CASE STUDY WORKSHOP
MARKET EXPANSION CASE
A European Manufacturer of confectionery products wants to enter the US market with a premium products line. Should the client consider entering the US market?
At this point in the interview I would like to discuss a business case with you and see how you would approach this business situation. It is a real situation, one that I have faced with a client at A.T. Kearney.
The Client is a European Manufacturer of confectionery products which wanted to enter the US market with a premium products line. They came to us and asked us to tell them whether they should consider entering the US market.
I would like you to imagine that I am the Project Manager for this new assignment and you are a member of the team. I am keen to hear how you would tackle the assignment as this is our first meeting to discuss the case.
Candidate (Considered response)
The overriding question really boils down to whether the US market is attractive to our client, a European confectionery manufacturer, for its premium line. I’d like to break this down into a number of separate questions.
Is the market attractive?, What is the market attractiveness likely to be in the future?, What competencies are required to be successful now and the future?, Does our client have them?, Can our client build/buy them?, How are the competitors likely to react if our client enters?, What options are available for entry-joint ventures etc.?, Is the US option the best one for our resources? I should like to begin by looking in detail at the market attractiveness, but before I do, do you think I have missed any of the key areas.
No, I think you have covered the problem very well–how would you examine market attractiveness?
We need to examine a number of issues to look at attractiveness. Different segments of the market are likely to exhibit different characteristics so I would aim to segment the market on different dimensions. So we should look at the size of the segments, profit margins as a start–the Porter model would be a good way of synthesizing the data and being a basis for developing potential trends. We could see the level of competitive rivalry, the power profile of industry stakeholders, and the likelihood of other potential entrants. Similarly examining the historical development of the markets can be used as a basis of observing trends. This really leads us into perhaps the more important question of how attractive the market is likely to be in the future.
The candidate has started by repeating the key information in the case study thereby confirming she/he has all the facts. He has then structured this as a question and logically broken down the question into various parts. She/he has demonstrated structure and also creativity by coming up with some thoughts outside the main question. By talking about client competencies he has thought about some of the implementation aspects. He has confirmed with the interviewer that he has caught the main themes.
In his second response he has suggested the use of relevant frameworks, but not having any data, he has at this stage not suggested any hypotheses.
Yes but before we move onto that I would really like to know where you think we may be able to derive information to understand the market.
I don’t know if the companies are quoted but broker reports and the annual report and accounts over the last few years are likely to prove a good source of information on the companies. I would also try to speak to internal experts within ATK and perhaps industry experts. The client himself is likely to have done at least initial research and some ideas about the market. We could speak to some suppliers and buyers. There may perhaps be some industry reports. My belief is that we have a relatively mature market, being the US, with some powerful competitors who have built their position through heavy and subtle advertising, profit margins are high though volumes are relatively low.
Actually the economies of scale in the US meant that volumes were much higher than in Europe. We did have difficulty in getting specific numbers on profit margins as the published data tended to cover margins across the whole product range. Do you have any thoughts on ho we could get information on the profit margins of the premium line.
I think I would try to estimate the value chain for the premium line to get the costs–we can get the price for one of the competitors. The raw materials are commodities. Advertising costs may be difficult to obtain but we can estimate this by …
The interviewer has decided to go into more detail on attractiveness before proceeding to the other aspects of the case. He is examining the candidate’s ability to find relevant data. The candidate is relaxed, confident, organising his thoughts, stating assumptions and looking at all elements of the case.