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Deleted
on Jul 09, 2018
Global
I want to receive updates regarding this question via email.

Is the market big?

Hi guys, I am a student and just started my prep. 

I know how usually I am supposed to get myself the information about market size and growth rate in a market entry case. But how am I going to determinate if the market is "big enough" or if it's growing "fast"? I have seen a walk trhough video in which the interviewee looks at an exhibit and states: market is quite small. 

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Top answer
Francesco
Coach
on Jul 10, 2018
#1 Coach for Sessions (4.500+) | 1.500+ 5-Star Reviews | Proven Success: ➡ interviewoffers.com | Ex BCG | 10Y+ Coaching

Hi Claudia,

there is one single variable that makes the market big enough or growing fast enough: the goal of the client.

Let’s say for example the goal is to increase revenues by $20M in 2 years, and you are looking to enter a new market. You find that the size of the market is $1B, with no growth for simplicity. Given you would need 2% of the market to reach your goal, from the point of view of the size the market is attractive. However, let’s say that your goal becomes instead reaching $800M in 2 years. The same market is not attractive anymore in terms of size, as you would have to reach 80% market share to meet your goal.

In case a growth rate is present your can follow the exact same approach, calculating the actual dimension of the market by the time you have to reach the goal, and comparing such value with the objective you have to reach.

Hope this helps,

Francesco

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Deleted user
on Jul 28, 2018
sorry I could not access the site! Thank you for your example, is very helpful :)
Sidi
Coach
on Jul 10, 2018
McKinsey Senior EM & BCG Consultant | Interviewer at McK & BCG for 7 years | Coached 400+ candidates secure MBB offers

Hi Claudia,

"big enough" or "fast enough" are attributes that can only be defined against the prevalent objective. The actual question is:

  • "Is the market size or growth rate sufficient to reach the objective?"

This objective can either be defined as a clear target value (e.g., "break even within 3 years", or "reach EUR 100 millions in sales by 2022"), or in terms of exceeding opportunity costs (e.g., "we have expanded our production capacity and will expand to a new market if the expected additional profits there exceed the additional profits we would expect if we just pump additional volumes into our existing market").

So in summary, you always need to start your thinking from the objective, and then assess whether the market preferences will allow you to meet this objective.

Cheers, Sidi

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Deleted user
on Jul 28, 2018
thank you very much! sorry I could not access the site! that is very helpful.
Vlad
Coach
on Jul 10, 2018
McKinsey / Accenture Alum / Got all BIG3 offers / Harvard Business School

Hi,

There are two ways here:

  1. The market is obviously big (Tens of billions USD) or the market is obviously small (<500 Mln USD). However, you should be very careful here since everything is relative and in the case of SMBs (small business) case these numbers are irrelevant
  2. The market is big in comparison to the other markets (e.g. if you have a market entry case and have to choose between several markets)

Best!

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Deleted user
on Jul 28, 2018
sorry I could not access the site! thanks for your answer I understand better now
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Market Entry
Market entry cases are one of the key issues in the consulting industry and present consultants and firms with unique challenges and opportunities. These cases require deep analysis and strategic planning to successfully enter new markets. Variants of Market Entry CasesMarket entry cases in consulting involve analyzing and developing strategies for a company’s entry into a new market. This includes analyzing the market potential, understanding the competitive landscape and assessing the risks and opportunities. The goal is to recommend the best approach for the company to successfully enter and succeed in the new market.Market entry cases have two variants:Market development: This involves introducing an existing product or service into a new market where the company currently does not operate. This strategy focuses on finding new market opportunities, understanding the local market, adapting the product or service to fit the new market, and using effective marketing and distribution methods to succeed in the new market.Diversification: Diversification takes place when a company introduces a completely new product or service into a new market. It is different from market development because it involves offering products/services that may be unrelated to the company’s current products or target markets.Market entry cases are often hidden in other case types, such as growth or profitability cases. For example, if you are confronted with a scenario in your case interview such as, “Our business model is currently stagnating. What should we do?”, it is imperative to consider various strategic options, including market development or diversification, to revitalize the business and drive sustainable growth. Use the Following Six Steps to Approach a Market Entry CaseBy following these six steps, you can systematically approach market entry cases, conduct a deep analysis and develop strategic recommendations tailored to the client’s objectives and the market. These steps serve as a guideline, but always remember to adapt your recommendations specifically to the company’s case and situation.1. Paraphrase and Clarify the Objective of the Case at the Beginning.This first step lays the foundation for the analysis and guarantees that the customer’s expectations are met. In this first stage, it is particularly important that you understand the reasons and background as to why the company wants to enter a new market, whether a market development strategy or a diversification strategy is to be followed and what challenges are involved.So, when the interviewer presents the case to you, make sure you listen carefully and take detailed notes. Start with paraphrasing the problem and clarify all questions with the interviewer to make sure you understand the problem correctly. Take a minute to structure your thoughts and decide what questions to ask based on the structure. Frameworks such as Porter's Five Forces can help you structure thoughts and systematically identify key information. But always make sure to adapt standard frameworks to the individual circumstances of the case.2. Understand the Client's Company.Gain a deep understanding of the client’s business, including its core competencies, products or services, market position and competitive advantages. Understand why the client wants to enter the new market and identify the key issue. Knowing this information will be important in giving a final recommendation.Important information to determine if the company is ready to enter the target market are:What are current revenue streams?What are the client's key strengths, weaknesses, opportunities and threats? (SWOT-Analysis)What is the product mix? How many and what types of product lines, brands, variations of products does the company have? What is the lifecycle of each product? Also, how closely related are the current products?Who are current customers, and how are they segmented?What are the current distribution channels?What is the client's current financial situation?3. Understand the Market of Interest.Understand the market the client wants to enter and evaluate its attractiveness. Using a structured approach, you can gain a deep understanding of the market, identify opportunities and risks, and develop strategic recommendations tailored to your client's needs. To analyze the new market, the following steps may be a useful guideline:Estimate the Market Size: If available, start by estimating the market size if that information is available. If not, be prepared to calculate the market size yourself in such cases.Evaluate the Growth Rate: What is the growth rate of the market? Is it expanding rapidly, stable or shrinking?Determine the Lifecycle Stage: At what stage of the lifecycle is the market? Emerging, Mature, Declining?Identify Customer Segments: Who are the customers in this market? What are their specific needs and preferences?Understand the Competitive Environment: Who are the key players in the market? What makes them stand out? What are their differentiating factors? Porter’s Five Forces can help you to analyze the competitive environment and the attractiveness of a market in a case study.Analyze Industry Trends and KeyTechnologies: What are current trends in the industry and the market? For example, are there movements towards digital solutions or sustainability? Is there any significant technology driving this market? How quickly is it changing?4. Evaluate the Financial Aspects of a Potential Market Entry.In this fourth step, analyze and evaluate the financial impact of entering the target market. By structuring the analysis into costs, revenue potentials, and rate of return, you can provide a comprehensive and organized approach to assessing market entry strategies. 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There are generally three ways to enter a market:Starting from Scratch: Independently establishing a business in the new market.Through a Joint Venture: Partnering with a local company to enter the new market together.Through Mergers and Acquisitions (M&A): Taking over an existing company or business in the target market.By considering these following factors and matching them to the company’s specific goals and circumstances, a well-grounded market entry strategy can be developed for successful entry into a new market:Competitive Advantage: Can you apply the same business strategy as in your current market, or do you need to adapt the product, marketing, or even sales channels to reach customers?Timing: Can you use a first-mover advantage, or would you rather let the competitors try their luck first?Speed of Entry: Define whether you want to test a single store or region, or cover the entire market at once.Entry Mode: How much commitment do you want to make? 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