Question

Evaluating the prospect of entry, an entrant may fear that engaging in head to head competition post-entry with the incumbent may result in severe losses. Some companies manage to make a virtue out of staying small when entering markets dominated by large incumbents. What is the role of commitment in adapting this strategy and what are the attributes of commitment?

Answer 1

It is true that some companies while using the international strategy enter different markets using the virtue of staying and playing lower or small dominated by the large incumbents. Many countries have a strict control over their markets and doesn't really allow to have an open economy. Thus, many companies while entering and increasing their business in such kinds of market tends to remain low for a couple of years to seek and understand what the market is like.

For example, Starbucks before entering China to increase and diversify its business and operations tend to work under a local and famous Tea shop there and stay lower in the business. This is because of the reason that China has more tea lovers rather than coffee. Thus, by staying lower and working under an established business, Starbucks tends to learn more about the market, the culture and the players in the market to make a move. Finally, when customers tend to like and adapt to the culture brough in by Starbucks, the bug guns were released and Starbucks became a famous spot to relax and have coffee in.

Thus, we can see that commitment to the bigger company and also to the cultural and economical aspect of the market is very important. The commitment plays a role of making the company which wants to diversify its business to well understand what is happening in the market, how well to adapt, the features and how could eventually the company would be able to develop a trust among people to invest in the same for growth and diversifcation.

The attributes to commitment shown are how well you are adapted in the market for growing, how focused are you into learning the same growth, how passionate and how knowledgable are you understanding the various elements in the internal as well as external dimensions.