{"id":4092,"date":"2018-10-30T06:54:38","date_gmt":"2018-10-30T11:54:38","guid":{"rendered":"http:\/\/flevy.com\/blog\/?p=4092"},"modified":"2020-12-19T20:52:04","modified_gmt":"2020-12-20T01:52:04","slug":"for-a-successful-market-entry-first-we-must-remove-our-cognitive-biases","status":"publish","type":"post","link":"https:\/\/flevy.com\/blog\/for-a-successful-market-entry-first-we-must-remove-our-cognitive-biases\/","title":{"rendered":"For a Successful Market Entry, First We Must Remove Our Cognitive Biases"},"content":{"rendered":"

\"\"New market entry<\/a> provides potential opportunities for organizations to grow.\u00a0 But penetrating a market and establishing a new business is fraught with complications and failure.\u00a0 Attempts at entering a new market often fail, in fact, research suggests that for every successful market entry about 4 fail.\u00a0 The reasons for such high failure rates involve timing, scale, competition, capabilities, and predominantly irrational decision making.<\/p>\n

The decision to successfully enter a market necessitates detailed analysis.\u00a0 These critical decisions often get flawed by Cognitive Biases\u2014the systematic errors in the way people process information\u2014resulting in huge financial implications.<\/p>\n

Cognitive biases distort executives\u2019 perception regarding their firm\u2019s capabilities, potential market, and competition.\u00a0 These biases trigger misleading beliefs in executives\u2014such as, their existing capabilities are in line with what\u2019s required in the future, or that the market entry move will go unnoticed by the competitors.\u00a0 Removing biases out of decision making is an arduous task, as not many executives are able to identify the biases that manipulate their planning and decision making processes.<\/p>\n

Cognitive biases damage a firm\u2019s market entry planning and decision making processes.\u00a0 Market entry analysis requires a robust methodology.\u00a0 A 2-step methodical approach helps executives understand the Psychology of Market Entry Analysis<\/a><\/strong> and eliminate cognitive biases from their crucial market entry decisions.<\/p>\n

    \n
  1. Develop a Reference Class<\/li>\n
  2. Remove Bias from Decisions<\/li>\n<\/ol>\n

    \"\"<\/a><\/p>\n

    Develop a Reference Class<\/strong><\/h3>\n

    While making such critical decisions, most executives count on their gut and consider only their company\u2019s inside view.\u00a0 This approach is misleading and prevents them from developing an outside perspective based on previous market entry experiences, and assessing opportunities against certain success parameters.<\/p>\n

    Executives can utilize a reference class\u2014group of similar decisions that other firms have taken in the past that provide valuable benchmarks for decision making.\u00a0 A reference class of should be thoroughly evaluated in terms of circumstances that warranted those decisions and the outcomes that those decisions leveraged, to generate empirical predictors of success.<\/p>\n

    The approach saves the decision makers from falling into the \u201cconfirmation trap,\u201d which urges them to seek information that confirms to their hypotheses only.\u00a0 It also drives the analysts to explore more options and data.\u00a0 Companies in various sectors understand the importance of drawing a reference class, while some don\u2019t consider looking at the experience of outside companies worthwhile and encounter failures as a result.<\/p>\n

    In preparing a reference class, executives need to explicitly review 6 key factors that serve as predictors of successful market entry.\u00a0 These predictors of market entry success help the executives decide whether to go ahead or drop their entry decision.<\/p>\n

      \n
    1. Size of entry relative to minimum efficient scale<\/li>\n
    2. Relatedness of the market entered<\/li>\n
    3. Complementary assets<\/li>\n
    4. Order of entry<\/li>\n
    5. Industry lifecycle stage<\/a> (more on this can be found here: Consolidation-Endgame Curve<\/a>)<\/li>\n
    6. Degree of technological innovation<\/li>\n<\/ol>\n

      Remove Bias from Decisions <\/strong><\/h3>\n

      Biases in corporate decisions are a product of behavior, training, culture, and human nature.\u00a0 These biases deviate the executives from thinking rationally, and prevent them from organizing and analyzing data properly.\u00a0 Executives need to work on identifying, labeling, and eliminating biases from their decision making process.<\/p>\n

      Removing cognitive biases objectively leverages improved chances of success for the organizations; this entails targeting the following 5 core issues:<\/p>\n

        \n
      1. Value Proposition<\/a><\/li>\n
      2. Market Size<\/li>\n
      3. Competition<\/li>\n
      4. Market Share and Revenue<\/li>\n
      5. Costs<\/li>\n<\/ol>\n

        Interested in learning more about removing Cognitive Biases in Market Entry Analysis<\/a>?\u00a0 You can learn more and download an editable PowerPoint about the Psychology of Market Entry Analysis<\/strong>\u00a0here<\/a> on the Flevy documents marketplace<\/a>.<\/p>\n

        Do You Find Value in This Framework?<\/h2>\n

        You can download in-depth presentations on this and hundreds of similar business frameworks from the FlevyPro Library<\/a>. FlevyPro<\/a> is trusted and utilized by 1000s of management consultants and corporate executives. Here’s what some have to say:<\/p>\n

        “My FlevyPro subscription provides me with the most popular frameworks and decks in demand in today\u2019s market. They not only augment my existing consulting and coaching offerings and delivery, but also keep me abreast of the latest trends, inspire new products and service offerings for my practice, and educate me in a fraction of the time and money of other solutions. I strongly recommend FlevyPro to any consultant serious about success.”<\/p>\n

        \u2013 Bill Branson, Founder at Strategic Business Architects<\/p>\n<\/blockquote>\n

        “As a niche strategic consulting firm, Flevy and FlevyPro frameworks and documents are an on-going reference to help us structure our findings and recommendations to our clients as well as improve their clarity, strength, and visual power. For us, it is an invaluable resource to increase our impact and value.”<\/p>\n

        \u2013 David Coloma, Consulting Area Manager at Cynertia Consulting<\/p>\n<\/blockquote>\n

        “As a small business owner, the resource material available from FlevyPro has proven to be invaluable. The ability to search for material on demand based our project events and client requirements was great for me and proved very beneficial to my clients. Importantly, being able to easily edit and tailor the material for specific purposes helped us to make presentations, knowledge sharing, and toolkit development, which formed part of the overall program collateral. While FlevyPro contains resource material that any consultancy, project or delivery firm must have, it is an essential part of a small firm or independent consultant’s toolbox.”<\/p>\n

        \u2013 Michael Duff, Managing Director at Change Strategy (UK)<\/p>\n<\/blockquote>\n

        “FlevyPro has been a brilliant resource for me, as an independent growth consultant, to access a vast knowledge bank of presentations to support my work with clients. In terms of RoI, the value I received from the very first presentation I downloaded paid for my subscription many times over! The quality of the decks available allows me to punch way above my weight \u2013 it’s like having the resources of a Big 4 consultancy at your fingertips at a microscopic fraction of the overhead.”<\/p>\n

        \u2013 Roderick Cameron, Founding Partner at SGFE Ltd<\/p>\n<\/blockquote>\n

        “Several times a month, I browse FlevyPro for presentations relevant to the job challenge I have (I am a consultant). When the subject requires it, I explore further and buy from the Flevy Marketplace. On all occasions, I read them, analyze them. I take the most relevant and applicable ideas for my work; and, of course, all this translates to my and my clients’ benefits.”<\/p>\n

        \u2013 Omar Hern\u00e1n Montes Parra, CEO at Quantum SFE<\/p>\n<\/blockquote>\n","protected":false},"excerpt":{"rendered":"

        New market entry provides potential opportunities for organizations to grow.\u00a0 But penetrating a market and establishing a new business is fraught with complications and failure.\u00a0 Attempts at entering a new market often fail, in fact, research suggests that for every successful market entry about 4 fail.\u00a0 The reasons for such high failure rates involve timing,… For a Successful Market Entry, First We Must Remove Our Cognitive Biases<\/span><\/a><\/p>\n","protected":false},"author":110,"featured_media":4094,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"neve_meta_sidebar":"","neve_meta_container":"","neve_meta_enable_content_width":"","neve_meta_content_width":0,"neve_meta_title_alignment":"","neve_meta_author_avatar":"","neve_post_elements_order":"","neve_meta_disable_header":"","neve_meta_disable_footer":"","neve_meta_disable_title":"","footnotes":""},"categories":[81],"tags":[1286,172,1356,1357,1358],"class_list":["post-4092","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-strategy","tag-cognitive-biases","tag-market-analysis","tag-market-entry","tag-reference-class","tag-removing-biases"],"_links":{"self":[{"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/posts\/4092","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/users\/110"}],"replies":[{"embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/comments?post=4092"}],"version-history":[{"count":12,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/posts\/4092\/revisions"}],"predecessor-version":[{"id":7939,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/posts\/4092\/revisions\/7939"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/media\/4094"}],"wp:attachment":[{"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/media?parent=4092"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/categories?post=4092"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/flevy.com\/blog\/wp-json\/wp\/v2\/tags?post=4092"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}