The Ultimate Guide to Market Entry Analysis for Startups, pt. 1

The Ultimate Guide to Market Entry Analysis for Startups

This is the first entry of two in our guide to market entry analysis for businesses. Sign up for our newsletter and alerts to get the next post in this series and all the latest insights, news and more from the Olympus Intel team.

Entering or expanding to a new market is a pivotal move for any growing company or startup. Prospects of growth, increased revenues, and opportunity to make a significant impact are apparent. But...without a strong understanding of the market landscape, entering new markets can be fraught with risk. Market Entry Analysis (MEA) is a process that equips organizations with the intelligence needed to successfully plan, launch and navigate new territories confidently. This guide will help you learn the basics of MEA, its importance, the steps involved, and how tools like Olympus Intelligence can make the process more efficient and actionable for your organization.

Understanding Market Entry Analysis

What is Market Entry Analysis?

Market Entry Analysis is a systematic approach to evaluating new markets, used to determine a market's viability for a business’s products or services. It involves assessing and weighing factors such as market size, customer needs, competition, the regulatory environment, and pricing optimization. The goal is identification of opportunities and threats related to entering new markets so leaders can make informed decisions about the tradeoffs involved in a market expansion.

Why is MEA Crucial for Startups and Growing Businesses?

For startups, resources are often scarce, and the margin for error is slim. When you're racing against the clock (be it for funding, improving cash flow, building traction and more) making informed strategic bets is critical to success. MEA helps in:

• Minimizing Risks: Understanding the market dynamics, startups can avoid costly mistakes by making better, informed strategic decisions about entering markets before committing substantial time and resources to the effort.
• Strategic Planning: Provides data-driven insights to formulate effective entry strategies, like where the highest number of addressable accounts or units could be, alternatives to existing expansion plans and more.
• Investor Confidence: Demonstrates robust and thoughtful due diligence, vital for building credibility with investors and securing funding.
• Competitive Advantage: Identifies gaps in the market that can be exploited and ability to move to market faster.

Growing businesses enjoy many of the same benefits as startups by effectively leveraging MEA. Beyond the things listed above, more established businesses will be more effectively deploy existing resources or sales talent, spot similar but unaddressed markets that may have lower barriers to entry and better prioritize expansion or pivot bets based on robust data.

The Market Entry Analysis Process

MEA involves several steps that may vary depending on an organization's needs. Here’s a step-by-step guide to conducting a comprehensive analysis:

Step 1: Market Research

Data Collection

Gather data on the target market:

• Economic Indicators: Economic or industry growth rates, changes in employment or hiring trend, business spending habits, etc.

• Industry Trends: Emerging technologies, shifts in business investments or purchasing habits, performance of sub-categories within industries, etc.

• Firmographic Data: Information such as number of firms or locations, geographic concentration of firms, revenues, etc.

These data are often sourced by varying means, and care must be taken to use only sources that are considered trustworthy. Many of these datasets in their basic forms can be accessed through various government resources, such as the U.S. Census Bureau, the Bureau of Labor Statistics and more. Often, industry trade associations or other groups may publish research reports or presentations that contain relevant information on industry sizes and trends.

Step 2: Market Sizing (TAM, SAM, SOM)

Understanding the potential market size is crucial for gauging the amount of revenue that could be gained from a successful expansion. There are a few key measures to understand related market sizes, all of which are relevant when performing a Market Entry Analysis.

Total Addressable Market (TAM)

• Represents the total market potential for your product or service
• Calculation involves assessing the overall revenue opportunity if you reached 100% market share. In other words, it answers the question: "What could our revenue be if every possible company that could buy our products or services did?"
  • Think of this like fishing in the ocean. There are several, but you're only going to fish in the Pacific Ocean. That whole ocean is your TAM.

Serviceable Addressable Market (SAM)

• The portion of TAM that aligns with your business model, capabilities and other external factors.
• Considers things like in geographic reach, target customer segments, product specifications, regulatory restrictions and other things. In other words, it answers the question: "What things about our product, customer types, and more will limit our ability to sell to the entire market". This is your SAM.

• The percentage of SAM that you can realistically capture in the short to medium term.
• Considers competition, market saturation, and your company’s resources.
• Factored in, this becomes your SOM.

Accurate market sizing informs strategic decisions and sets realistic expectations. 

Olympus Intel has done the hardest parts of assembling an accurate market size estimate for you already. Numerous datasets and tools are available within our platform to help you quickly and accurately understand your market potential. At a fraction of the time for doing it yourself, more accurate than estimating from of old data in industry reports and priced to be accessible to entrepreneurs at every stage of their growth journey, we're making market sizing easy. Learn more about our platform or sign up for access today.

Step 3: Competitive Analysis

Identify Competitors

• Direct Competitors: Businesses offering products or services that directly compete with your product or service.
• Indirect Competitors: Alternative solutions that address the same or similar needs your potential customers may have.

• Pricing models: How do other places price their offerings? How much would it cost to get real value from our product's solution versus a competitor's? How do others use pricing to meter access to their product, like seat-based pricing models versus usage-based pricing.
• Marketing tactics: Where and how are other businesses trying to reach their prospective customers? How resource intensive would it be to compete in those same channels or using alternative strategies?
• Distribution channels: How does the product or service get delivered?
• Strengths and weaknesses: Based on the above, where do we think we are better than existing offerings? Where do we have gaps or weaknesses compared to what we observe in the market?

• Determine the level of competition and potential barriers to entry.
• Identify gaps or underserved segments in the market.

Thanks for reading, and remember to check back here or subscribe for part 2, where I'll go deeper on a few more key steps, like considering regulations, cultural barriers and more. I'll also take a look at some common challenges with running a market entry analysis and how to overcome them. And of course, you can get started today with many of the tools you need to kickstart your market entry analysis by signing up for a subscription to the Olympus Intel Platform. Head over here to learn more and get started. 

Questions? Our team would love to hear from you, so please get in touch! 

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