Hypothesis For an Expansion Case

Case consulting MBB
New answer on May 01, 2020
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Kass
Skilled
asked on Apr 19, 2020
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I have come across a case where the client would like to expand into the European market and the case asks to elaborate a market entry strategy. So logically, I split the case into 2 sub-problems:

1- Identify a potential market in Europe

2- Market Entry Strategy

Given the fact that I am not diagnosing a problem in the company to base the strategy on (like decrease in revenues is due to a decrease in the # of customersb etc ... so we would come up with a strategy accordingly) so it is harder to come up with a hyposthesis.

Can I say for example: I am going to hypothesize that there is an attractive market in Europe for Company X to enter.

and then moving to the market strategy: we have two options M&A or enter solo so I am going to hypothesize that company X can enter the market Solo and to prove that bla bla bla.

suggestions on how to come with a hypothesis for expansion / market entry type of cases?

Clairifcation after some of the good comments below: I am not saying I would "assume" an attractive market and move to the market entry strategy. I am "hypothesizing" (to be proven) an attractive market to prove it or nullify it by analyzing the first sub-problem as mentioned above that I have in my structure to investigate a potential european market. My question is for that sub-problem what would be a possible hypothesis.

Thanks for all the helpful the comments !

(edited)

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Vlad
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replied on Apr 20, 2020
McKinsey / Accenture Alum / Got all BIG3 offers / Harvard Business School

Hi,

First of all - it's not mandatorily required. I would say - use the hypothesis if you are really good at solving the cases. If not - use the basic approach

There are two ways to use the hypothesis:

First - presenting a structure using the hypothesis. For example, if you are having a PE (private equity) case, you should do the following:

1) Make classic structure (market, company, competitors, feasibility of exit)

2) Make subpoints (e.g. in market: size, growth rates, profitability, segmentation, etc)

3) Present your 1st level Hypothesis:

  • - "In order to understand whether we should invest in Company A, I would like to check that the Market is Attractive, the Company is Attractive, the competition is favorable and we have good opportunities for of exit"

4) Present the main 2nd level Hypothesis:

  • "In the market, I would like to make sure that the market is big enough and growing;
  • In the company I would like to find additional opportunities for growth;
  • In competition I would like to check that the market is fragmented enough;
  • Finally, I would like to check if we have potential buyers and can achieve desired exit multiples"

Another way to use hypothesis is using the hypothesis to prioritize your analysis:

1) Make a structure: "Problem in sales may be related to Sales Motivation, Sales Strategy, Sales Coverage, and Sales Process:

2) Prioritize a part of the structure based on your knowledge / common sense / available data: "Taking into account that motivation is the core problem of the sales organization, I would like to prioritize this part of the analysis"

Good luck!

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Anonymous replied on Apr 20, 2020

Hi Kay,

Agree with Raphael that you cannot just assume the market entry makes sense and jump into the "how to entry" (M&A vs solo). You'd be missing half of the question this way. You need to first justify that the market entry is a good idea to pursue.

In real project, it also happens that the client might ask consultants to solve problem A, but actually problem A is not the right problem to solve in order to achieve their objective, and consulting team actually discovers that problem B is the real issue to be addressed and need to convince client to do so. Had the team just jump straight away into the how of problem A, they would be pursuing a wrong path.

Best,

Emily

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Anonymous replied on Apr 19, 2020

Hello Kay,

Before defining how to enter this new market, you need to determine whether or not it is attractive. You don't have to make any assumption, you need to understand better market dynamics in terms of (non-exhaustive):

i) size and growth

ii) segmentation and product differentiation

iii) margin

iv) competition and HHI (a measureof market concentration)

iv) current capabililities

Ideally, an attractive new market has big revenues, is growing consistently, has high margins (and high here is relative), is not concentrated and your company has all the capabilities to fulfill customer needs.

Only after that you can define the best market entry strategy.

Cheers,

Raphael

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Clara
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updated an answer on Apr 20, 2020
McKinsey | Awarded professor at Master in Management @ IE | MBA at MIT |+180 students coached | Integrated FIT Guide aut

(edited)

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Antonello
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replied on May 01, 2020
McKinsey | MBA professor for consulting interviews

Hi, I think your overall approach is good. The first thing to do in quantitative case problems is always clarifying the goal: how much revenue increase are they looking for? Then I agree to split the resolution into 2 parts: before it is important to identify the correct market considering your goals, your products, the synergies, the competitive landscapes, the size of the market etc. Once you have identified the best market to enter think about the entry strategy, discussing pros and cons of the 3 main scenarios (M&A, JV, from scratch)

Best

Antonello

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Francesco
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replied on May 01, 2020
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Hi Kay,

you may state several hypothesis for a case like the one you mentioned, for example:

  • The fact the market is attractive
  • The fact that a possible ways to enter (such as M&A) is feasible
  • The fact that the client can achieve its target goal in that market

Hope this helps,
Francesco

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Vlad gave the best answer

Vlad

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