TABLE OF CONTENTS

> Factor 1: Why expanding into this particular market?
> Factor 2: How should the market be entered?
> Factor 3: Which partners are needed/beneficial for expanding into new markets?
> Factor 4: What unique challenges does the market present?
> What's next?

FACTOR NO. 3: WHICH PARTNERS ARE NEEDED/BENEFICIAL FOR EXPANDING INTO NEW MARKETS?

Getting the right partners on board is beneficial (and sometimes necessary) for succeeding in expansion efforts. Local partners provide valuable insights into the specifics of the market, while global partners provide the capacities and knowledge required to set up an automotive business in a new region.

Choosing suitable local partners

First, local partners are often essential for getting a clear picture of the market. Understanding all necessary legal guidelines, standards, and conventions of a country or region can only be done if the team seeks the support of local specialists who can assist them with the necessary research and paperwork.

Second, local customs and work conditions differ significantly between markets. Wage levels, benefits, unions, or culturally specific needs can all pose different challenges. This can be the case even if the source and target markets are located close to each other. Getting a local partner on board therefore becomes necessary as soon as a larger local workforce or target demographic is part of the market entry strategy.

Teaming up with well-matched global partners

While local partners can help a business to become familiar with region-specific customs and conventions, a global partner like Magna can aid in the entry process itself. From obtaining permits to site selection and ramp-up to complete vehicle development, a partner with international standing and expertise may provide a significant boost in speed and efficiency for the technical side of things.

FACTOR No. 4: WHAT UNIQUE CHALLENGES DOES THE MARKET PRESENT?

The global automotive industry is extremely diverse – every market provides its unique challenges and conditions, which expanding businesses need to get familiar with before they implement their entry plans.

Which local customs and conventions shape the market?

When entering a new market, a business naturally enters a new social world as well. Social standards, family structures, religious or ideological beliefs, and even business culture or working standards may all be very different in a new market. As such, a business may find vastly different standards than what they are used to in terms of what their customers value, what their partners expect, and what their workforce demands from them.

Likewise, the culture of the business itself will also become part of a new market. New employees and partners will need to familiarize themselves with the values of the newly arriving business.

What does the overall legal situation look like?

Each region is also unique due the specifics of its overall legal environment. For example, sustainability standards and guidelines are usually considerably stricter in Europe than in most other regions.
Similarly, some regions may be economically friendlier than others in general. The US, for example, not only has a sizable market, but its membership in numerous free trade zones allows access to vast supplier and vendor network potential extending from the Pacific Ocean to the Mediterranean Sea.

How established is the competition?

Finally, it’s important to consider the existing market competition. However, this goes beyond simply analyzing the market shares of a business. Rather, what should be examined is how strongly those brands are ingrained in the local identity.
Take Germany, for example. The home country to several global automakers has a particularly well-established automotive industry. German vehicle brands make up a sizable portion of the country’s total economy. These brand names not only enjoy an established position, but are also deeply ingrained into the German mindset. Germans are proud of their long-standing automotive history, which makes it very difficult for new players to gain significant traction.
However, things look quite different just across the border. Poland is heavily influenced by its neighboring industries, but it does not have the same kind of ingrained self-perception as a “car making” nation. As such, new car businesses may find it easier to score a larger share of the market there.

WHAT'S NEXT?

To summarize: Before entering a new market, four factors should be taken into account:

1. Why should a specific market be entered?
2. How “thorough” should the market entry be?
3. What local and global partners are needed for market entry?
4. What unique challenges does the market present?

There is, of course, much more to this list than meets the eye. For example, the process of establishing a suitable market entry strategy usually takes anywhere from several months to years before it’s completed. But what’s important to remember is that expanding a business is much more than just opening a new facility in a location some 200 to 10,000 km away.

Once a business enters a new market, it opens itself up to what is essentially a different world. From legal standards to local mannerisms, every new market brings its own set of new challenges and opportunities. Good business leaders realize that expanding does not only mean tapping into a new market. It also means that they will become part of a completely new business and social culture. And likewise, some of their own culture will also be brought into the new market.