Market entry strategy: 6 questions to answer before you export

Picture a family firm in Brianza that makes upholstered chairs. One morning a buyer in Chicago emails for a quote. The owner sends a price, hears yes, and a pallet is soon on its way across the Atlantic. Six weeks later she sees what her chair sells for in the shop. Freight, duty, the importer’s cut and the retailer’s cut have all been piled on top, and it now costs more than the local competitor’s. No one cheated her. She had simply asked the questions after the pallet left, not before.

This is the hub of our cross-border series, and it takes about ten minutes to read. By the end you’ll have a market entry strategy boiled down to six questions, a scorecard that fits on one page for choosing between countries, a way to work out shelf prices from the far end of the chain, a table comparing five ways in, and a list of the public help you can ask for. Starting from scratch? Begin with our beginner’s map from zero to a first round and come back here after.

What is a market entry strategy?

Think of it as the route your product takes to its first customers in a new country, put on paper before any money moves. You don’t need a 60-slide deck, because one page will do. It answers six questions, in this order: where, to whom, at what price, through whom, as what kind of company, and with how much money. Startup people call it your go-to-market plan.

Order matters more than it looks. Plenty of owners jump to question four because a distributor happened to phone, and they meet questions one to three later, often with a first container as the tuition fee. And if you’ve never checked that anyone wants the product at all, do that before anything else. Our guide to validating an idea without spending money works for a foreign market as well.

Which market first? Build a one-page scorecard

A scorecard settles the argument about which country feels right. List three or four candidate markets and pick five criteria. Give each criterion a weight, and make the weights add up to 100. Then mark every market from 1 to 5 on every criterion. Multiply each mark by its weight, add the results, divide by 100. That’s the score. An afternoon is enough.

Where do the scores come from? From things you can look up or ask. Import conditions and rules of origin are in Access2Markets. Competitor prices are in the shops. The rest comes from a few calls with buyers. Market size, the thing analysts split into TAM, SAM and SOM, feeds the first criterion.

Here is the Brianza chair maker again, scoring three markets. The criteria, weights and scores are invented to show the mechanics. Yours will differ.

Criterion (weight)	Germany	United States	Brazil
Demand for your product (30)	4	4	3
Price you can charge after landed costs (25)	3	4	2
Ease of entry: rules, labels, logistics (20)	5	2	2
Competition and gaps on the shelf (15)	2	3	4
Contacts and support you already have (10)	4	2	1
Weighted score (out of 5)	3.65	3.25	2.50

Germany wins on ease, the United States on price, Brazil on gaps. The winner isn’t the point. The disagreement is. If two partners score the same market 4 and 2 on demand, you’ve just found the assumption to check before you spend anything. And a gap of 0.1 is a tie, whatever the decimals suggest.

What will it cost on the shelf? Price after duties and logistics

The nasty surprise in exporting is usually arithmetic. Your invoice says one amount. The shopper on the far side pays a lot more. Between your factory gate and the shop shelf, the goods pick up freight and insurance. Then duty, customs handling and a truck ride inland. Then an importer who wants a margin, and a retailer who wants one too.

So start at the shelf and work back. Find out what a local competitor charges, strip out each step of the chain, and see what’s left for you. The table walks the other way, upwards, with invented numbers for one chair.

Step	What happens	Price per chair
Ex-works price	Your invoice to the importer	€100.00
Freight and insurance	Transport to the destination port or warehouse	€108.00
Import duty	5% of €108.00 (invented rate; some countries count freight and insurance in the value for duty, others don’t)	€113.40
Clearance and local transport	Broker fees, haulage, storage	€120.00
Importer or distributor margin	25% on top of cost	€150.00
Retailer margin	40% of the shelf price	€250.00

A €100 chair becomes a €250 chair. If the local competitor’s sits at €190, you have a decision to make: a cheaper route to market, a premium story that justifies €250, or another country. Better to learn that before the pallet leaves. What’s left of each unit after all these costs is your unit economics in that market.

For the real duty, use the destination’s own tariff database. For goods leaving the EU, the Commission’s free Access2Markets portal lets you search the conditions to trade your product, rules of origin included. For the American case, our guide on how to enter the US market from Italy shows where to look.

How will you sell? Five entry modes compared

Entry modes sit on a ladder. At the bottom you spend little and control little. At the top you control a lot and carry the cost and the risk. The table compares five.

Mode	How it works	Control	Upfront cost and risk	Fits when
Marketplace	You list on a platform and ship order by order	Low: the platform sets rules and fees	Low	You want quick market data on a small product that’s easy to ship
Distributor	It buys your goods and resells them in its own name	Medium: depends on the contract	Low to medium	The market needs local logistics, language and shop relationships
Agent	It finds customers for a commission and doesn’t own the goods	Medium	Low to medium	You want to keep the invoice and the customer relationship
Own subsidiary	You set up a local company with staff and stock	High	High	Volumes justify fixed costs and you need to be close to customers
Joint venture	You share a local company with a partner	Shared	Medium to high	The partner brings licences, access or capital you can’t get alone

Start low. A single marketplace listing, or one distributor, will tell you more about price and demand than another month of desk research. Climb when the numbers say you should.

A word on agents. Within the EU, self-employed commercial agents fall under Council Directive 86/653/EEC of 18 December 1986, and every country layers rules of its own on top. Read the clause on what happens when the contract ends twice before you sign, since it’s usually the one that matters most. Outside the EU the local law decides, so find a local lawyer.

Do you need a company in the target market?

Not at the start. Sell through a marketplace or a distributor and you can skip it. The day you keep stock in the country, hire your first local employee or sell straight to shoppers, a local company starts to make sense. The same goes for a tender that asks for a local entity, or an investor who wants one.

In the United States that usually means an LLC or a C-corporation, and founders often pick Delaware for it. Our guide to the Delaware flip covers the investor side. For South America, see how to expand to Latin America. Coming from abroad and wanting a company in Italy instead? Read about opening a company in Italy as a foreigner.

Any company abroad brings tax, accounting and reporting duties, there and back home. Show your plan to an accountant who knows both countries before you incorporate, not after.

What public help can you get? ICE, SIMEST and free tools

Italy has an agency built for this. Its name is ICE, the Italian Trade Agency, and it sits under the Ministry of Enterprises and Made in Italy. It has offices in 70 countries. Read its English homepage and you’ll find four lines of work: finding an Italian partner, business opportunities, investment opportunities and events worldwide. Reading isn’t enough, though. Call the office closest to your target market and ask what they’d do for your product. Which fairs? Which buyers could they put you in touch with? What help is there on the ground?

Money next. SIMEST belongs to the CDP Group and finances commercial structures abroad, trade fairs, e-commerce and more. The numbers live in our guide to SIMEST financing. One example: the market-entry loan can reach 35% of average revenue over the last two balance sheets.

For desk research, Access2Markets is free. It’s run by the European Commission’s trade department. Looking at South America? Our guide to the EU-Mercosur agreement for Italian SMEs explains what that deal changes.

Six mistakes that cost the most

• Choosing the market because a friend lives there or a buyer called. Score it against two other markets first.
• Quoting ex-works and forgetting what the shelf price becomes.
• Giving exclusivity to the first distributor, with no minimum volumes and no end date.
• Leaving product checks until the goods are on the water. Labels, registrations and certificates take time, and a pallet can’t wait for them.
• Entering four markets at once with the budget for one.
• Budgeting the launch and forgetting year two. Orders seldom turn up on the date the plan promised, and the bills still do.

Your market entry checklist

1. One page, six answers, two minutes to read. Market, customer, shelf price, channel, legal set-up, budget with timeline.
2. Three markets scored on a weighted card, then shown to a partner or an adviser who will happily disagree with you.
3. The duty and entry rules for your product code, pulled from the destination’s tariff database.
4. The price walk from ex-works to shelf, laid next to a local competitor’s price.
5. The lowest rung of the ladder that gives you real data, plus a date when you’ll review it.
6. A call to ICE and one to your bank about what support fits, and a read of SIMEST’s current conditions.
7. A lawyer’s eyes on every distribution or agency contract, before your pen touches it.

This article is general information, not legal or tax advice. Rules change: check the official sources, and ask a lawyer or an accountant before you sign a distribution contract or set up a company abroad.