Market Entry Strategy

After having detailed our market with its opportunities and our strategy to fit in, we will focus on our entry strategy. To do this, we will use strategy model that will help us to fond the right strategy.

If we consider the Porter’s model we can distinguish five forces :

  • Bargaining power of suppliers
  • Bargaining power of buyers
  • Threat of new entrants
  • Substitutes
  • Rivalry amongst industry

After studying these forces, we will concentrate of the barriers of entry in the threat of new entrants. To apply the Porter’s model we will study our company because we are the creators of the eco-building consulting. We also could have applied it to the overall building industry, but it has already been well described.That’s why this analysis is done in order to optimize our market entry strategy and not to be very exhaustive for the building industry.

1 Porter’s model

1.1 Bargaining power of suppliers

Here, at the very beginning this force will play against us but it will quickly become one of our strongest forces. Indeed, we will have to make some partnerships with local architects, masons…In a way, they are our supplier because we will manage house building with them. Without them, there is no house, nevertheless, as soon as the first partnership will be done, will bring customers to our suppliers. Finally, the bargaining power of suppliers can be seen as medium because depending on our partnerships.

1.2 Bargaining power of buyers

This is a very tough point. We will have to convince customers of buying our house, and above all, to convince them of the quality and the worth of our concept. The bargaining power of buyers will lie in their scepticism about our utility. So, we have to show that our role is essential by providing the best green-service at the best price and of courses, that in the long term, the will save money thanks their eco-house.

1.3 Threat of new entrants

As our strategy is to begin by a regional settlement, we risk seeing other consultant agencies created in other regions or, more probably, seeing local architect creating green-services. For this point, as we have already said before, we want to build a strong brand which will become the synonym of quality and ecology. Moreover, thanks agreement and the creation of standards with government agencies, our first-mover advantage will be huge : we will be the symbol of eco-building.

1.4 Substitutes

Actually, there is no substitute today. All big building companies propose sometimes a “green touch”, but it is nothing more than marketing. We can also see sometimes crank eco-fans constructing crazy houses in trees or importing traditional Mongolian houses…Obviously, this doesn’t affect us, in the sense that we aim to propose practical houses where it is easy and comfortable to live with his family.

1.5 Rivalry amongst the industry

Thanks our partnerships with local architects, we will able to build a strong network based on trust and a lot of potential customers. The green identity will be an important argument towards classical architects or building company. The market is growing and far from saturation, so with the leitmotiv of eco-building, the rivalry should not be too much intensive.

2 Entry barriers

We can distinguish seven entry barriers and thanks the previous analysis and this one we will see we will overcome them.

2.1 Economies of scale

The fact is that houses are not build in factories. The only possible economies of scale lie in capability of big building company to build the same house as we can see in modern housing development. Nevertheless, this kind of competitors is not our direct competitors. Our direct competitor would be rather architects.

2.2 Product differentiation

This entry barrier is in our favour because we bring a new concept on the market. Through our green houses, the customers will have a perception of uniqueness and satisfaction about his impact on the environment.

2.3 Capital requirement

This barrier can be huge in the building industry if we consider a constructor with workers and machines. Nevertheless, this is no relevant for us, because as consultants we only need a little office. The other costs of the capital requirement will be about the launch of our company which won’t be very excessive (a bit of local advertising, little cocktail to convince local architects…)

2.4 Switching costs

We can consider two sides : partnerships and customers. For both they are very important. Firstly, if our partners decide to break agreement, the will loose a lot of customers, furthermore, they won’t be able to use our concept directly because of reputation and the strength of our brand. Then, a very few customers build a house every weeks.

2.5 Access to distribution channel

This will be a real challenge. We have to construct our franchises’ network whereas big building companies have already a lot of contacts. That’s why the main role of partnership with architect will essential. If we can’t make good partnerships, we won’t be able to grow out of regional start.

2.6 Cost disadvantages independent from scale

These costs are directly linked to our differentiation : an eco-house is more expensive than a classical house. The cost advantage lies in the long term with energy saving for example.

2.7 Government policy

That barrier is good for us in the way that, recently in France, a lot of laws have been voted to encourage house building and especially eco-building. It exists now a lot of taxes credits if you buy green equipments. We will make these barriers important for possible other entrants by creating norms with government agencies.

3 Conclusion

Finally we make out several critical points to succeed in our entry strategy :

  • Make good partnerships with local architects to create a good distribution channel and convince masons and other “suppliers” to work with us. Architects will also a key for our credibility with agreements with government, in order not to be seen only as consultant, but also able to make build an eco-house.
  • In a more commercial view, our marketing will have to focus on the profitability of buying an eco-house associated to the environmental concern.