Market Entry Case: why is consumption per capita more important than total consumption in the country?

Question

Hi Everyone,

As I was looking at the suggested approach to tackle a market entry case, I've come across this statement: "a country where a consumer eats 10kg/ year of X is more valuable than a country where he eats 5kg/ year despite having a very large market value as a nation". My question is: doesn't it depend on the total kg consumption/ year? For example:

Country A consumes 600 million kg/ year with a per capita consumption of 5kg/year
Country B consumes 76 million kg/year with a per capita consumption of 9 kg/ year

Other factors staying the same, why is it more valuable to enter country B than country A? (this was the main claim in the suggested solution). Isn't it enough to look at kg / year at aggregate (country) level? In this case it would be better to target country A.

Thank you!

Answer 1

Hi!

You are very right to doubt this statement. In fact, the provided information is NOT justifying the statement! "More valuable" has to be defined - otherwise it is impossible to come to a verdict. If "valuable" is defined in terms of profits that a market entrant can expect, then the per capita consumption is just one of multiple driving factors. Others include competing suppliers of the same good, price level, country-specific cost positions, etc.

So either you have just provided a small snippet of the relevant information, or the solution of this case is (as it happens very oftne in case books) flawed and derived from weak thinking. I would almost bet that the latter is the case - this is why I always warn my mentees to not waste their time with the solutions provided in case books. They are almost never good, let alone great. Thinking rigorously will allow to spot such flaws more or less instantly.

Bust of success with the further preparation.

Cheers, Sidi

Answer 2

Hi Julia,

I agree with your comment and with Sidi, it is not possible to define that the 10kg/year country is necessarily more valuable with the information provided.

You would need at least the following:

A clear definition of what “valuable” means and
Information to calculate the exact goal based on the valuable definition. For example, possible elements needed may be:
- Total consumption in that market
- Average price of the product in that market

Best,

Francesco

Answer 3

Hi Julia,

I agree with the other coaches!

Can you tell us where you obtained this case?

My only thought is that this may be in the perspective of margin or acquisition cost (i.e. if it's too epensive to acquie a customer that only eats 5kg a year).

Answer 4

Smaller targeted customer, less marketing budget

Answer 5

Hello!

Unfortunatelly, info is not complet to be able to give you the right answer.

Agree with you on the fact that you need to calculate the TOTAL QUANTITY, as quantity/capita multiplied per the population. However, since we don´t have the data on that, I cannot assess.

Hope it helps!

Cheers,

Clara