The market entry framework

What is a market entry case?

A client is considering a new market: a country, a segment, a product line, a channel. The prompt usually asks “should they?” and sometimes “how?”. The trap is answering the first question before you have the numbers for the fourth column. The structure above is a sequence, not a checklist: each column only matters if the one before it came out well enough.

How do I structure it in 60 seconds?

1. Objective. “So the client wants to know whether to enter market X, and by when, judged on what: profit in year three, share, or strategic position?”
2. The four questions, named. Is the market attractive; can we win in it; how would we enter; does the entry pay back. One line of context under each for the client’s industry.
3. Where to start. Say which column you would open with and why. Usually the first: if the market is small or shrinking, nothing else matters.
4. The narrowing question. “Do we have a view of the market’s size and growth, or should I estimate it?”

A worked example: the payback column

Suppose the first three columns went well: the market is growing, the client has a product advantage, and a greenfield build is the route. The interviewer says: entry costs $40M up front; contribution is $8M in year one, $16M in year two, $22M in year three, $26M in year four. Should they enter?

Do not answer yet. Run the cumulative:

The cumulative turns positive during year three; interpolating inside the year gives a payback of about 2.7 years, and the four-year net is $32M. Say both numbers, then the check: “a 2.7-year payback on a $40M entry, if the ramp holds.” The numbers were run in a script; the point of saying them out loud is that the interviewer hears the setup before the answer.

Now the recommendation, and the risks that go with it

Only now: “Enter, because the market passed the first three questions and the entry pays back in under three years on the client’s own ramp. Two risks: the ramp assumes year-three contribution of $22M, which depends on share we have not tested, and the incumbent’s response is unpriced. Next steps: validate the year-two ramp with a pilot in one region, and model a price response from the largest incumbent.” Recommendation, reason, two risks, two next steps, in under 30 seconds.

What are the common mistakes?

• Recommending in column one. “The market is growing, so they should enter.” Growth is not a right to win and not a payback.
• Skipping “can we win”. The most common miss. A large attractive market with three entrenched players is an exit case for most clients.
• Treating build, buy and partner as equal. They differ on speed, control and cost; say the trade-off for this client, not the list.
• Payback without the cumulative. Dividing the entry cost by the year-four contribution is wrong when the ramp is uneven. Walk the years.
• No risks with the answer. A recommendation without two named risks sounds like a guess.