Market Entry/Product Launch Case Structure

Case structure and frameworks market entry profitability
New answer on Sep 28, 2022
5 Answers
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Anonymous A asked on Sep 19, 2022

Hi All,

Recently did a case from the Kellogg consulting book about a biotech company that developed a chemical that controls the ripening of produce, particularly apples. The client wants to know if they should commercialize the product, assuming profitability is the primary objective. 

There are two different ways I though of structuring/framing it and am not sure if one is better than the other:

Option A ("Traditional")

1. Is the market attractive (i.e. size in acres of apple orchards, is this growing or shrinking, what other products/competitors exist for this product?)

2. Can the client win the market (is their product good and how much value does it add, can they price it effectively, do they have the L/K to produce at scale, etc.)

3. Is it financially viable (Revenue: what will the price be, how many units/acres can they sell? Costs: unit costs to produce and any other up front investments?)

4. What are the risks (primarily environmental and regulatory). 

OR

Option B ("Driver focused")

1. Start with a profit tree showing revenue and costs and using that as the backbone of the case. For example, for revenue I would look at the total size of the market, the market share that the company can achieve, and then the price they can charge…compare to costs and then only once it has been established that it is a profitable project then look at the qualitative/operations/risk factors. 

In general I struggle with deciding whether to structure cases like this with a more traditional “structure" versus a “goal focused” approach. I assume it depends on how the case is set up and what the goals are but any clarity would be appreciated. 

Thanks!

 

 

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Pedro
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replied on Sep 28, 2022
Bain | EY-Parthenon | Roland Berger | FIT | Market Sizing | Former Head Recruiter

First of all, congratulations. Only a few people structure the first option like you did (around questions you want to answer) and that is definitely a superior way to approach a strategy problem.

Second, I am struggling here because I am still missing some context. I must ask whether this is an innovative product for a market that does not exist yet, or if there are already competing products in the market.

You see, if the market does not exist, the first approach will be quite difficult to implement. And in that case, using a “profit” framework woulf be a much better way to get you to the end result.

If the market does indeed exist, then doing the profit tree would make you miss all the more “qualitative” analysis that you have on the 1st approach. So that first approach is superior.

Having said this, you are missing a few things: 

  • target customer segments (what could be; are they attractive) 
  • winning in the market is always about serving the target customer segment better than the competition. So you are missing the competitive offerings in here.
  • How to reach the customer. Usually people neglect channel / distribution aspects - who do you really need to sell to. And this is particularly important in B2B businesses.

Finally, drop the “risks” thing. This is generic, and a lot of candidates believe they need to address this but… it's more relevant to perform reality checks and think about risk throughout the analysis than to have a specific “bucket” about this.

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Cristian
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replied on Sep 20, 2022
#1 rated and most recommended McKinsey Coach | 97% success rate (tracked) | Honest feedback: no sugar-coating

Hi there, 

Interesting that you say the first option is the more traditional one. I wouldn't call it so. In fact, only few candidates choose to structures cases in this way: coming up with questions that together sum up the necessary conditions to support the client's hypothesis. 

Nevertheless, I would strongly go with the first one. The main disadvantage of the second structure is that it's too narrow and could lead to you missing out on some important information along the way. 

Best,

Cristian

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Emily
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replied on Sep 20, 2022
Ex McKinsey EM & interviewer (5 yrs) USA & UK| Coached / interviewed 200 +|Free 15 min intro| Stanford MBA|Non-trad

So I much prefer the first option - but I think that it needs to be built out a bit. A few notes:

1. Don't put risks as a separate bucket - these should be scattered through each bucket

2. I'd add a bucket on client capabilities. Are they set up to sell this product? What would be the options for selling it (license the IP? Manufacture it themselves? White label it?)? Do they have other product that this would cannibalise or would selling it impact on their brand? (i.e., are they known for being a company which does only organic type food?)

3. What is the legislative environment? i.e., is this legal? Do they need to get government sign off to sell it (FDA / NICE etc)? Are there any side effects that they're liable to getting sued for? 

I wouldn't go with driver focused because you don't know enough about the environment to be able to assess the drivers and it's a broader market entry question then just ‘can we make money’.

Hope that helps! 

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Maikol
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replied on Sep 20, 2022
Incoming BCG Principal | Former Bain, AlixPartner, and Private Equity | INSEAD MBA | GMAT 780

Option A is definitely more to the point.

I strongly suggest that the easiest way to solve a problem is to think about the step-by-step process the company would consider to assess whether to commercialize a specific product.

The process is the following:

  • How big is the prospect market?
  • How competitive is the prospect market?
  • Which products are we introducing in the market
  • How are we selling and distributing this product?
  • What price and promotions (and business model) do we have for the product/market under discussion?
  • How do we finance the CapEx and OpEx we need to invest in to enter this new product/category? 
  • As a consequence of the above, what cash flow or profit are we expecting to get from this initiative? 

All the best,
M

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Ian
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replied on Sep 20, 2022
MBB | 100% personal interview success rate (8/8) and 95% candidate success rate | Personalized interview prep

Hi there,

This is Maine Apples :)

It's a good one!

I prefer your 1st framework (without Risks). I would also include/emphasize that the 3rd bucket very much takes into account the cost to enter the market itself (i.e. build up manufacturing, promote the product, etc.).

2nd bucket should include competitors as well, but only in the sense of “can we beat them slash is our product better than theirs”

Well done!

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Pedro gave the best answer

Pedro

Bain | EY-Parthenon | Roland Berger | FIT | Market Sizing | Former Head Recruiter
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