Session 3: Market Entry and

Growth
4/25/19

Bruno B Queliconi

Please enjoy some snacks!

Who are we?
Topics today
1. Market Entry/Growth Strategies
2. Problem types (2 min)
3. Example Framework for Market Entry (15 min)
4. Example Framework for Growth Strategies (15 min)
5. Business concepts (10 min)
6. Case recap + Interviewee/Interviewer led (5 min)
7. Cases (50 min)
Cases, and why this talk?
Cases are business problems that you solve during your consulting interview

● In a case you should

○ Understand the main question (s)
○ Create hypothesis using why/what/how to solve the problem
○ Show your ability to problem solving
○ Show your ability to work with business related numbers
■ Some guess is also important
○ Understand the data, drawn a conclusion
○ Give a recommendation to help the client
Market Entry / Growth Strategies
Why present Market Entry and Growth together? -> They are related topic!

● Example: A Moving Company wants to ...

○ New Country/Area (Market)
○ Creating a Storage product (Market)
○ Move to a new area to expand (Market/Growth)
○ Increasing Market Share (Growth)
○ Increasing Size/Revenues (Growth)
Market Entry
Sample questions based on real-life examples

● A biotech wants to move to a new disease area

○ Gilead expands from small molecule antivirals to cell-based therapies for
cancer (2017)

● A company wants to launch a credit card targeting a new revenue stream

○ Apple launches credit card (2019)

● An industrial company wants to develop a new product targeting a new

consumer segment
○ Boeing planning new midsize aircraft launch (2019)

● A F&B company wants to add a new line of product

○ Burger King launches vegan meat substitute burger (2019)
Growth Strategies
Sample questions based on real-life examples

● A Startup need to keep growing at fast rate

○ Uber expand from rides to food delivery

● A company wants to expand the market share of their main revenue source
○ Apple launches cheaper smartphones

● An search engine wants to expand the user base

○ Google partner with Mozilla/Apple to use their engine

● A Pharma company wants to growth their product line

○ GlaxoSmithKline acquired TESARO to strengthen their oncology pipeline
 Market Entry Framework

1. Why does • Diversify

company want to • Competitive response
enter market? • Increase revenue

2. Is entering a good • What is the market size?

idea? • Can you break even?

• Start from scratch

3. If entering is a
good idea, how • Acquire a company
should you enter it? • Strategic alliance/joint
venture
Adapted from Case In Point
 Market Entry - 1. Why?
Why should you ask why?

▪ Knowing why the company is entering the market allows you to tailor your framework and
questions
▪ E.g a company entering a new market to diversify may solely be looking for new opportunities
to balance their portfolio. On the other hand, a company looking for a new market because
they are currently unprofitable could have managerial problems fundamentally
▪ It is important to know the overall strategy of the firm
▪ Entering a new market may have some impact on their current business e.g a shift in
resources. Will this be okay?

Adapted from Case In Point

 Market Entry - 2. Is it worth entering?
Who is the customer?
Customer
Distribution channel

Key value to customer

Product
Differentiating features
Business Situation
Capabilities
Company
Finances

Market/competition structure
Competition
Barriers to entry

Adapted from Case In Point

 Market Entry - 3. How?
Start from scratch

Market
Partner with another Perform cost benefit
Entry If yes company analysis
Evaluation

Acquire a company

You should already have some information on the cost/benefit analysis from
your market evaluation

Cost/Benefit analysis breakdown: management, marketing, distribution

channels, product, customers and finances

Adapted from Case In Point

 Market Entry Framework
Operations Marketing, finance, culture, R&D, distribution
Internal
Strategy Does it fit the company’s core strategy?

Market
Entry Market Size, growth rate, development stage
Evaluation

Customers Who are they by segment

External Industry Entry and exit barriers, substitutions

Competitors Major players and their market share

Risk Market, technology and regulation

Adapted from Case In Point
Growth Strategies - What type?

Growth could mean an increase in

○ Customer base
○ Increase in sales/ revenue
○ Increase in profit

Growth strategies could focus on

○ Product
○ Division
○ Company
Growth Strategies
Growth
Internal External

Organic Inorganic

New market entry Join Ventures Mergers

Product line Acquisitions

Increase

Sales by discounts

Distribution channels

Marketing
Growth Strategies - Framework
Industry

External

Competitors

Growth
strategy Product

Finances
Internal
Marketing

Distribution
Growth Strategies - Internal
The Ansoff Matrix – Revenue Growth
Current Product New Product
Current Market

Market Penetration Product Development

New Market

Market Development Diversification

Growth Strategies - Internal
The Ansoff Matrix – Revenue Growth
Current Product New Product
Current Market

Attract new customer

‘New’ products can be adaptations/
Market
Steal market
Penetration
share Product Development
updates to existing products
Low growth potential
New Market

New market entry Different product, same customers

Can be regional, national or Synergic product, new customer
Market Development Diversification
international New product and customers
Higher risk High risk
Growth Strategies - External
Assessing Profitability from External Factors: The BCG Growth-Share Matrix

- Size of the market?

- Growth of the market?
- Who is the competitor?
- How many competitors?
- Where on the life cycle the asset is?
Business concepts

○ Cannibalization
■ Producing a new product for growth and/or new market can affect your main product
○ CAGR /COGS
■ Compound Annual Growth (CAGR) - aka Rate of growth
■ Cost of goods sold (COGS) - cost of the product (only) sold
○ Payback Period
Business concepts: Cannibalism
Cannibalism: A company’s new product takes revenue away from its existing products

E.g Company XYZ traditionally only sells pizzas during the Super Bowl. This year they plan to sell
hot dogs too. Estimate the potential revenue of XYZ.

○ IMPORTANT: Some of their pizza customers will now buy hotdogs instead. This loss in pizza
revenue must be incorporated.
Business concepts: CAGR
Compound Annual Growth (CAGR) - aka Rate of growth

CAGR Formula: FV = PV (1 + rate)n

FV = future value, PV = present value, n = number of years

○ Revenue is estimated to grow by 10% annually. What will its revenue be next year assuming
its current revenue is $10 million?
■ Rate = 10%, PV = 10 million, n = 1 year
■ FV1 = 10(1+0.1)1 = 10(1.1) = 11 million
○ Year 2 🡪 11 million(1.1) = 12.1 million
○ Year 3 🡪 12.1 million (1.1) = 13.3 million

○ Depending on the rate, the future values can increase rapidly!

○ Look out for high growth rates when analyzing cases
Math Shortcut
● Rule of 70/72
○ For what: Determine the amount of time an investment would take to
double, given a fixed annual interest rate (up to 25%)
● Precise equation
○ 69.3 / % interest rate = number of time periods -> changes to
○ ~70 or 72 / % interest rate = number of time periods

Assume an investor invests $20,000 at a 10% fixed annual interest rate. Estimate the
number of years it would take for his investment to double.

○ 70/10 = ~7 years for his investment to double. (Precise would be 7.3)

Business concepts: COGS
Cost of goods sold (COGS)

COGS: Fixed + Variable costs related to a product

○ Do not include
■ Marketing
■ Sales
■ R&D
○ Include
■ Raw Material
■ Production costs
Business concepts: Payback Period
Payback Period

0 = Years of Profits from that investment - Investment costs

○ If a new drug costs 1 B to develop

○ When the company will recover it investment?
■ Year 1 -> 50 M
■ Year 2 -> 100 M
Profits

■ Year 3 -> 400 M

■ Year 4 -> 500 M
Giving a Case
To train well you need partners who know the case well and can give quality feedback.

The following are points to keep in mind before giving a case:

○ Read through all figures and calculations

■ Make sure you know what information can be given/how
○ Know the trigger for each step, including when to go into the math
○ Math is usually simple, but make sure you understand it so you can help troubleshoot if
something goes wrong
○ Feedback is Key, don’t be afraid of brainstorming if the main points are not discussed
■ Ask “What else” to keep the discussion going, or
■ “What about Area X”
Giving a Case

○ For interviewee led (BCG style case) let the interviewee drive case/decide where to
go next instead of immediately correcting mistakes
○ Cases are conversations, but if interviewee spends too long on the wrong track,
interviewer should cut case short or nudge them in right direction, remember the
case should be less than 30 min
○ Feedback at end of case should be specific (i.e. do X, Y, and Z to improve)
Checklist
Keep this main points in mind to have great case results

❏ Have clear, organized notes

❏ Focus on the main question
❏ Always have a hypothesis in mind, and communicate it / update it
throughout the case
❏ Talk, clarify, question -> The interview is a conversation
Other events/resources
ADC Resources -> Through our website you can access Case/Math/Framework books

Case partner matching spreadsheet goo.gl/KoMLiQ

Syllabus for Case Interview Prep
Date Room

■ Intro 04/04 Alway M112

■ Profitability 04/11 Alway M106

- Nothing Scheduled 04/18 Alway M112

■ Market entry/growth strategies 04/25 Alway M112

■ Breaking the Fourth Wall: Interactive Case Practice 05/02 Alway M112

■ M&A / Pricing Strategies 05/09 Alway M112

■ New Product Launch / Competitive Response 05/16 Alway M112

■ Breaking the Fourth Wall: Interactive Case Practice 05/23 Alway M112

- Nothing Scheduled 05/30 Alway M112

■ Complex Cases 06/06 Alway M112

■ Personal Experience Interview (PEI) TBD TBD

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Today’s Case
Mckinsey x Bain/BCG case styles

Interviewer led x Interviewee led

- Interviewer led -> You have to discuss and cover all the topics the interviewer will guide you thought
the case (deeper discussion in each point)

- Interviewee led -> You need to ask and find what information is available. This will check your ability
to find what is needed and present what is essential. The Interviewer will wait for you to lead the
discussion
Today’s Case
Suggested PEI: Tell me about a leadership experience?

1) VitaminCo (Bain style) (25 min)

2) Electric Car Manufacturer Growth (McKinsey style) (25 min)

If you’re new to cases

For the first case, split into groups of 3-4 with an experienced leader. The leader
will then give the case to a volunteer so others will know how to give cases; others
will watch.

For the second case, split up as you choose.

Have fun!