Uncertainty is a normal challenge confronted by companies entering any new market. A well-oiled marketing and sales strategy for your home market or having a product that is widely popular does not mean automatic success when coming to the U.S. Companies must remain agile and be willing to make the investments needed to succeed in the new market, which can require market research, investments in new ideas and products, and patience to see a return on your investments.
The bottom line is that global expansion doesn’t come cheap. Some companies can take up to 5 years to start seeing a profit in the U.S. That means if a company doesn’t already have proven success in the U.S. (through importers or distributors, for example), it will need dedicated funds in anticipation of necessary adjustments to its plans. If it doesn’t, there could be missed opportunities and even a potential retreat from the U.S. market altogether. Take, for example, Company Y.
Problem
Company Y had a successful business in Europe that was carried primarily by a single product that relied heavily on major licensing agreements. However, both large and small retailers in the U.S. demanded a diverse product line, thus creating a mismatch between Company Y’s offerings and market demand.
MI’s Solution
Recognizing the need for an expanded product line, MI intervened to assist Company Y. By leveraging its network, MI did a market study and engaged industry expert product designers to explore new possibilities for the company’s product portfolio.
Deep Dive
Finding a New Strategy
Company Y’s decision to enter MI’s International Business Incubator program aimed to jumpstart its operations in the U.S. market. In their home market, Company Y’s core competency was a single, consumer product. This hyper-focus served them well—they arguably made the best product in their niche market in the world from a safety and quality standards perspective. Combined with the strategy to use licensed characters for their product’s labels, they had a significant market share throughout Europe.
Unfortunately, the same strategy could not be used in the U.S. market. Their best-selling characters were already licensed to their competitors through exclusive agreements for the North American market. Since Company Y was still the expert in their products, with the assistance of MI, a new brand was created for the U.S. market with a higher value proposition. While the strategy was to compete without relying on the character to sell the product, but rather the quality itself, it did limit their distribution channels.
While stores liked the quality of the product, as Company Y started selling, it became apparent that retailers sought a range of differentiated products within the category of goods Company Y made rather than the homogeneous goods the company was offering. Company Y had the same essential product packaged in different quantities and with different labels but no companion products to use with their core offering. At the end of the day, retailers did not want to have multiple vendors to get the full line of products customers were demanding and, therefore, preferred working with companies that could supply all their needs.
Developing New Products
While Company Y had companion offerings in their home markets, these were items that were sourced in China, not developed and produced in-house like their core product offering. This meant the products were of a lower value and quality. As a result, the products did not match the brand position crafted for the U.S. market. In addition, similar products were already in the U.S. market at the lower retail chains that Company Y was not targeting.
To rectify this mismatch and to help Company Y stand out, MI’s team embarked on an extensive market research process to generate innovative product development ideas. MI collaborated with various product designers to explore the scope and potential of these developments. The idea was to create an innovative product that matched the brand’s position in the U.S. and used Company Y’s core product. This would ensure the long-term success of the core product in the market (think about it like a really fancy razor that helps sell the replacement quality razor blades).
As this was a significant departure from their core competencies, Company Y struggled throughout the process with some indecision and the investment required to execute the plan. All the while, the business remained operational but unprofitable, furthering their fear that they were putting more money into a sinking ship.
Leaving the Market
Ultimately, Company Y concluded that the financial investment required for working with inventors, product development, and market launch was beyond their current capabilities. They stopped operations and thought about other avenues for success in the U.S., but ultimately decided the risk was not worth the reward. This resulted in a retreat from the U.S. Market at a loss.
Key Learnings
This case study highlights the critical lesson learned by Company Y: foreign companies must be willing to invest a significant amount over a few years to make it in the U.S. market, and they must have the ability to pivot quickly when faced with changing market dynamics. Adaptability and a clear understanding of market demands are crucial factors in ensuring the success of such ventures.
The experiences of Company Y underscore the importance of setting measurable success metrics, proactively addressing market demands, and maintaining flexibility. By embracing these principles, organizations can navigate the challenges of uncertainty, maximizing their potential for success in new markets.