Rally racing

As you describe it, this is the longest version of this case format; normally too long for an oral interview, so it's super important to listen whether the question is about if (the client should enter the market) or how (to enter).

Let me answer your direct question 2) first, the how. This is the general "market entry strategy" case. For this strategy, you need the following:

1. Product strategy -- what are you going to sell? Your existing product as is, a high-spec or low spec version of it, or something else? (Hint: It needs to be at least adjacent, either new product for same customers or same product for new customers, otherwise it makes no sense; steel mills are rarely becoming tech cos. Compare the Ansoff-Matrix)
2. Geographical region -- where are you going to sell? Needs to be defined, often already part of the case question itself
3. Distribution strategy -- how are you going to sell or who is selling your product? Which channel? Own shops, specialty shops, big box retail, online, partnerships, etc. Depends on the product/service, for services or B2B it's Sales (inside sales, field sales, sales partners) instead of channel.
4. Promotion strategy -- how will customers know about your product? Often forgotten even by consultants :), but highly important. Marketing.
5. Pricing strategy -- what will you charge? In essence, you figure out steps 1-4, and then figure out max price point "allowed by" competition given quality of the client's offering.

Few comments:

• Customer (segment) strategy is missing. I tend not to include it, as to me it's above the framework, you need to figure it out before doing all 5 steps. Take into consideration if necessary.
• Competition - to me it's not a separate step as it's nothing you do or decide. I would bring it up as part of pricing. As consultants, you advise the client, and case result is rarely "competition is too strong, let's pack our bags and go home". One can get into any market with an attractive offer, and in 90% of cases it depends on the client's capabilities more than competition. Should be evaluated when testing market attractiveness.
• Some of these steps may be a given, i.e., part of the case question (e.g., "client wants to expand to the UK", or "Chinese solar company wants to expand to U.S."). Don't question the question, solve for the remaining variables.
• Do not overestimate clients' capabilities, clients are typically multi-billion-$ companies with lots of bureaucracy. Changing all 5 points from above won't work in practice. (New product in new region with new ...)
• The power of the status quo. One trick for you is to ask how the client is selling their current products right now in their home market. Chances are, approach in the new market will be kind of similar - if they sell detergent in supermarkets now, it's highly unlikely that selling online will be the solution in another market.
• If this sounds awfully similar to the 4P - it's because it's EXACTLY the same. Compare my answer here https://www.preplounge.com/de/consulting-fragen/mece-ways-to-grow-market-share-205 (Over time I found there are only 6 major case approaches that kill 95% of all case questions, so would be strange if this would be completely different :)

Basically memorize the 5 steps, and you're good!

Regarding your 1), you're completely correct, but I would prioritize it way more. Key points for me would be:

• (Long term) growth -- trumps everything. Power of compounding interest; even if current market size is small or (current) profitability is low
• Client capabilities - what does the client bring to the table? Should be either product capability (they can do X already so not hard to do Y, or, major R&D invention or something), or customer access (weaker, but still good -> cross-selling). Here I would compare it to the competition, as cababilities only make sense on a relative basis anyways.
• Your other points are all important, but if it's a really fast growing market and the client can play in it, you can directly go to step 2) and figure out the details.

I should shorten this answer, but rather get some sleep instead... Hope it still helps, good luck with your interviews!! :)

Hi Elisey,

I would personally not recommend to use a single framework for all the so-called business situations (M&A, Entry, New product, Operations etc). Although this would help to more easily remember the framework, it would make more difficult to present a customized structure when the interviewer asks the initial question. Moreover, since every business situations has some peculiar key elements (eg how to enter in a market-entry case, price valuation in M&A, etc), this could lead to completely miss one core bucket.

Based on my experience, it thus make sense to make the extra effort to learn 3-4 different structures for business situations (potentially with some elements in common), and be able to present from the beginning something ad hoc when needed.

Moving to the framework per se, using as an example market entry, this is how I would structure it:

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 for the market and potential subsegments the following
  • Growth
  • Size
  • Barriers to entry
• Key industry players. This includes:
  • Customers segmentation
  • Competition
  • Occasionally for some cases: suppliers and substitutes.

You should present this area connecting with the goal, and not purely listing the elements to analyse as if it was a laundry list. The best way to do so is explain how a certain variable will help you to achieve you goal. Eg, if your goal is to increase revenues, don’t simply say “I want to look at growth, size and barriers”, rather “I want to look at growth and size – this will tell me if the market has the potential to provide enough revenues for our client. I would also like to check the barriers, to understand which are the obstacles in entering such a market and thus increase revenues”.

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 (eg profits, revenues, market share, etc)?
• Are there positive or negative synergies in such industry?

In the first point, you will probably have to go through a profitability/revenue/cost framework, to calculate the effective result.

4) Best way to enter. Once you know the industry is attractive and you can reach you goal, you should consider the entry options.

• Which are the possible ways to enter the market? Usually you should consider (i) starting from scratch; (ii) M&A; (iii) Joint Venture or licencing
• Which option meets better our capabilities to enter the market? Each specific way to enter will require some different capabilities. If you start from scratch you may need skilled people in all the phases of the value chain; if you buy another company you may need less people, but more upfront capital, etc.

5) Risks and next steps. What are the major elements that we should further analyse based on the previous points (eg regulator decision, unexpected competitor reactions, potential wrong pricing in the new market, etc)?

This would include all important market metrics, presenting barriers to entry into the industry. I would not consider the price or the product in the first or second level for a market entry, but rather as a possible third level once reached step 3, when we have to understand if/how we can meet the client's goal.

Hope this helps,

Francesco

Hi there,

I would start by asking some general questions to have a better feeling on the case:

1) Does our client provides this new service elsewhere? If not, does our client already has the capability to provide it without major investments?

2) How does this particular auction work? (i.e. it is like an "English auction"? / do we have some type of advantage for being an outside bidder? etc)

3) What dictates a good deal in the client's eyes? Does he want to breakeven in a certain timeframe? Does the contract has a timeframe?

Then I would move on to my structure:

I would like to analyze this problem in two steps: first the qualitative side and then the quantitative side. On the qual. side I would look for both external and internal conditions; external being market and competition and the internal being more about our client and the 5G technology we are going to provide.

Basically on the first step, I would like to analyze the size of the potential market, what companies will bid with us and what do they have to offer, I would look for possible barriers to enter and focus on what we can provide as well.

After gathering all the info I would focus on the quantitative side, probably through a breakeven analysis or use some type of target (i.e. client would like to see some return after X years, or the contract is only valid for a certain timeframe and our client would like to breakeven within that time).

--

The analysis I proposed could vary depending on the answers to the 3 first questions. (mostly for the bid)

Hi,

1) You proactively ask in the beginning, even before drawing the structure (something like "What kind of products / revenue sources do we have) and then split the structure into price, qty, product mix. Distribution and customers I usually check within qty part

2) Not sure if I understand the question. Your company does not necessarily replicate industry trend, so you have to look at it separately

Hi Kay,

this is indeed one of the fundamental things that you need to learn in order to rigorously disaggregate the value drivers of a business. The driver tree allows you to identify the numerical drivers and sub-drivers of profits. The qualitative elements (such as consumer demand, market structure, company operations, etc.) then have to be mapped to the sub-branches of the tree!

Hence, your analysis has two steps. Imagine you want to run a diagnostic on why profits have fallen. First you need to identify the numerical driver of the problem (e.g., customer base is shrinking). This gives you an understanding of the WHAT. The second step is the understanding of the WHY! To do this, you have to examine the qualitative elements that link to the "number of customers"-sub-branch in your driver tree (e.g., competitive situation, market entries, new substitutes, relative price point, customer preferences, product/service properties vs. competition, etc.)

You can think of these qualitative elements as the typical business situation framework elements (see V. Cheng et al.) - but here, they are not hanging in the air, but they are embedded in a rigorous thinking frame which emerges from the disaggregation of value drivers and linking it to qualitative reasons.

Cheers, Sidi