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:
- Easy to enter (presumably)
- No one player can dominate you or force you out (Amazon/Facebook/Amazon for example)
- No one player has unfair advantage in the form of buyer/supplier power
- You can product differentiate to win
- You can possibly merge/acquire/grow to gain market share and eventually dominate
Cons:
- Likely highly competitive
- New (and possibly better) entrants may come in all the time
- Margins will likely be tight
- Price competition likely
- You are not a market maker (i.e. you are bound by the laws of supply meeting demand)
Concentrated Market
Pros:
- Once you're in, risk of new entrants/competition is low (high barriers to entry)
- Once you win, you have monopoly power (high margins, market control, etc.)
- The existing player(s) is/are likely very weak (high marginal cost structure, inefficiencies, slow to move)
Cons:
- Will be extremely hard to enter
- Will be extremely costly to enter
- Once you're in, you will likely get bullied by the existing power
- The existing power will have more buyer/seller power and a natural advantage over you
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?
- Company - Who am I
- Customer - Do I offer something people want
- Competition - Can I do this better than everyone else?
So, to decide this, you need to solve a whole case ;)
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:
- Easy to enter (presumably)
- No one player can dominate you or force you out (Amazon/Facebook/Amazon for example)
- No one player has unfair advantage in the form of buyer/supplier power
- You can product differentiate to win
- You can possibly merge/acquire/grow to gain market share and eventually dominate
Cons:
- Likely highly competitive
- New (and possibly better) entrants may come in all the time
- Margins will likely be tight
- Price competition likely
- You are not a market maker (i.e. you are bound by the laws of supply meeting demand)
Concentrated Market
Pros:
- Once you're in, risk of new entrants/competition is low (high barriers to entry)
- Once you win, you have monopoly power (high margins, market control, etc.)
- The existing player(s) is/are likely very weak (high marginal cost structure, inefficiencies, slow to move)
Cons:
- Will be extremely hard to enter
- Will be extremely costly to enter
- Once you're in, you will likely get bullied by the existing power
- The existing power will have more buyer/seller power and a natural advantage over you
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?
- Company - Who am I
- Customer - Do I offer something people want
- Competition - Can I do this better than everyone else?
So, to decide this, you need to solve a whole case ;)