Acclaro Growth Partners' M&A and Strategy Weblog

Considering New Market Entry? Learn the Eight Strategic Research Steps that Will Help You Decide on Whether to Pull the Trigger

As you contemplate a new market, put that market opportunity to the test.  There are eight simple questions to ask of your company and your potential new market.  Answering these questions may require some research, but will help ensure your company makes a sound decision.

 

1.    What are your core competencies and how well do they match the critical success factors for supplying this market?

2.    What is your unique value proposition for this market?  In other words, which of your core competencies are truly unique (versus competitors) and inherently valuable and necessary (to customers)?

3.    How attractive are customers in this market?  Do their purchase decision criteria align with your unique value proposition?  Are they willing to pay for your unique capabilities? Do they have consistent needs?  Are they willing to consider a new source of supply, or are they loyal to incumbent vendors?

4.    Is the price that your company expects to charge in line with customer expectations of value?

 

5.    Does your company have access to the channels necessary to reach end-customers?  How difficult will it be to access these requisite channels?

6.    Will your company be able to promote its unique capabilities effectively to build brand equity with customers?  Remember, customers brand you; you do not really brand your company.  And branding is a function of three steps: 1.) Customers must receive a clear message that is credible  2.) The message must convey uniqueness  3.  The unique characteristic must also be important and meaningful in the purchase decision process for the customer.

7.    Is your company truly unique versus the competition?  What are their strengths and weaknesses?  What direction are they heading in?  Where do they see the opportunities of the market, and how are they going after them?

8.    Is the market as large and attractive (in terms of growth and profit potential) as you think it might be?

 

These questions are not rhetorical; they require real answers.  And the answers should not be based on gut feel, historical experience and wishful thinking.  The answers should be grounded in facts, and lots of them.  So who conducts the research necessary to answer these questions? 

 

Acclaro Growth Partners is a research-based strategy consulting firm focused on helping clients make decisions based on facts.  New market entry is a typical decision in which we assist clients.  Contact me at kit@acclaropartners.com to learn more.

Uncertainty and Customers’ Product Life Cycles

It is often difficult to forecast customer demand.  And when your company is a component supplier for your customers’ end product platform, you must plan for your next few years of production capacity and top line revenue growth without a clear understanding of where your customers’ plans and businesses are going.

Your customers may not know or be willing to share the current lifespan of their platforms, the replacement / update schedule, and whether they intend to source from the same vendors in the next product cycle.  Often, the feedback you get from your customers can be misleading, overly optimistic, or may not take into consideration the competitive products or technologies that could overtake or replace their products earlier than expected.

When it is time to develop and replace a product platform, customers often put out RFPs and look for additional vendors.  There is always a risk that you, the incumbent supplier, will be replaced by another supplier – for cost or capability/service reasons.  Mitigate some of the risk associated with losing a contract renewal. The more information you have coming into the RFP process – and the more feedback and expert guidance you give your customers even before the RFP process – the better positioned you will be to be “spec’ed in” to the next proposal process.  Remember, you have the expertise in the components your customers are looking for, not them.  An understanding of how your customers’ needs will change from one cycle to the next, an understanding of competitive suppliers’ offerings, and an awareness of competing products or technologies that may challenge your customers’ products will put you in a better position to make a competitive, insightful, and best-fit proposal response.

To gain an accurate picture with the best possible forecast available, you have to tap the knowledge and expectations of multiple groups of organizations.  Customers, themselves, should be the starting point in solving the puzzle.  Other key component suppliers may have additional insights as to raw material shortages or early notification about production or technology changes.  Your customers’ competitors may be aware of market externalities that may affect demand and production levels, or they may be planning game-changing moves that your customers may not be privy to.

Those companies with a well-rounded understanding of how their customers use their products and how those products are situated in their respective markets will be able to react to market changes faster than those simply supplying product.  By understanding your customers’ processes and their product landscape, you can remain ahead of the curve, better plan your own production capacities, play an integral role in upcoming generation designs, and become more of a manufacturing partner than simply a commoditized supplier.

Prime-sourced, third-party research can shed light on the critical questions surrounding product life cycles:

p What is the typical life cycle of a product in this industry?  How often is it updated?  How frequently do radical improvements occur?

p What happens to older product generations?  Are they replaced immediately, or can they be counted for a period of continued revenue?

p How quickly will demand pick up or scale back throughout the product’s life cycle? 

pWhat are the triggers – both within your customers and external to the market – that will affect demand and supply?

To understand product life cycles, and therefore make production and development plans accordingly, you must be able to answer the questions above.  No single point of contact in the marketplace will have all the answers; instead, these issues for a puzzle for which the pieces are held by customers, competitors, suppliers, and channel partners.

Acclaro Growth Partners’ role is to gather the data, analyze it, and offer recommendations for your management team.  Our unique value involves our ability to conduct primary research objectively, quickly, and with actionable results.  Visit our website.