Sprinkler market entry strategy
The sprinkler market entry strategy is simultaneous business expansion to a number of foreign markets. Its main characteristic is the simultaneous market entry in pursuit of benefits that an early entry provides. Thus, it is a high-risk, high-reward approach - a successfully executed sprinkler strategy allows collecting profits from several markets while also being ahead of your competition, but a failed entry (withdrawal from markets) costs a lot of resources and provides little in terms of compensation.
A company enters several foreign markets at once and tries to establish itself, promote the product and build a client base simultaneously. The company receives profit and internationalization knowledge from several markets, which makes spreading the business even more effective, as there are so many sources of resources and information. This is similar to a water sprinkler, where each individual droplet is small, but they are numerous and spread all around, so that all the nearby area is watered evenly and thoroughly.
The sprinkler market entry strategy is best suited for companies, who produce products with a short life cycle or whose products are in the introduction or growth phase. Usually the sprinkler strategy is supplemented by the price skimming technique, when the initial price is rather high and is lowered with time. This allows generating as much profits as possible in a relatively short period of time, taking into consideration profits from all the regional branches.
Another thing to keep in mind with the sprinkler market entry is the procedure standardization. As it is almost impossible to customize and adapt for each and every market entered, standardization plays an important role in keeping the business expansion process coherent and the incoming data comparable. Of course, it does not mean that everything should be uniform - it is still vital to pay attention to, for example, cultural differences and how they affect advertising and branding. Thus, for example, hot dog companies in Malaysia in 2016 were forced to rename their products concerning the word 'dog', as this animal is considered to be 'unclean' in Islam, which is one of the major religions of the region. If the sprinkler strategy fails to adapt to such peculiarities, expansion into a certain market may stall.
The sprinkler market entry strategy is an effective method of outrunning competition and utilizing the first-mover or technological advantage. While the competitors enter just one or two markets at a time, the business in question raises the brand-awareness in many more markets. Even if the competitors also enter these markets, they will be seen as followers, rather than as innovators. The business that uses the sprinkler market entry strategy has more time to analyze the market and make adjustments. An early simultaneous entry also means more possibilities for registering intellectual property, which hinders the later advance of competitors even more.
Another advantage is the amount of income from a large number of entered market, especially if the business expansion was successful in the majority of the markets. Besides just receiving profits and using them to develop the company, this also gives another advantage - the profits from successfully entered markets can be allocated to less successful regional branches, thus minimizing the risk of withdrawal across all the markets. This makes the sprinkler strategy advantageous in the long-run.
The sprinkler market entry relies on a big number of markets entered simultaneously, which, in turn, requires a significant amount of initial investments. This includes both finances and staff, as well as the general business expansion planning. Depending on the markets and other circumstances, production facilities, offices, logistics networks and bank accounts will need to be established in numerous markets at once, putting additional strain on resources.
Another disadvantage of the sprinkler strategy is the high risk of entering a number of markets at once. Although a failure and possible withdrawal in one can be compensated by the profits from other markets, if the whole business expansion is unsuccessful, the losses are rather serious (due to big initial investments, see the previous disadvantage).
Other market entry strategies
The sprinkler market entry strategy is only one of the possible options for expanding your business, which is why you might also want to read about other approaches: