Common Market Entry Mistakes to Avoid in the Philippines

Market entry is a costly endeavor. There’s no denying that a lot of capital and manpower are required to successfully establish a foreign company overseas. In the Philippines, this doesn’t always work out. Hanjin Heavy Industries and Construction Philippines (HHIC-Phil) is one of the biggest cautionary tales. 

Established by a South Korean parent company in 2006, the major shipbuilding and construction subsidiary declared bankruptcy in 2019. On its last legs, HHIC-Phil failed to pay back over $1.3 billion in loans, including $400 million owed to Philippine banks and $900 million to South Korean lenders. This led to massive layoffs, shrinking the workforce from 33,000 to 300 people, before finally ceasing operations and beginning restructuring.

This financial catastrophe caused the Philippine government to lose upwards of $85 million in tax breaks and subsidies given to HHIC-Phil, highlighting the risks associated with large-scale foreign investments.

But why did it fail so profoundly? In this article, we’ll cover the main bases of common market entry mistakes so you don’t make the same slip-up when your company enters the Philippines.

What are the Common Market Entry Mistakes in the Philippines?

  1. Insufficient market strategy and research

Mistake: You need to know what kind of market you’re going into before spending money on anything else. Too often, overconfident companies jump in with little to no research, burning their budget on an inefficient marketing strategy, and getting surprised by their unreachable target market.

Solution: Let market research be your first investment and don’t leave out its results from your decision-making process. The things you should keep an eye on are identifying a target market, analyzing competitor strategies, and assessing the overall market landscape.

  1. Working with the wrong local partner

Mistake: Local partners are a great way to ensure a smooth and successful market entry. But what if you’re connected with a misleading partner? Doing so can make things worse, leading to mismanagement, brand damage, or even legal disputes.

Solution: It doesn’t hurt to be too careful. Do extensive vetting. And then once it’s done, try again. Evaluate potential partners based on track record, financial outlook, industry reputation, and alignment with your business goals. Be careful not to have a language barrier in your business activities.

  1. Setting pricing based on global standards

Mistake: The average purchasing power of Filipinos is different from whichever country your company comes from. Failing to understand that and adjust accordingly will alienate consumers, leading to losses.

Solution: Conduct market research to understand what your target segment can afford and what they’re willing to pay. Look at how local competitors price their goods. Consider tiered pricing or localized product variations.

  1. Failing to localize

Mistake: The Philippines has a rich culture, with its own subtleties and quirks. With a population of 115 million in over 7,000 islands, buying habits can vary wildly between urban areas like Manila and Cebu. Underestimating regional market diversity will inevitably cause clashes like incompatible pricing or inefficient distribution.

Solution: To connect with local Filipinos, you have to make them stop seeing your company as a “foreign” brand. The first step to winning them over is by respecting their local values and culture. You can do this by incorporating Filipino traditions and holidays in your marketing campaign. Working with the right local partner can go a long way toward solving this issue. Another way that works wonders is tailoring your marketing and distribution strategy to fit with the specific region you’re targeting.

  1. Bureaucratic negligence

Mistake: Even though the Philippine government has increased the ease of doing business in the country, regulatory requirements are still compulsory. Failing to clear them in time may lead to legal issues down the line.

Solution: Work with a trusted legal advisor or business consultant who can help you navigate business registration, taxes, employment laws, and permits.

How Double M makes sure you can enter the Philippine market flawlessly

Learning from HHIC-Phil, if you want to start a business in the Philippines, you shouldn’t leap before you look. Consider a slow but steady scalability to match your business ambition with commercial ability. A trusted expert could be just what you need, someone able to give you a knowledgeable second opinion.Even though it’s tempting, adopting a one-size-fits-all approach isn’t enough when expanding your business to the Philippines. If you want to avoid failure, you should be willing to adapt your company to the local environment. Double M can help you achieve just that. With our B2B matchmaking service, we’ll connect you with legitimate local partners and avoid legal disputes. With our market research service, we’ll help you develop appropriate pricing strategies along with competitor benchmarking and consumer behavior analysis. Whatever your market entry needs, Double M has the service. Contact us now and make your company establishment dream a reality.