Case_In_Point_7th_Edition_Page001_183_2

[ 1I Entering a New Market ]
Question: Your client manufactures hair products. The company is thinking about entering
the sunscreen market. Is this a good idea?
Step 1: Determine why. What’s our goal? What’s our objective? Does it fit into our overall strategy?
Step 2: Determine the state of the current and future market.
What is the size of the market?
What is the growth rate?
Where is the company in its life cycle? (Stage of development: Emerging? Mature? Declining?)
Who are the customers and how are they segmented?
What role does technology play in the industry and how quickly does it change?
How will the competition respond?
Step 3: Investigate the market to determine whether entry it would make good business sense.
Who is our competition and what size market share does each competitor have?
How do their products and services differ from ours?
How will we price our products or services?
Are there substitutions available?
Are there any barriers to entry? Examples are: capital requirements, access to distribution
channels, proprietary product technology, government policy.
Are there any barriers to exit? How do we exit if this market sours?
What are the risks? For example, market regulation or technology.
Step 4: If we decide to enter the market, we need to figure out the best way to become a player. There
are three major ways to enter a market:
Start from scratch (see Starting a New Business).
Acquire an existing player within the desired industry.
Form a joint venture/strategic alliance with another player with similar interests.
Analyze the pros and cons of each. This is sometimes called a cost benefit analysis. You can use this
whenever you are trying to decide whether to proceed with a decision.