Competitive advantage of Startups for Expanding into new markets (Part 2)

Tuesday, 05/07/2022 12:00 (GTM +7)

In part 1, we explored three factors influencing startups when they enter new markets, including:

Local competitive context
Local customer preferences
The brand’s readiness and adaptability

Together with ITI Fund, in this article, we will know some strategies to help startups increase competitive advantage if they have problems with the above factors.

Adjusting existing products or services

In some situations, startups need to adjust existing products or services to reduce the gap between the brand and penetrated market. For example, Starbucks changed its ineffective business model in Australia.

ITI Fund_Starbucks_Australia A coffee store of Starbucks in Australia (Image source: Starbucks)

Instead of competing directly with local coffee shops that are well-received by customers, Starbucks has targeted international tourists familiar with the brand in Sydney, Melbourne, and other popular destinations. They were more than a third of Australia’s population before the Covid19 pandemic.

Similarly, Xiaomi – the China smartphone company – which succeeded in the home market by selling online, has challenges in Europe because most customers want to purchase mobile phones directly at stores.

ITI Fund_Xiaomi_Europe Xiaomi invest in building direct sale store to enter Europe market (Image source: Internet)

Realizing that online stores do not bring a competitive advantage in Europe, this business has cooperated with retailers and carriers, building its store to develop direct sales channels. Currently, Xiaomi is the 3rd largest smartphone vendor in this market.

Developing new competitive advantages

If product and service adjustments are ineffective, startups may have to develop new approaches. For example, InMobi – India’s advertising company, has technology as the core competitive advantage.

However, they changed strategy when InMobi expanded into the Chinese market, which has solid technological capabilities and is challenging to compete with. They focused on their solid global reputation and extensive networks with advertisers and partners.

Up to now, InMobi’s ecosystem has more than 30,000 local apps. As a result, this company has become the largest independent advertising business in the Chinese market.

Hyundai – the Korean car brand – also has similar problems in this billion-people country when realizing that domestic manufacturers can design the same quality products at a lower cost.

ITI Fund_Hyundai Custo 2022_China Custo 2022 of Hyundai that will launching in China (Image source: Internet)

Unable to rely on price as a core competitive advantage, Hyundai has invested in building a premium brand image, enhancing the global brand’s effect in this market, and touching customers’ emotions.

Leaving the market

Finally, in some cases, startups must choose the safe way and are out of the market. For example, when Amazon realized it needed to spend enormous resources and adjust firmly core products to penetrate China, it decided to leave.

Similarly, after seven years of net losses in Brazil and sales are only 1.4% of total global sales – Walmart has decided to pull out of this country and allocated resources for other potential markets.

ITI Fund_Walmart_Brazil Walmart must leave Brazil because of net losses for 7 years (Image source: Internet)

Depending on specific conditions, there are different challenges in each market; startups should consider the information carefully when making decisions on whether to adapt to the new market or continue to consolidate their position in the existing market.

Source: Marketing Trips