Market entry: the date is set by rent, and that is why it fails
Target lost $5.4 billion in Canada opening on a rent-driven schedule with an untested supply chain. IKEA left Japan after twelve years. Thirty-nine entries on record, and the one thing the reversals have in common.
Entry is the decision most often undone
Of the 24 decision types in the record, Market-Entry Gambit has one of the lowest persistence rates: 62% of the 39 settled entries were never reversed, which means close to four in ten were walked back, exited, or materially rebuilt. Seven were reversed outright and eight held only in part.
That is worth sitting with, because entry is also the decision most often presented internally as low risk. The capital is staged, the market is large, the plan can be adjusted. The record says otherwise: once you are in, the adjusting is expensive and the exiting is public.
The reversals were scheduled by the wrong thing
Target opened 124 Canadian stores from March 2013. The record states the choice plainly: open on the rent-driven schedule despite an untested SAP supply chain, rather than delay until the system worked. The stated reason was to stop paying rent on empty acquired leases, so that opening would at least buy revenue against that rent. Less than two years later Target Canada was in creditor protection with approximately $5.4 billion of expected pre-tax losses on discontinued operations.
The date was set by the lease, not by the supply chain. The lease was the thing costing money; the supply chain was the thing that had to work.
IKEA entered Japan in 1974 with the standard unadapted product, because IKEA standardizes by default and adapts only when a market refuses to buy the standard. Japan refused. IKEA withdrew in 1986 after twelve years, and re-entered later with a curated adapted range. L'Oreal entered India in 1992 at the mass-market end to compete on price against Hindustan Unilever, and did not turn a profit there until 2004, after thirteen years of losses and a pivot upmarket.
What the entries that stuck did differently
The 24 entries that were never reversed do not share a market, a sector or a decade. They share a sequence: the thing that had to work was proven before the thing that costs money started running.
That sounds obvious written down. It is not what happens in a room where a lease is already signed, a competitor is already moving, or a board has already been told a date. Every reversal in this record had a good reason for the date it chose. The reasons were about the company's own clock, and the market was on a different one.
How to run this decision
Drawn from what separated the records that stuck from the ones that were undone. A step nobody in the record can be seen taking is not here.
- 01
Name the single thing that has to work, before the plan
Supply chain, licensing, a local partner, a product change, a payments rail. One sentence. If the list has five items, you do not yet know what the entry depends on, and the date you pick will be arbitrary.
- 02
Set the opening date from that thing, and from nothing else
Not from the lease, the fiscal year, the competitor's launch, or what the board was told last quarter. Target's date came from rent. The supply chain was not ready, and the stores could not be stocked.
- 03
Decide in advance what you will adapt and what you will not
IKEA's default is to standardize and adapt only when a market refuses the standard. That is a legitimate policy and it cost twelve years in Japan, because nobody had agreed in advance what a refusal would look like or how long they would wait to see one. Write down which two or three elements are negotiable before you arrive.
- 04
Pick the end of the market you can defend, not the end that is largest
L'Oreal went to the mass end of India against an entrenched local titan and lost thirteen years to it. The largest segment is usually the one the incumbent is strongest in and most willing to defend on price.
- 05
Stage the capital against the proof, not against the calendar
Tie each tranche to a specific result rather than a quarter. The staging most companies do is time-based, which means it releases money whether or not anything was learned.
- 06
Write the exit condition down on the way in
The number, the date, and who reads it. Exits in this record happen late and in public. They happen late because no one agreed beforehand what failure would look like, so every quarter is arguable.
What it looks like when this is going wrong
- The opening date was fixed before the operating dependency was tested.Target Canada, 2013.
- The date is justified by a cost you are already paying rather than by readiness.Target Canada, 2013.
- The product is going in unchanged because changing it is against policy.IKEA Japan, 1974.
- The plan is to win the biggest segment on price against the local leader.L'Oreal India, 1992.
- Nobody can state the condition under which you would leave.The seven reversed entries on record.