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ROI: RESEARCH INSIGHTS FROM KENAN-FLAGLER


Entering a New Marketplace Is as Easy as 1-3-2

6/7/2012

Consider taking the road less traveled

When it comes to entering emerging markets, sometimes you can’t get there from here. Research by Chris Bingham points to the importance of sequencing – entering markets in the order most effective to getting where you want to go.

Bingham cites a startup in Singapore wanting to do business in Japan in “Oscillating Improvisation: How Entrepreneurial Firms Create Success in Foreign Market Entries Over Time,” published in the Strategic Entrepreneurship Journal. Ironically, the company had to do business first in the United States to get an American customer reference before broaching the Japanese market.

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“It’s counterintuitive that this Singapore startup, instead of going directly north to Japan, had to go way far west to the United States to get the Japanese to look at them differently,” Bingham said.

There’s a pecking order of nations, Bingham said, that changes with the industry. Understanding that order can come along three main paths: through trial and error; vicariously, through the experiences of similar companies or products in an industry; or through a consultant with extensive firsthand knowledge of the culture and market quirks.

Bingham tells of another company wanting to do business in Japan that moved first into Taiwan and Korea. Japanese customers tend to be critical and take a long time to make product decisions. Startups don’t have much time or money to spend waiting for a market to respond. Taiwan and Korea value being first to market, so they’re willing to accept a relatively untried product in order to have it first. Success in those two countries paved the way for success in Japan.

“The sequence by which you get there is as important as the markets themselves,” Bingham said. “Sequencing is provocative. Sometimes you have to enter markets you don’t want to be in to get to the end prize.”

Christopher B. Bingham is an assistant professor of strategy and entrepreneurship at UNC Kenan-Flagler.

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