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Market entry case structure

Anonymous A asked on Aug 09, 2018 - 2 answers

Hi guys,

I'm currently practicing the market entry cases and found my structures for all the cases with this type are pretty much the same. Below is the general structure I'll use for all the maret entry cases:

1. Market attractiveness

- market sizing (top down approach)

- market trend (I don't find this very useful since in most market entry cases the market is growing)

- profitability

- client's market share

- revenue stream (price * units per category)

- cost (fixed, variable, initial investment)

2. competition

- local competitors' market share

- competitive response

3. local customers' preference/ culture (for entering a new geographic area)

4. risks / entry barriers ( I found it's difficult to list this as an independant bullet point, because most risks are discussed during the qualititive analysis)

Below are the two cases I did today and I used exactly the same framework for the cases:


1. Your client is a real estate developer, ????????? Luxury Properties, and is currently assessing a new
project idea in Costa Rica. Costa Rica has a beautiful coastline which has historically been difficult
to access. The nearest airport was over six hours away. As of last year, a new airport was
constructed only a half hour away. There has been an investment boom in the region due to the
increasing number of tourists (popular with Americans and Asians). The Mandarin Oriental and The
Four Seasons, two prominent luxury hotel chains, were the first to enter this market with a 250-room
hotel each. Should your client invest in the tourism opportunity created by the new airport? Would
you recommend that s/he enter the market?

2. Dean of Kellogg School of Management want to start a satellite campus in India. Whether to enter?

(edited)

2 answers

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Sidi
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replied on Aug 09, 2018
McKinsey Engagement Manager & BCG Consultant | Interviewer at McK & BCG for 7 years | Coached 100+ candidates secure MBB offers
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Hi Anonymous,

frankly speaking, what you outlined above is NOT a case structure! It does NOT show in any way how you are thinking about the problem and how you are going to answer the question! What you have outlined is simply a structured list of buckets that you want to look into, in the vague hope of finding interesting evidence for the attractiveness of the focal market. This reveals a purely explorative mindset, which is the OPPOSITE of rigorous and hypothesis-driven thinking! Moreover, the four areas you want to explore seem arbitrary - you do not provide any logic why and how exactly looking into these areas will lead to the answer to the case question! So the most important and fundamental element of solving a case is completely missing: making explicit the CRITERION to answer the case question, and outlining the rigorous LOGIC TREE to disaggregate each element of this criterion (or criteria) into its underlying drivers. ONLY THEN the discussion of the four areas above (and you have probably omitted several important areas due to the lack of underlying logic) will make any sense (since now you can attach your elements to sub branches of the logic tree!).

Cheers, Sidi

P.S.: I know that such random list of topic areas is what has been brought forward by Victor Cheng et al. more than 10 years ago. But, with all due respect, this is teaching a fundamentally flwaed way to think about business problems (irrespective of whether we talk about market entry or any other strategic issue). The most important element, the INHERENT LOGIC of your approach towards answering the clients' question, is completely disregarded in such simplistic frameworks. So my advice to any candidate is: learn how to think through a business issue based on first principles! NEVER use a "framework" to structure a case.

Vlad replied on Aug 09, 2018
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Hi,

The exact structure will depend on the particular details of the case and the industry. But here is some inspiration for structuring a market entry problem:

Market

  • Size
  • Growth rates
  • Profitability
  • Segments
  • Distribution channels
  • Bereers (mainly regulation)

Competition

  • Market shares of competitors and their segments (see the next point)
  • Concentration / fragmentation (Fragmented market with lots of small players is less mature and easier to enter fom a scratch. Concentrated market is hard to enter but has potential acquisition targets)
  • Unit econmics of the players (Margins, relative cost position)
  • Key capabilities of the players (e.g. suppliers, assets, IP, etc)
  • Previos / projected entrants

Company

  • Unit economics (Margins, costs) in current or target markets
  • Brand
  • Product mix
  • Key capabilities

Opportunities to enter - a bucket sumarizing:

  • Time to enter
  • Branding (Do we keep an existing brand / do sub brand if it is the new segment or create a new brand?)
  • Existance of acquisition / liscencing / JV targets if relevant
  • Cost and benefits

Good luck!

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