Case_In_Point_7th_Edition_Page001_183_2

r i :el f Qwe sell cleaning solvents to Pepsi and then we get into manufacturing aluminum,
maybe we can sell Pepsi soda cans. We also have a history of marketing and selling businessto-business,
so we might want to stay away from consumer products. We could look at other
commonalities, such as distribution channels and sales force.
Once we narrow the list, we need to analyze the market to find out who the major players are
and what, if any, the barriers to entering the market are.
– Okay, what else?
There are three ways to enter a new market: Start from scratch, acquire an existing player, or
do a joint venture. Depending on the industry and the barriers...
– What sort of barriers are you talking about?
Could be government regulations. If you try to start a business and your products have to get
approved by the FDA or the EPA, then that could take years. In a case like that, you might want
to acquire an existing player. A barrier might be a stranglehold on the market — if, for example,
two companies hold an extraordinarily large market share and have a habit of destroying new
entries. If raw materials or supplies proved hard to come by, that would be another barrier.
– Okay.
Did I mention substitutions as a barrier?
– What’s next?
I’d look very carefully at the future of the industry. It currently may be growing over 10%, but is
that going to last and for how long? Is the market growing or shrinking? Is the number of
players growing or shrinking? Have there been many mergers or acquisitions lately? And I’d
take some time to think about exit strategies as well.
– Summarize for me.
I’d identify all the relevant industries, analyze their markets and determine the best way to
enter that market. I’d also conduct an analysis to see if the company might not be better off
just investing the money into the stock market. It may make a better return and its investment
would be a lot more liquid.
Type of case: Entering a new market
Comments: Ninety percent of this question is irrelevant fluff. It’s not about the chemical
industry, it’s about entering a new market. The candidate took the time to ask for the