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Market Entry Order

Anonymous A asked on Jun 14, 2019

I was wondering if it's usually better to start a Market Entry Decision with an analysis of the current company in order to understand the capabilities and then deep dive into the market or if it's better to try to figure out the attractiveness of the industry, then look at threats and, finally analyze if the company has what it takes to mantain a competitive andvantage to remain a leader in the industry or to capture value from it and defend from possible competitive responses or future entrances

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Ian
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replied on Jun 14, 2019
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Hi,

The first step is to make sure you're clear on why the company is looking to enter the market. Is it for topline growth, bottom-line growth, diversification, to gain economies of scale, to gain market share, build new skills/competencies, pre-emptively strike a foreign competitor, ahieve a long-term vision (applies well to an NGO) etc.?

Once you have this, you can get a feel for which of your 3-4 classic market entry buckets (company, market, competitor) you want to tackle first.

For example, if it's topline growth, the market size probably matters most. If it's economies of scale or building skills/competencies it's company first. If it's strike a foregin competitor or even bottom-line growth (for a comparison) it's competition first. I think you get the gist :)

Sidi
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replied on Jun 14, 2019
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Neither of the two! A case approach should always be a LOGIC, not a set of areas to scrutinize. So you have to start with setting up the criterion which needs to be fulfilled to answer the core question with "yes"! All the areas that you want to scrutinize (be it market, company, customer segments etc etc.) are just a consequence of that logic and are influencing different parts of your driver tree.

Please have a look at my previous anwers to similar questions - I have disaggregated the whole essence of setting up a structure in great detail.

Cheers, Sidi

Vlad replied on Jun 14, 2019
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Hi,

Always start with clarifying an objective:

  1. What are we going to achieve on the market and what is the timeline?
  2. What are our business model and revenue streams now in the current market
  3. Are we going to enter organically or non-organically?

Then I would use the following structure:

Market

  • Size
  • Growth rates
  • Profitability
  • Segments and growth rates
  • Distribution channels
  • Barriers (regulation)

Competition

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

Company (If the case says you have the company that operates in a different / adjacent market)

  • Your current capabilities (e.g. suppliers, assets, IP, etc)
  • Brand
  • Previous experience in entering the markets

Entry strategy

  • The need for investments
  • Time to enter
  • Branding (Do we keep an existing brand / do sub-brand if it is the new segment or create a new brand?)
  • The existence of acquisition / licensing / JV targets if relevant
  • Risks

Good luck!

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