Hi Alexandra,
this is how I would recommend structuring a market entry analysis:
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 macro variables here.
- Barriers to entry. This includes regulation or technology requirements.
- Key industry players. This includes:
- Customers segments
- Competitors concentration
- Occasionally for some cases: suppliers (if they have market power) and substitutes (if competitors are weak)
- Key industry numbers. This includes for the relevant customer segments the analysis for the following elements:
- Growth of the market/segment
- Size of the market/segment
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 explaining 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”, 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.”
3) BEST WAY 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 the industry is attractive and you have ways to enter, you can move to check the fit between the client and the selected industry.
- Are there positive or negative synergies the client can develop in that 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, opportunity cost of not entering in other markets, potential wrong pricing in the new market, etc)?
Hope this helps,
Francesco
Hi Alexandra,
this is how I would recommend structuring a market entry analysis:
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 macro variables here.
- Barriers to entry. This includes regulation or technology requirements.
- Key industry players. This includes:
- Customers segments
- Competitors concentration
- Occasionally for some cases: suppliers (if they have market power) and substitutes (if competitors are weak)
- Key industry numbers. This includes for the relevant customer segments the analysis for the following elements:
- Growth of the market/segment
- Size of the market/segment
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 explaining 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”, 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.”
3) BEST WAY 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 the industry is attractive and you have ways to enter, you can move to check the fit between the client and the selected industry.
- Are there positive or negative synergies the client can develop in that 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, opportunity cost of not entering in other markets, potential wrong pricing in the new market, etc)?
Hope this helps,
Francesco