Market entry and Growth case studies

growth strategy MBB New Market Entry
New answer on May 26, 2020
3 Answers
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Anonymous A asked on May 26, 2020

I have been preparing for a few upcoming interviews, and have faced the following two recurring questions frequently during my case prep process. Usually, there is further information which helps me substantiate my choice, but a lot of times the questions below are posed as it is (was asked to me by an MBB interviewer) and I feel like I could have answered it better:

1. If it is a growth case and I am to choose between 2 regions for expansion, one that has a small footprint for the client but high expected market growth rate, and one that has a large existing footprint but low expected growth rate, which is a better market to focus on? (if the answer is 'it depends', what factors does it depend on? Let's take the example of a prototype industry like Healthcare)

2. In a market entry case, if I have to choose between 2 countries to expand into, one of which has a concentrated market with two market leaders and the other which has a fragmented market with multiple smaller companies, which country should I choose? (Again, if the answer is 'it depends', what factors does it depend on? Taking the example of the Healthcare industry for ease of comparison)

Thanks for your help!

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Sidi
Expert
updated an answer on May 26, 2020
McKinsey Senior EM & BCG Consultant | Interviewer at McK & BCG for 7 years | Coached 300+ candidates secure MBB offers

Hi!

There is actually a very clear answer to your questions. The base principle that you have to understand is that all decisions depend on the underlying objective. When you stay conscious of this, the argument becomes more or less obvious.

1. Your objective is growth! So Option 1 clearly dominates Option 2, since it gives you much more growth potential (at least if the “expected market growth” is higher in absolute terms!). Please look at the graph – it should be self-explanatory.matrix market entry and market growth

2. It essentially depends on where you will be better able to reach a strong market position. Usually, it is easier to grab a sizable chunk of the market demand if there are less competitors, and it is harder if the competitive intensity is very high and there are many granular players. The one thing you have to check though is whether there is an Oligopoly structure which has erected market entry barriers (e.g., created lock-in effects for the customers). In this case it might become very hard to break this Oligopoly. So in Summary – if there are fewer competitors and there are no fundamental entry barriers, then this is a much better scenario then a granular market with dozens of competitors.

Cheers, Sidi

(edited)

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Anonymous B on May 29, 2020
Why should you be able to get more market share if there are few strong competitors? That doesn't make much sense to me
Sidi on May 29, 2020
Because it is much easier to get, say, 5% market share if you only have 2 or 3 players in the market, as opposed to a situation with dozens of competitors, where 5% market share would be equivalent to becoming a leading player immediately (usually not very realistic)
Ian
Expert
Content Creator
replied on May 26, 2020
BCG | 100% personal interview success rate (8/8) and 95% candidate success rate | Personalized interview prep

1. The answer to this question is huge (i.e. in which market will our product be better suited, where will our costs be lower, how are customer preferences changing, where is competition less stiff, where can we actually ge tpast government legislation, where do we already have experience, where is more similar to where we currently operate, where is there more environmental of social risk, etc. etc.)

The short answer is: which market will give us more money. I.e. multiply the current size, times the growth rate, times whatever % of that amount we'll get, calculate the net present value minus the cost to go into the market, and voila.

2. In which one can you win? Where is your competition weak? I.e. are there two market leaders because they're dominant? Or are there two market leaders because there are strong barriers to entry, which, once broken down, leaves these companies resting on their laurels and ripe for disruption?

Alternatively, is the market fragmented because there's fierce competition which means price wars and low margins, or is there an opportunity to bring economies of scale, consolidate, and become the big fish?

I highly recommend you get a case coach...these answers need to be discussed in great detail and have a much deeper understanding than a simple "a if this, b if that" response!

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Clara
Expert
Content Creator
replied on May 26, 2020
McKinsey | Awarded professor at Master in Management @ IE | MBA at MIT |+180 students coached | Integrated FIT Guide aut

Hello!

Can you post the case and you initial assessment?

If not, the answers won´t be helpful -will be a sum of "depends".

Cheers,

Clara

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Sidi gave the best answer

Sidi

McKinsey Senior EM & BCG Consultant | Interviewer at McK & BCG for 7 years | Coached 300+ candidates secure MBB offers
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