Just based on the market information (market size and competitor shares), how can I decide which market is better for entry - the fragmented one or the concentrated one (monopoly/ monolpolistic)? If you think we need to have more information to decide that, what would those factors be?
Hi there,
It's a great question and something that too many candidates mix up!
Neither a fragmented nor a concentrated market is necessarily good nor bad to enter.
Fragmented
Pros:
Cons:
Concentrated Market
Pros:
Cons:
What information do I need to decide whether to enter? Well, not to be cheap/use a generic framework, but I need to know the three Cs (Company, Customer, Competition).
Fundamentally, if I enter, will I win?
So, to decide this, you need to solve a whole case ;)
Hi there,
Which market is better depends on the objective.
A fragmented market offers the following plus:
On the other hand, it could have the following minus:
To sum up, you should assess which market helps to meet better your goal and choose accordingly.
Best,
Francesco
Hi,
It highly depends on the constraints that your client has and goals.
Competitive market with numerous players would usually signal that the entry barriers are not high but it will be more difficult to reach a high market share.
Concentrated market would usually signal that there are high entry barriers but once you manage to overcome it you can get a higher share.
Conclusion: without understanding particular client situation any piece of advice is useless.
Best,
Anton
Hi
The answer depends on the objective
- If you are looking for a market with high margins and high barriers to entry then one with few players and high costs for entry is a better option. Of course given these characteristics it is not easy to enter the market so you typically have to buy your way in through an expensive M&A deal or spend a lot of money on investments. An example of this is something like autonomous vehicles or even electric cars
- If what you want is a market where the costs of entry are lower (but so are the margins and profits to be made) then higher competition is a good sign. It indicates that the market is open to new entrants and that entering it requires limited investment. It also indicates that your profits are largely limited to how well you can market and brand your product as there is limited meaningful innovation - most of the innovation can be easily copied. An example of this is the beauty/skincare market which has exploded of late with many players
Best,
Udayan
Hi Anonymous,
Ian gave an excellent answer on that content-side of the question.
I'll approach it from a different angle and say that's the idea of an interactive case interviewe with your interviewer. Based on the information given it's impossible to decide to go for the fragmented or concentrated one since neither the one nor the other is universally better - the idea is to find that out in a structured discussion with your interviewer, specifically for that situation of your client!
Hope that helps - if so, please be so kind to give it a thumbs-up with the green upvote button below!
Robert
Hello!
On add on top of what has been said already: DEPENDS. On the following:
Hope it helps!
Best,
Clara
Dear A,
Fragmented competitive landscape is preferred over a concentrated, because there are more smaller players, the competition is mre fare and you could easily increase marketure in this segment compare to the concentrated one, where companies are in a sort of oligopoly. Therefore it's better to have fragmented competitive landscape.
Best,
André
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