10/24/2013 | Jennifer Schiff

The National Center for the Middle Market (NCMM) interviews Brent Lang (BL), the CEO of Vocera Communications, Inc. (NYSE: VCRA), a middle market company that provides integrated, intelligent communication solutions for healthcare, hospitality, energy, retail, and other mobile work environments in North America, EMEA, and APAC, on how to formulate a successful market entry strategy.

NCMM: How did Vocera choose which foreign market(s) to enter? Did you have a market entry strategy?

BL: For Vocera, our products and solutions have to be the right fit. The wireless infrastructure of the hospitals has to be in place in order to implement our solutions. And there has to be enough market interest in order for us to successfully enter a new region.

In the case of early beachheads in Canada, UK, Australia, and New Zealand, language played a major role in the speed at which we were able to enter those markets because they are English speaking and our product uses a speech-recognition user interface. Similarly, with a country such as Singapore, very little localization was needed, and it had the right infrastructure and critical mass of market interest that fit our criteria.

NCMM: What questions should a CEO ask him/herself or seriously think about when formulating a new market entry strategy?

BL:

  • What is the real market opportunity and how is it different from the other regions where you currently operate?
  • Do you have the right people and strategy to pull this off?
  • Are you willing to make a long-term investment?
  • What is this going to do to your domestic resources?
  • What is this really going to cost in terms of time, money, margins, engineering, and development?
  • When will you realistically see revenue from this market?
  • What is the exit strategy if things go wrong?

NCMM: What should a CEO be prepared for or expect after entering a new region?

BL: Companies need to realize it could take longer than desired or expected to generate revenue and to become profitable. Also, even if revenue begins to expand at a healthy rate, the overall margins may be lower than domestic margins. It's important to understand how much impact this might have on the financials.

CEOs should also expect and research in-country competition that might be different from competition in the home market. While it's possible to enter a market where there is no direct competition for your products or services, customers may avoid buying from what is perceived to be a foreign brand until the company is established.

In addition, a CEO needs to be pragmatic when reviewing a detailed business plan [or new market entry strategy] outlining all of the resources required. You need to think about what will be needed "in country," but it's also important to understand what resources are needed at the corporate headquarters to support this new market.

Also, CEOs should keep in mind that what works in one country may not work in another. If companies are inflexible in their business models, CEOs may fail against in-country competition or customers may reject their way of doing business. Localization, culture, and the country's political and trade systems all play a critical role in a successful market entry. Trying to apply U.S. standards to different regions can lead to what I refer to as "organ rejection."

NCMM: Any final words of advice for CEOs of middle market companies regarding market entry strategy?

BL: When any company enters a new region, it can take time to establish a brand. In addition, there are different regulations, tariffs, tax structures, and employment and compensation laws to consider.

For technology companies, an important factor has to be the overall communications infrastructure of the country. Since mobile and Web-based technologies are so fundamental to enterprises, a country needs widespread, affordable, and stable networking environments in order to support new companies and technologies coming into the region.

One strategy that has been effective for Vocera is that once enough market interest has been established, we usually partner with an in-country specialist and run a series of pilot programs. There are key learnings throughout this process, which include business model adjustments, country-specific technology requirements, and costs and challenges associated with doing business in that market.

Lang also offered the following market entry strategy suggestions:

  • Talk to other CEOs who have successfully entered markets you are interested in, asking them what challenges or issues they faced.
  • Find strategic in-country partners you trust, who are willing to work closely with you.
  • Create a set of milestones and criteria for a "go/no-go" scenario.
  • Stay focused and have patience as the market develops.

Jennifer Lonoff Schiff is an NCMM contributor and award-winning business writer and president of Schiff & Schiff Communications, a marketing communications firm focused on helping businesses of all sizes better interact with their customers, employees, and partners.