What a typical prompt looks like
A market entry case usually involves a firm expanding its offerings to new geographies or venturing into a new product or service line. You are required to advise them on whether they should enter the market, and if yes, how.
It is important to begin with some preliminary questions. Some important questions for market entry cases are:
- 1What does the client do? What are the current geographies they operate in?
- 2Have they entered similar markets in the past?
- 3Why are they looking to enter this market? Are there any other markets they are considering?
- 4What parameters will the market entry decision be based on?
- 5When are they looking to enter the market by?
Start by assessing how attractive the market is
Most market entry cases begin with an analysis of the financial attractiveness of the proposed market.
Expected profits
Expected profits = (Market size (in units) × % Market Share × Profit / unit) - Fixed costs
Usually, the interviewer will ask you to estimate the above figures. Thus, these cases often involve market sizing guesstimates to arrive at the starting figure. Once this is estimated, you can discuss with the interviewer to make an estimate of the percentage of the market the firm will be able to capture initially. This will be based on the number of players in the market, how fragmented the market is, and the product differentiation that exists.
Moving on to the profit per unit, this can be calculated by estimating the variable costs that will go into making the product or rendering the service in question. Lastly, any fixed costs that will be incurred can be reduced from this figure to arrive at the expected profits.
Do keep in mind the market growth rate and competitive landscape before coming to a conclusion on the market's attractiveness.
How will we actually enter the market
Sometimes, you may be asked to assess the operational feasibility of the proposed business. This is essentially the "How will we enter?" part of the case. Under this, you can look at how the business can be set up in the new market. Insights can be drawn from the firm's current operating model and the tweaks which the new market will require. After confirming that the firm will be able to secure the necessary permissions and licenses, you can go about drawing the firm's value chain and discuss how each step of the value chain can be set up. Common questions you need to ask yourself are:
- 1Should we outsource this step or do it in-house?
- 2Should we produce in the home country and export, or should we set up units in the new market?
- 3If we entered a market recently, how did we set up operations there?
Go the extra step and analyse the risks
Most candidates stop the case at this step. However, we advise you to go the extra step and analyse the risks associated with this venture. This not only gets you brownie points but also recognises the different challenges the firm will face. "Porter's five forces" and "PESTEL" are two frameworks which will help you think about the various risks the firm may face.
Finally, based on your evaluation of the proposed idea and attractiveness of the market, you can take a decision on whether the client should enter the market.