New Market Entry: how to decide which market based on size and competition?

Hi Aditya,

having to decide which market to enter, this is what I would consider:

1) Goal clarification. It is always good to start with the end in mind – thus what is the specific reason why you want to enter the market? Is it revenues, profits or specific synergies?

2) Industry. There are two macrovariables here.

• Key industry numbers/facts. This includes
  • Growth
  • Size
  • Barriers to entry
• Key industry players. This includes:
  • Customers
  • Competition
  • Occasionally for some cases: suppliers and substitutes.

Here you should compare the different industries and understand which is the one fitting more with your goal. Eg, if your goal were to increase revenues, then an industry with high growth and size with low competition would be your target. If your goal is to generate synergies with your current product, customer fit would be more important. You could then eliminate those industries that clearly would not fit with your client objective and move with the remaining to the next step.

3) Company - Target objective feasibility. Here you want to check the fit between the client and the selected industries.

• Can our specific client reach its objective in the selected market (this includes understanding its capabilities)?
• Are there positive or negative synergies in such industry?

Here you want to test the feasibility for our client to achieve a specific target in an industry. Say that in your final selection you have Industry A with size of 10 and growth rate of 5% and Industry B with size of 8 and growth rate of 4% - all the rest being the same - and your goal is to maximize revenues. If your specific client has enough synergies in Industry B, it could find better to enter such an industry, as the synergies could prove to be superior to the higher growth and size of Industry A; of course, that should be verified, ideally with quantification of the relevant numbers.

Hope this helps,

Francesco

(edited)