come to terms with the rapidly changing global landscape where demand for goods and services was quickly shifting to India and China.
European companies have historically been slower to enter and expand in Asian markets than their American and Japanese counterparts. This can be attributed to various factors, such as cultural and language barriers, a lack of knowledge about the local market, and a greater focus on established domestic and European markets. However, in recent years, many European companies have been actively seeking to expand into Asia to tap into the region’s growing consumer base and take advantage of the increasing economic opportunities.
There are a variety of market entry strategies that European companies are using to target business opportunities in Asia. Some of these include:
- Establishing a direct presence in the target market: This can be done by opening a local office, factory, or store and hiring local staff. This approach allows the company to connect directly with customers and be more responsive to local market conditions. In India, I found Ikea taking this route. They are opening stores under their brand name.
- Forming strategic partnerships: European companies form partnerships with local companies to gain access to their expertise, distribution networks, and customer base. This can help the European company to enter the market more quickly and efficiently.
- Exporting products and services: European companies can export their products and services to Asia without establishing a direct presence in the market. This approach can be less risky and expensive than other options, but it also means that the company will have less control over the marketing and distribution of its products.
- Investing in Asian companies: European companies can invest in Asian companies to gain access to their expertise, distribution networks, and customer base. This can be a good way to enter the market quickly and efficiently.
- Developing a targeted marketing strategy: European companies need to understand the culture, language, and consumer preferences of the Asian market they are targeting. Developing a targeted marketing strategy that considers these factors can help the company be more successful in the market.
- Adapting products and services: European companies need to understand the local market and adapt their products and services to meet the needs and preferences of Asian consumers. This can help the company to be more successful in the market.
Nearly all of the above points are relevant to any enterprise seeking to enter a new market. These are standard new market entry strategies. The initial reluctance to enter Asian markets probably was a typical change management syndrome with business and society structured into three broad segments innovators, followers, and laggards. It is innovators who take the lead. After all, in the 18th century, the Europeans were leading the world. It was just a matter of time before the innovators took it upon themselves to lead, collaborate and take advantage of the business opportunities in the emerging markets.
That is already playing out with the French, German and Nordic countries taking the lead in actively exploring Asia for business opportunities, making investments, and setting up units. They are cautious and follow the classic new market entry approach. It calls for starting small, testing the market, and then scaling up. European companies and following the market entry strategies outlined above.