Marketing Science – Market Size vs. Market Entry

Marketing Science - Market Size vs. Market Entry

Previous Measures
A recent study by Sungwook, Namwoon and Ge Zhan (2017) researched the level of impact the market size has on firms entering a new market. Previous studies (e.g. Combe, 2012; Geroski, 1995; Gort and Klepper, 1982; Rodríguez-Pinto et al., 2007; Thomas, 1987) suggest that the importance of the market size is one of the most important factors due to the increasing potential of profit and market share. Furthermore, they believed that the bigger the market is the lower the entry barriers could be, as other companies have taken the step to enter that certain market.

These findings were important measures for firms that were planning a marketing strategy for a potential new market entry. As there have been different findings in this field however, the research of Sungwook, Namwoon and Ge Zhan (2017) is aimed at bringing further insights into this research area.

Research Findings
As the research results have differed in the past, Sungwook, Namwoon and Ge Zhan (2017) empirically tested the effects of new market entries and the size of new markets. For this purpose, a meta-analytic approach was carried out that included the analysis of 41 studies on this subject. The findings suggest that the market entry variables are influenced strongly by the market size. However, the results differ when it comes to niche-markets and high-technology markets.

For niche-markets there can be a positive influence depending on market size if compared to non-niche markets due to the higher potential of profits. For high-tech markets the size of the entry market is not as important due to different motivational reasons of the market entry. Also, the market size of relatively new developed markets plays a lower role in market entry decisions.

The implication these findings have for decision makers e.g. is to know how the entry behaviour of other companies could be and therefore help managers in making own decisions for entering a new market.

Source:
Sungwook Min, Namwoon Kim, Ge Zhan, (2017) “The impact of market size on new market entry: a contingency approach”, European Journal of Marketing, Vol. 51 Issue: 1, pp. 2-22.

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