The market entry framework is a tool to assess whether a company should enter a particular market or introduce new products in existing markets, by assessing growth opportunities, capabilities and challenges. In case interviews, these frameworks are useful template for market entry cases.
In this article, I will explain how you can apply market entry frameworks in market entry cases, using a four-step guide and case examples. Let’s get started!
1. Market Entry Cases – Definition & Formats
Before going into the Ultimate Market Entry Framework, you really need to understand what market entry cases are and what case interview frameworks are. I cover these in the first two sections. If you’re already familiar with these terms, feel free to skip to the third section.
Our Case Interview End-to-End Secrets Program assembled everything you need to know about consulting case interviews and how to pass them, so that’s the best place to go if you have general questions. But if you’re ready to dive into market entry cases, read on.
What is a market entry case?
A market entry is a type of case interview that asks candidates to evaluate and decide whether a client company should enter a particular market. Among MBB (Big 3) firms, market entry cases are more common at BCG and Bain than McKinsey.
Types of market entry cases
There are two main types of market entry cases:
Type 1: Geographic Market Entry Cases
Geographic market entry cases ask candidates to assess whether the business should expand to a new geographical market, for example, if Amazon Go should enter the UK or if Mercy Meats should enter South America.
Type 2: Product Portfolio Diversification Cases
On the other hand, product expansion cases ask candidates to assess whether the business should launch new business lines into their existing market, for example, if Disney should launch their own streaming service, or if Walmart should start selling meal kits from its service partners.
No.3: Examples of market entry cases
Some examples of market entry cases are:
- Example 1: A French soft drink company, Le Seine, is looking to diversify its holdings by investing in a new fast food chain in the US. You are hired to determine whether they should pursue this path and, if so, how they should go about execution (HBS Case Interview Guide).
- Example 2: The client is a grocery store chain that is considering whether or not they should enter the emerging Internet-based grocery shopping/delivery market in the Boston area. This regional chain is currently one of the leaders in the traditional grocery store market in northern New England. In their core market, two competitors have emerged in the Internet/at-home grocery shopping business, and are rapidly gaining market share. Should the client enter the market?
- Example 3: Our client is Hertz, a global car rental company present on the European and and North American markets. Hertz is present in most of Europe except the Baltic countries. You are hired to determine whether they should enter the Baltic countries, and recommend an entry strategy.
2. Case Interview Frameworks – Definition & Characteristics
Now that you understand what market entry cases are, let’s turn our attention to case interview frameworks. Understanding what a framework is, characteristic of good frameworks, and how you can apply them in case interviews, is essential to sounding structured and methodical – two main consulting traits interviewers look for.
No.1: What is a case interview framework?
A case interview framework is a template used to break down and solve business problems in case interviews. A framework can be highly customized for specific cases or versatile enough for general problem-solving.
The most important thing to remember when using frameworks to solve a problem is to be FLEXIBLE. Consulting problems are complex and usually, there are no clear-cut, ready-to-use frameworks to solve them. The interviewer looks for context-relevant frameworks, not complicated but inappropriate ones.
Hence, the more you master the “building-blocks” frameworks, the better you can draw specific frameworks suitable to each context. Learn more about frameworks here.
No.2: Characteristics of a good framework
So what makes a good framework, exactly? When building a framework, you should keep these three priorities in mind:
- A good framework is top-down: the problem must be broken down from the generic to the specific, with each hypothesis staying on one level of the issue tree.
- A good framework is MECE: MECE is extremely important in problem-solving because it ensures complete coverage of the problem while preventing effort duplications.
- A good framework is geared to isolating the root cause: To isolate the root cause, your framework must strictly follow the problem-solving methodology.
3. The MConsultingPrep Market Entry Framework
In a market entry case interview, you are expected to evaluate an expansion opportunity (entry into new markets or expand product lines in existing markets), decide whether the client company should pursue it, and, if yes, suggest an entry strategy. The underlying principle of the market entry framework is based on this process.
A market entry framework answers three questions, in order: “Should I enter?”, “Can I enter?”, “How to enter?”. These ordered questions make up the three steps of a market entry framework: Assessment, Feasibility, Implementation.
Part 1: Assessment – Should I enter?
The first step is to justify WHY the company should pursue a particular expansion opportunity. To answer “Should I enter?”, there are two assessments you have to make – market assessment and company assessment. Company assessment will reveal the company’s internal motivations to expand, whereas market assessment shows the external motivations driving expansion decisions.
Step 1: Company assessment:
The first step after receiving a case is to ask for more information about your client company. Use that data to understand if there are internal motivations driving expansion decisions.
For example, let’s say you asked about revenue and was informed of a declining trend. You know this is a market entry case, so you might hypothesize that the client company’s revenue is declining because their product is at the mature stage of the product life cycle.
If the hypothesis is confirmed, this implies an internal motivation of the company’s expansion to other markets to capture new market shares, or introduce new products to capture more revenues from their early life cycles.
Step 2: Market assessment:
The next step is to inquire into the market of interest to pinpoint the external motivations that can justify the need to expand. What is attractive about this market? Is it the market size, or the potential market demand? If information about the market size is available in the case, this implies that you need to first estimate it.
Sometimes, markets are attractive because of their location advantage, that can save transport cost, or enable the client company to obtain cheap inputs. The open trade environment of a market might also help firms jump trade barriers. Finally, political stability is also attractive to minimizing risks and conducting business sustainably in the long run.
After gathering information about company and market opportunities, do your cost-benefit analysis. By then, you can decide if the company SHOULD enter a new market or not.
If you decide that the company should not enter, you no longer need to answer the other two questions. If you decide that it should enter, move on with the next step.
Part 2: Feasibility – Can I enter?
Remember, only move on with this step if you’ve decided that the estimated benefit of this market entry outweighs the estimated cost. At this point, you need to assess the feasibility of entering a new market – does the client company have the financial capacities and capabilities to adapt to and profit from the new market?
Step 4: Financial feasibility
Figure out whether the client company’s financial situation can cover investment costs. To do this, you first need to estimate the amount of investment required.
Step 5: Capability feasibility
The company’s capabilities help it secure market share by differentiating it from other competitors in the market. Examples of capabilities are firm-specific competitive advantages such as patented technologies, efficient logistics & production capacities, local knowledge, a low cost structure, etc.
Part 3: Implementation – How to enter?
Capability-wise, if it’s feasible for the client to enter this new market, you must next suggest an entry strategy, or an implementation plan. This plan must be specific in terms of timeline, modes of expansion, and execution details.
Step 6: Propose a timeframe
Propose a time frame for your expansion strategy. When is the right time for the client company to enter the market? Is there a first-mover advantage at present? Don’t forget to refer back to the above information about the company’s situation and market opportunities to support your decision.
Step 7: Propose a method of expansion
Regarding modes of expansion, there are three common strategies:
- Partnership: partnership entry modes are those wherein two (bilateral partnership) or more (network partnership) firms cojoin their finance, skills, information and/or other resources to minimize risks. These are joint ventures, licensing, or joint distribution networks.
- Organic: organic entry modes involve those that increase the company’s sales using only internal resources. In other words, they are trade-based entry modes, such as exporting.
- Mergers and Acquisitions (M&A): M&A generally occurs when one company directly purchases another company. Together, they form a new legal entity under one mother corporation.
Again, evaluate the information about the company and carefully compare that with the risks of each entry mode to decide on a suitable one. For example, if the client company has a patented technology, choosing a partnership entry mode runs the risk of technological thefts.
You should also consider the commitment factor – how much control does the company want over the new market, and how much investment is it willing to make? With a simple strategy like exporting, you can exit easily but have less control. Meanwhile, with a wholly owned subsidiary, investment costs are high but you also have more control.
Step 8: Finalize your execution plan
The final step is to specify your execution plan, containing the key objectives to be implemented. The plan will also need to specify what tasks to be completed, who is in charge of each task, and how they should be carried out. The final plan will be the final deliverable to the client. The client can then choose to implement it themselves or sign another implementation contract.
4. The Market Entry Framework – Sample case
Now, let’s apply the framework into a real case so you can see the flow.
Part 1: Assessment – Should I enter?
We’ll begin by assessing the company – Mercy Meats, and Brazil’s market, to make an entry decision.
Step 1: Company Assessment
For company assessment, we want to find out if there are any internal motivations specific to Mercy Meats regarding this entry decision. We are told that the only motivation is to satisfy its stakeholders’ expectations, profitability-wise and mission-wise.
- Profitability-wise, shareholders want to scale up production to capitalize on economies of scale, thereby maximizing profits.
- Mission-wise, the CEO and investors want to reduce the environmental footprint of the factory farming industry, by competing with conventional meat producers and make more consumers cut back on animal meat consumption.
Step 2: Market Assessment
For market assessment, we will look at external motivations that Mercy Meats seek to justify their entry decision – attractive characteristics of Brazil’s alternative protein market.
What is the market’s size, growth rate, trends, and industry life cycle?
First, we’ll want to know the life cycle of plant-based meat, its market size in Brazil, the market’s growth rate, and trends. The plant-based industry is in its growth stage, with an annual average compound growth rate of 8% globally and 20% in Brazil’s market.
Meanwhile, we’re told that Brazil’s plant protein market size is predicted to reach $30.2 billion by 2023. This is mainly attributable to a strong shift in attitude towards vegetarianism among young Brazillian consumers. With a strong growth rate driven by positive attitude shifts, this market is an attractive place to be.
Who are the customers? What are their needs and preferences?
We can broadly construct a portfolio of our customers: people who are health-conscious, high-income, concerned about animal welfare, would buy plant-based protein as substitution for animal protein, and enjoy similar tastes of real meat.
The interviewer might also inform us that our customers could be swayed by lab-grown meat for its real taste and “real meat” brand, although this technology is yet to be marketable due to its high price and environmental concerns.
Who are the existing competitors in the market?
Competitors of Mercy Meats will consist of any businesses meeting the same customer demand mentioned above. We’re told that direct competitors in the market are local plant-based brands, however, the tough competition will be posed by conventional meat players (such as Marfrig or JBS), who are starting to develop their own plant-based products.
Are there any macroeconomic, social, or geopolitical factors to consider?
Here, we should talk about events that can broadly affect our entry strategy. For example, we might point out that complex bureaucracy and lack of transparency are the two biggest barriers to doing business in Brazil.
As a response, the interviewer might say that Brazillian governments are committed to reducing bureaucracy by simplifying its tax structure and investing in public services digitalization (such as digitized tax fillings). This is a positive improvement, making Brazil a more attractive place to do business. You can raise other concerning issues in a similar manner if needed.
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Part 2: Feasibility – Can I enter?
Now that we’ve decided that entering Brazil is beneficial for Mercy Meats, we need to see whether the client company is equipped with what’s required to do so, capability-wise and finance-wise.
Step 3: Capability feasibility
First, we need to understand whether Mercy Meats has the capabilities (competitive advantages), to sustainably compete in the new market.
Does the company have efficient distribution channels/ logistics?
In the US, Canada and Singapore, Mercy Meats have very efficient logistical channels, with low warehouse capacity, minimal shipping time, low inventory turnover rate, and high number of orders relative to all of its major competitors. The company definitely has the required capability to replicate another efficient logistical channel in Brazil.
Can the company produce premium quality products at a lower cost than its competitors?
Mercy Meats products, Mercy Burger, Mercy Sausage, and Mercy Pork, are much more expensive compared to animal meat products in Brazil. For example, one Impossible Burger pack weighing 1.4kg is currently priced at around $30, nearly 4 times higher than the same amount of beef (around $8 per 1.4kg) in Brazil.
However, Brazil is the leading exporter of soybean in quantity due to its low price and premium quality. Hence, if the company can take advantage of the low soybean input in Brazil and can scale up its production, a more reasonable product pricing can be achieved.
Does the company have a patented technology/design that distinguishes it from other competitors?
Mercy Meats owns a patented technology over its heme ingredient, a soyroot-extracted ingredient that makes its products taste and look almost identical to animal meat. In fact, Burger Queen, a major fast food chain, chose to partner with Mercy Meats in the US because its products taste much more like real meat than that of Beyond Meat, Mercy Meats’s biggest competitor in the plant-based industry.
Step 4: Financial feasibility
What is the current financial situation of the company? Can the company fund the investments itself or can it raise the required capital?
Next, we will look at how much investment is required and whether the company can financially cover it. Total investment cost is estimated at $80 million, while the expected return is over $180 million in 2 years.
Finance-wise, the company is doing really well, with average yearly revenue of $151 million. Mercy Meats also attracted many investors in the past, with $1.4 billion in total funding, in which $200 million was acquired in 2020. These figures exhibit investor confidence in the company, which imply high chances of getting more funding in the near future.
Part 3: Implementation – How to enter?
The final step is to formulate an entry strategy, which includes deciding the implementation timeline, choosing the methods of expansion, and drafting an execution plan. We will examine each aspect, in the above order.
When is the best time to enter Brazil’s market?
The best time to enter Brazil is right now. We’ve observed that our major competitors, such as Marfrig, have started developing their own lines of plant-based meat. These competitors have better local knowledge than our client company, and an already widely-recognized brand name in Brazil. Mercy Meats needs to move fast if it wants to secure a fair share of the plant-based meat market.
Which method of expansion is the most suitable?
To effectively gauge demand, Mercy Meats should consider expanding under trade-based modes, exporting in particular, and grow organically first. After that, it is recommended that Mercy Meats establish its own subsidiary, to have better control of two aspects: technology and market.
First, partnership modes are risky due to the potential of technological theft, subsidiaries or M&A modes can eliminate this risk, although they require more investment. Second, establishing a production subsidiary will enable the company to exert more control over the target market, by quickly adjusting production to customers’ needs and reduce logistic costs to be more cost-competitive .
What is the execution plan?
Finally, we need to develop an execution plan.
- What: The breakdown of tasks in the overall implementation plan, for example, establishing partnerships for exporting, marketing the product, setting up the factory, etc.
- Who: Who will be in charge of the aforementioned tasks? What are their deliverables?
- How: What are the targets for each task, what are the expected quality standards that align with the key objectives?
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