The Ultimate Guide to Market Entry Case Interviews

Market entry cases are one of the most common types of cases you’ll see in consulting interviews. There is a very good chance you will see at least one market entry case in your upcoming interviews, especially in first-round interviews.

 

The good news is that market entry cases are fairly straight forward and predictable. Once you’ve done a few market entry cases, you’ll be able to solve any market entry case that comes your way.

 

In this article, we’ll cover:

  • The three different types of market entry cases

 

  • The five steps to solve any market entry case

 

  • The perfect market entry framework

 

  • A market entry case example

 

The Three Types of Market Entry Cases

 

A market can be broadly defined as the group of consumers that are interested in a particular product or service. There are three different types of market entry cases:
 

  • Entering a new geography

 

  • Targeting a new customer segment

 

  • Entering a new product or service category

 

In the first type of market entry case, the company is not launching a new product. Instead, the company is trying to sell an existing product to customers in new countries.

 

Example: Uber is a peer-to-peer ride-hailing company based in the United States. They are considering expanding their operations into Thailand. Should they enter? 

 

In the second type of market entry case, the company is also not launching a new product. Instead, the company is trying to sell a version of an existing product to a new customer segment. Customers can be segmented by a variety of different factors such as age, gender, needs, or preferences.

 

Example: Salesforce is a software company that provides customer relationship management tools. They primarily sell to large enterprises. Salesforce is considering expanding their customer base by also targeting small- and medium-sized businesses. Should they do this?

 

In the third and final type of market entry case, the company is looking to launch an entirely new product or service category.

 

Example: Coca-Cola is a large beverage corporation that produces soft drinks, sports drinks, fruit juices, teas, and other beverages. They are considering entering the vodka market. Should they enter?

 

The Five Steps to Solve a Market Entry Case Interview

 

Step One: Understand why the company wants to enter the market

 

The first step to solve any market entry case is to understand why the company is looking to enter the new market. The four most common reasons are:

  • The company wants to increase profit

 

  • The company wants to increase revenues

 

  • The company wants to invest in a fast-growing market

 

  • The company wants to gain access to new customers

 

Only when you understand why the company is looking to enter the market will you have the context needed to properly assess whether or not they should enter.

 

Step Two: Quantify the specific target or goal

 

Now that you understand why the company wants to enter the market, identify what the specific target or goal is.

 

For example, if the company wants to increase revenues, how much of a revenue increase are they targeting? By what time frame are they looking to achieve this revenue increase by?

 

If the company wants to invest in a fast-growing market, what return on investment are they targeting? In how many years are they hoping to achieve this level of return by?

 

By quantifying the target or goal, you can more easily make the case for entering or not entering the market. If the company can achieve their goal, you would recommend entering the market. Conversely, If the company cannot reach their target, you would recommend not entering the market.

 

Step Three: Develop a market entry framework and work through the case

 

With the overall target or goal of the market entry in mind, you will now move onto gathering data and information to build support for your recommendation.

 

The most efficient way to do this is by using a market entry framework to structure all of the important questions you will need to answer.

 

We’ll go over the perfect market entry framework in the next section of the article, but there are four major areas of your framework:

 

Market attractiveness: Is this an attractive market to enter?

 

Competitive landscape: How strong are competitors and how easy is it to capture meaningful market share?

 

Company capabilities: Does the company have the capabilities to successfully enter the market?

 

Financial implications: Will the company achieve its financial goals or targets from entering the market?

 

Step Four: Consider the market entry strategy OR consider alternatives to entering the market

 

Your market entry framework will help you investigate different areas in the case to develop a hypothesis for whether the company should enter the market.

 

What you do next will be determined by whether you are leaning towards recommending entering the market or recommending not entering the market.

 

If you are leaning towards recommending entering the market…

 

Think through what the right market entry strategy would be. You should think through three different questions:

  • When should the company enter the market?

 

  • At what speed should the company enter the market?

 

  • How should the company enter the market?

 

When should the company enter the market? Should they enter right away to get a first-mover advantage? Or should they wait to see how competitors enter the market and learn from their mistakes.

 

At what speed should the company enter the market? Should they target the entire market immediately? Or should they target a smaller subgroup to test their product first?

 

Finally, you should consider how the company should enter the market. There are three different ways to enter a market:

  • Developing the capabilities internally

 

  • Partnering or forming a joint venture

 

  • Acquiring an existing company

 

Each of these strategies has their own advantages and disadvantages.

 

The main advantage of entering the market from scratch by developing capabilities internally is that the company has full control over the strategy and operations. The disadvantages are that this requires significant capital and investment costs, the company may not have all of the capabilities needed to be successful, and market entry will likely be slower than the other strategies.

 

The advantages of a partnership or joint venture are that there are much lower capital and investment costs and market entry will likely be faster than entering the market from scratch. The disadvantages of this strategy are that it requires working with the partner effectively and that this strategy does not give the company full control over the strategy and operations.

 

The advantages of acquiring an existing company are that it is a faster way of entering the market compared to the other strategies and that the company has a high level of control over the strategy and operations. The disadvantages are that acquisitions are expensive and it can be challenging to fully integrate an acquired company effectively.

 

If you are leaning towards recommending NOT entering the market…

 

Explore the other alternative options the company has. Is there another potentially attractive market that the company should enter instead? Are there other projects or investments that the company should pursue?

 

Remember that there is always an opportunity cost for each investment a company makes. If you are recommending that the company should not enter the market, what is the next best alternative?

 

Step Five: Deliver a recommendation and propose next steps

 

By this time in the case, you should have explored all of the major areas and questions needed to make a firm recommendation.

 

State your recommendation and then provide three reasons that support it. Conclude by proposing potential next steps.

 

Here are some potential areas to include for next steps:

  • Areas of your framework you have not explored yet

 

  • Open questions that have not been answered

 

  • Information or data that would make you feel more confident in your recommendation

 

The Perfect Market Entry Framework

 

A market entry framework breaks down the complex question of whether or not the company should enter the market into smaller, more manageable questions.

 

You should always try to create a framework that is tailored to the specific case you are solving for. Do not rely on using memorized frameworks.

 

However, for market entry cases, there are four major things you should probably include in your framework.

 

1. Market attractiveness

 

For this area of your framework, the overall question you are trying to answer is whether the market that the company is looking to enter is attractive.

 

There are a number of different factors you can look at to assess the market attractiveness:

  • What is the market size?

 

  • What is the market growth rate?

 

  • What are average profit margins in the market?

 

  • How strong are substitutes?

 

  • How strong is supplier power?

 

  • How strong is buyer power?

 

  • How high are barriers to entry?

 

  • Are there other macroeconomic, geopolitical, or social factors to consider?

 

If you don’t have a strong business background, it may be helpful to review Porter’s Five Forces to better understand the five forces that determine the attractiveness of a market.

 

These five forces (supplier power, buyer power, substitutes, threat of new entrants, competitive rivalry) are already incorporated in this market entry framework.

 

2. Competitive landscape

 

For this area of your framework, the overall question you are trying to answer is how competitive the market is and how easy is it to capture meaningful market share.

 

The market can be attractive, but if it is extremely difficult to capture market share, then entering the market may not be a great idea.

 

There are a number of different factors you should consider in assessing the competitive landscape:
 

  • How many players are in the market?

 

  • How much market share does each player have?

 

  • Do players have competitive advantages?

 

  • Do players have meaningful differentiation from one another?

 

3. Company capabilities

 

For this area of your framework, the overall question you are trying to answer is whether the company has the capabilities to successfully enter the market.

 

The market can be attractive and competition can be weak, but if the company does not have the right capabilities, they will not be able to successfully compete in the market.

 

There are a number of different factors you should consider in assessing the company’s capabilities:

  • Does the company have significant capability gaps?

 

  • Can the company leverage synergies with existing capabilities?

 

  • Is the company in a favorable financial position to enter the market?

 

  • Does the company have the right distribution channels?

 

  • Does the company have the right relationships with suppliers?

 

4. Financial implications

 

The last area of your framework covers the financial implications of entering the market. The overall question you are trying to answer is whether the company will meet its financial targets or goals by entering the market.

 

Depending on what the specific goal of the market entry is, you may need to look into the following questions:

  • What are the expected costs of entering the market?

 

  • What are the expected revenues of entering the market?

 

  • What are the expected profits from entering the market?

 

  • How long will it take to break even?

 

  • What is the expected return on investment?

 

Market Entry Case Example

 

Let’s put our strategy and framework for market entry cases into practice by going through an example of a market entry case.

 

Market entry case example: Facebook is an online social media and social networking service with $70B in annual revenue, $20B in annual profit, and roughly 2.5 billion users. They are looking to continue growing at a fast pace and are considering entering the global smartphone market. Should they enter?

 

Let’s go through the five steps we outlined above on how to solve a market entry case.

 

Step One: Understand why the company wants to enter the market

 

In this case, we are told that Facebook is looking to enter the global smartphone market in order to continue growing. However, it is unclear what they are trying to grow. Is it revenues, profits, number of users, or something else?

 

We need to ask the interviewer a clarifying questions so that we can understand why Facebook wants to enter the smartphone market.

 

Question: Is Facebook specifically looking to grow revenues, profits, or number of users?

 

Answer: Facebook wants to grow profits.

 

Step Two: Quantify the specific target or goal

 

Now that we understand that Facebook is looking to enter the smartphone market to grow profits, we need to quantify what their specific target or goal is.

 

Again, we’ll ask a question to the interviewer to get this information.

 

Question: Is there a particular financial goal or metric that Facebook is trying to reach within a specified time frame?

 

Answer: Facebook is looking to grow annual profits by $10 billion over the next year.

 

Step Three: Develop a market entry framework and work through the case

 

With this specific goal in mind, we need to structure a framework that will help us solve the case. We can use market attractiveness, competitive landscape, company capabilities, and financial implications as our four broad framework areas.

 

Then, we’ll need to identify and select the most important and relevant questions to explore in each of these areas. One potential framework could look like the following:


Market Entry Case Framework Example

 

Let’s say that you gather the following data and information as you explore different areas of your framework:

  • The global smartphone market size is $800 billion, which is large compared to Facebook’s annual revenues of $70 billion

 

  • Facebook would need a 20% market share to break even

 

  • The top six smartphone players have 80% market share, which implies high barriers to entry and fierce competition

 

  • The top two smartphone players each have 20% market share

 

  • There are limited synergies Facebook can leverage with its existing capabilities

 

Step Four: Consider the market entry strategy OR consider alternatives to entering the market

 

At this point, we are leaning towards recommending that Facebook should not enter the market.

 

It is unlikely that Facebook will be able to grow annual profits by $10 billion over the next year. They already need 20% market share just to break even, which would tie them with the top two largest smartphone manufacturers.

 

Therefore, we should consider the alternative options Facebook has. Is there another market that may be worth entering? Are there other projects or investments that the company should pursue?

 

Thinking through potential markets, we think that Facebook is best suited to enter markets that can leverage its online platform. Potential markets may include the online travel booking market or the online gaming market.

 

Step Five: Deliver a recommendation and propose next steps

 

Now it is time to summarize all of the work we have done so far into a clear and concise recommendation. One potential recommendation may look like the following:

 

I recommend that Facebook should not enter the global smartphone market for the following three reasons.

 

One, although the market size is massive at $800B, the smartphone market is highly concentrated. The top six players have 80% of the global market share. This implies that competition is fierce.

 

Two, Facebook would need to capture a 20% market share to break even. For comparison, the top two smartphone market leaders have 20% market share each. Therefore, this target does not seem feasible.

 

Three, barriers to entry are high and Facebook will likely not be able to overcome them. Facebook has minimal experience in producing hardware and they have no distribution channels with smartphone retailers.

 

All of these reasons strongly suggest that Facebook will not achieve its target profit growth of $10 billion over the next year. For next steps, we can look into other adjacent markets, such as the online travel booking and online gaming markets. These markets may be more attractive and feasible for Facebook to pursue growth in.

 

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