3 tips for foreign tech startups entering new markets

By Patrick Charuza, Fueled


Market entry is one of the most pivotal steps for a business. By diversifying their customer base, companies can customize their products and services to target each market, thereby minimizing the effect of negative perceptions.

One example is the Lincoln Motor Company’s current success  in China. Due to popular conceptions of classic American success, the Lincoln brand is often placed in higher esteem than that of Audi, a move that few American consumers would make. As a result, the company designed many models with the Chinese consumer in mind.

However, every success story begins by learning from failure . To help make success a reality, here are 3 important tips for foreign businesses breaking into a new tech market.

1. Data is objective, you are not.

Time and time again, market entries have resulted in failure due to gross miscalculation. This often stems from cognitive biases, which can wildly skew predictions and results. For example, an executive might easily think that a product that does well in the domestic market will see similar success overseas. However, this judgment rests on a number of assumptions about consumers and competitors.

Many market entries have been ruined by an aggressive response by potential competitors. The only way to predictably avoid cognitive bias is to construct a detailed analysis of preceding companies in your field. No tech company operates in a vacuum; there are always similar companies that offer similar products. By analyzing the successes and failures of other companies, a tech firm can create a significantly more reliable model of business practice.

2.  Size matters.

Before entering a foreign market, companies should create data-driven estimates of potential market size. These estimates are normally created by categorizing customers, then applying pricing and elasticity estimates to determine the likely number of buyers in each category. However, these estimates are often anchored to a moving point, such as the current rate of market growth.

In the US, for example, point of sale (POS) technology, the sort that allows small business owners to charge credit cards on their smartphone, is growing at an exponential rate. This level of growth, while it may last for several years as awareness grows, is unlikely to provide a stable rate. As a result, establishing the life cycle of the market is a necessary step for correct market size calculations.

3.  It will cost more than you think.

As economist Paul Geroski once said, “the life of a typical entrant is nasty, brutish, and short.” Most companies aren’t able to correctly predict the cost, difficulty, and sales of their market entry simply because humans tend to overestimate their abilities. Today’s technology market is ripe with opportunity for both foreign and domestic companies, but only a measured, data-driven approach will yield results. This is an approach that many company executives are not mature enough to take. To achieve success, it’s imperative that those who want to succeed utilize the tools available to them, because if they don’t, someone else will.

Entering a foreign market can be a daunting task; however, if you stay organized and keep these three important tips in mind, you have a much better chance of succeeding.

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