Hi Anonymous,
I agree with Vlad, a structure will always be incomplete and not fitting the case until you have clarified the goal of the client. In order to have a structure fitting the case, you should then present connecting each point of the structure with the goal, explaining the rational why you are looking at that point.
In terms of the structure per se for market entry, I would recommend to proceed as follows:
1) GOAL CLARIFICATION. It is always good to start with the end in mind – thus what is the specific reason why you want to enter the market? Is it revenues, profits, specific synergies or something else?
2) INDUSTRY. There are three key macro variables here.
- Barriers to entry. This includes regulation or technology requirements.
- Key industry numbers. This includes, for the market and potential subsegments, the analysis for the following elements:
- Growth of the market/segment
- Size of the market/segment
- Key industry players. This includes:
- Type of customers
- Competitors concentration
- Occasionally for some cases: suppliers (if they have market power) and substitutes (if competitors are weak)
As mentioned, you should present this area connecting with the goal, and not purely listing the elements to analyze as if it was a laundry list. The best way to do so is to explain how a certain variable will help you to achieve your goal. Eg, if your goal is to increase revenues, don’t simply say “I want to look at growth, size and barriers”, rather “I want to look at growth and size – this will tell me if the market has the potential to provide enough revenues for our client. I would also like to check barriers to entry, to understand which are the obstacles in entering such a market and thus increase revenues”. If there is no rational to look for a point, you should not consider it.
3) POSSIBLE WAYS TO ENTER. Once you know the industry is attractive, you should consider the entry options.
- Which are the possible ways to enter the market? Usually, you should consider (i) starting from scratch; (ii) M&A; (iii) Joint Venture or licensing
- Which option meets better our capabilities to enter the market? Each specific way to enter will require some different capabilities. If you start from scratch you may need skilled people in all the phases of the value chain; if you buy another company you may need fewer people, but more upfront capital, etc.
4) COMPANY - TARGET OBJECTIVE FEASIBILITY. Once you verified you can enter the industry, you can move to check the fit between the client and the selected industry for a specific way of entry.
- Are there positive or negative synergies in such industry?
- Can our specific client reach its objective in the selected market (eg profits, revenues, market share, etc)?
In the second point, you will probably have to go through a profitability/revenue/cost framework, to calculate the effective result.
5) RISKS AND NEXT STEPS. What are the major elements that we should further analyze based on the previous points (eg regulator decision, potential wrong pricing in the new market, etc)?
Hope this helps,
Francesco