Market entry cases ask a candidate to evaluate a specific growth opportunity and decide whether or not the company should pursue it.
For example, a classic market entry case might read like this:
“Retail Co. specializes in outdoor apparel for children. They’ve been very successful in the midwest and are considering launching in Canada due to similar climate and demographics. What factors would you look at to determine if this expansion would be successful?”
Just hearing this type of question makes some people nervous - where do you start and how do you evaluate the problem in a structured way? Don’t worry; after reading this post, you’ll be able to recognize a market entry question like this and crack it in no time!
Market entry cases are a very common type of case during the interview process. There are two reasons for this. First, they test a variety of skills consultants care deeply about: structured problem solving, logical reasoning and creativity. Second, consulting companies frequently help clients with market entry problems, and case interviews mirror real world consulting work. Since consultants often give candidates cases they’ve worked on with real clients, tso there’s a good chance you’ll get one of these eventually.
The good news is, these are fairly straightforward cases. We’ll go through one framework that can be used to solve these types of cases, as well as a more detailed example. As always, don’t forget that every problem is unique, and a great answer will always take into account the nuance of the problem and propose a tailored framework.
There are three main buckets of market entry cases: geographical, product line expansion, and generic growth strategy.
The question you’re trying to answer in the geographical type is whether a company should expand their current business to a new market. For example, if Chipotle should expand into Europe, or if Uber should launch in China.
In the product portfolio type of market entry case, the question is if a company should launch a new product into their existing market. For example, if Harley Davidson should launch an electric motorcycle, or if Whole Foods should start selling meal kits in addition to groceries.
Sometimes market entry cases can be hidden in the introduction but appear partway through the case.
For example, your interviewer might say something akin to: “Client Co. has seen declining revenue recently. What should they do?” This is a growth strategy case, which could have various paths such as acquire a competitor or invest in internal R&D. One hypothesis may be expanding to a new market to grow their customer base. In this example, the market entry aspect of the case would branch out from a higher-level growth strategy problem.
Now that you’ve seen what market entry cases look like, let’s talk about how to solve them. There are four steps to these cases: assessing the target market, evaluating the company’s capabilities, quantifying the opportunity, and outlining a go-to-market strategy.
In this step, you’ll want to evaluate the market in question. The main goal here is to determine if the market is large, growing, and what the competitive landscape looks like. In addition, you’ll want to determine if there are any additional factors that might prevent a company from expanding successfully, for example, if there were a war in the country, high levels of corruption or anti-American sentiment.
Key questions include:
Now it’s time to look internally, you’ll want to dive into the client’s business to understand their product offering, their current customers, strengths and weaknesses, and their financial situation. Just because a new market is attractive doesn’t mean a company should always expand there. The company needs to have the right characteristics to successfully enter.
For example, expanding into China might look like a good opportunity for a hotel chain, but if they don’t have anyone on their team with experience in China and have never grown internationally before, it will probably be a very tricky strategy to carry out successfully.
The key questions you’ll want to answer in this step are:
If you’ve gone through the first two steps and decided the market entry is a good idea for the client, the next step is determining the investment that would be required to enter the market versus the expected revenue potential. In other words, would the juice be worth the squeeze?
The final step for a market entry case is laying out the ‘how’ once you’ve come up with an answer on whether or not to enter. There are several ways a company could enter a new market.
Each of these would be evaluated using pros and cons:
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Let’s try going through a market entry case using the framework above. The question we’ve been given is: “Taco Bell recently expanded into the UK with great success, should they launch in France as well?”
We’ll walk through each question below and demonstrate the kind of thought process the candidate should be going through (and voicing over to the interviewer) if they were in a real case interview. Remember, this isn’t how an actual conversation would go, but it does provide an example of how this framework could be applied to a real question, and the types of issues you should be thinking about.
We’ll begin by assessing the attractiveness of the French market. Let’s go through our key questions:
How big is the market and is it growing?
Here, we’d want to know how big the fast food market is in France and what the growth rate is. Let’s say our interviewer tells us it’s a $50B market and has been growing at 12% for the past 3 years. Right away, we see that this is a large and rapidly growing market, which means this is an attractive place to be at a high level.
Who is the target customer and what are their needs or preferences?
Based on what we know about Taco Bell domestically, we can build a profile of the target customer: someone who goes to other fast food restaurants, is looking for a quick and cheap meal, enjoys Mexican food, and isn’t very health conscious. The biggest question is if this type of consumer is as prevalent in France as they are in the US. We might receive additional information from our interviewer that the French don’t prefer spicy food and aren’t as familiar with Mexican cuisine.
What is the competitive landscape?
Competitors to Taco Bell would include any other businesses that meet the same customer needs mentioned above. For example, other fast food restaurants or other Mexican restaurant chains that are popular in France. In this case, we’re told there are no direct competitors (no Mexican fast food restaurants) but McDonalds, Subway, and Pizza Hut have ~25% of the fast food market.
Are there any social, macroeconomic, or geopolitical factors to consider?
Here we could bring in any current events that might impact our strategy. For example, we might know that the minimum wage in France is much higher than the US. This higher cost of labor could cut into Taco Bell’s profits if they weren’t able to raise prices to offset it.
Overall, after a quick evaluation of the market, it appears to be an attractive region for a fast food restaurant, but there’s an open question on the customer preferences piece and whether French people will embrace Mexican food.
The next step is looking at Taco Bell’s current performance and determining if they would be successful expanding into France:
What is the current product and customer mix?
Taco Bell serves lunch and dinner with a broad menu of American Mexicanized food. Historically, their largest customer segment is 18-25 year old men, although menu additions such as salad bowls have aided in their effort to attract 25-35 year olds as well as women. Domestically, the bulk of their business comes from drive-thru orders, however, in the UK their urban locations attracted a broader demographic, including teens and families.
What are the strengths and weaknesses of the company?
Taco Bell is a well known brand that’s recognized globally. They’ve recently proved an ability to successfully co-brand menu items (for example their domestic partnership with Doritos) which could be employed abroad with popular brands in the target country. In addition, their success in the UK has shown they have the skills and experience needed to launch in a new market.
Who are the key suppliers?
Key suppliers include food processing plants for meat, wholesale distributors for fresh foods, and packaging providers. Labor is also a key supplier, as food is ordered and prepared at each location, and they haven’t embraced digital ordering kiosks as fully as competitors like McDonalds.
What is the current financial position?
Taco Bell’s revenue is ~$11B and has been growing in the double digits recently. We would also want to look at same store sales to determine if revenue was growing solely due to expansion or if existing locations were also seeing an increase in business.
From this quick look, we see that Taco Bell is in a solid place financially and has a dominant position in the market. They’re experienced with new market entry as well.
Now we want to determine if expanding into France will be financially attractive for Taco Bell.
What share of the market could be captured?
Of the $50B fast food market, how much do we think Taco Bell can capture? At this stage, we would likely be given some additional information, such as the market share of the largest competitors. We find out McDonalds has a 10% market share and they’ve had to transform their product in order to be successful - focusing on a Cafe area and larger seating spaces. In this case, we might assume Taco Bell could eventually capture just 1% of the French fast food market, or $500M, as the cuisine isn’t nearly as popular
What would the main costs of entry be?
The primary costs would include real estate, building the team, and doing market research to develop a menu tailored to local tastes. Marketing would also be a large cost to educate the French market about their brand and product.
What are the outstanding risks?
The biggest risk for Taco Bell is there’s no product-market fit e.g. the French consumer doesn’t eat Mexican food. One way to mitigate this is to start with a very small footprint, just a couple locations, and put them in a densely populated area with a more diverse population.
Finally, we would want to recommend a strategy for Taco Bell to enter France. In this case, growing organically makes the most sense as the brand is the major strength. Starting with a couple locations in Paris where there is lots of foot traffic and both locals and tourists makes sense. Additional market research would need to be done to determine which menu items should remain and what should be added to localize the flavor profiles.
You’re bound to get a market entry case during the interview process, so it’s a good idea to get familiar with this framework and the types of questions you’ll be looking to answer. Your interviewer will guide you through the process a bit in terms of the additional information they start to share, so you’ll see where to push more or less. Remember, these are real problems clients are looking for advice on, so it’s great practice in that regard as well!
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