Strategic market entry by applying the path dependency approach

Abstract: Entering a new market is one of the most important strategic decisions a company makes, and being an external player can make it possible to reveal opportunities not apparent to the industry players. The key is to not take industry structures for granted, but to think outside the box when formulating the entering strategy. This study rests on the assumption that there are factors in industries that are more path dependent than others, hence they are rigid and difficult to change. These factors could eventually prevent the industry from evolving even though new technology and processes are available. By first identifying factors strongly governed by path dependency and then delving deeper to understand the reason why they have not changed, this study argue that new business opportunities can evolve. The approach developed in this paper is particularly beneficial when the product or service is not yet developed and the company has many different resources, enabling a more diversified product portfolio, in which opportunities can be prioritized against the company resources. This enables matching a product or service to the industry rather than pushing it out on the market. In this report the path dependency approach is applied on the banana market, which has features governed by path dependency, and the entering company is a subsidiary to an established company and thereby has multiple resources as well as products and services. Since the subsidiary chose to proceed with the strategy formulated by using the path dependency approach the findings from the case study show that the approach can be useful when entering a new market. The report concludes that the concept of path dependency is ambiguous and subjective but could be useful when formulating an entry strategy into a new market. However, further research is needed to evaluate the application of the approach and the path dependency approach should primarily be seen as a complement to existing market entry strategies.