Entering a new market Flashcards
1
Q
What is the first question to ask?
A
Why does the company want to enter this market?
2
Q
What is the market entry-tree? (4)
A
- Company
- Current and future market
- Competitor
- How to enter
3
Q
What are the four steps of a market entry (5)
A
- Start off with questions about the company (core list)
- Determine the state of the current and future market (core list)
- Investigate the market to determine whether entry makes good sense
- Consider the best way to enter a market
- If no, say no, and provide an alternative strategy
4
Q
Should company A enter market X? (5)
A
- Is the company capable of entering the market? (Should)
- Is the market attractive? (Would)
- Are we able to compete? (Could)
- How should we enter the market?
- What is the alternative to entering the market?
5
Q
Is the company capable of entering the market? (7)
A
- What are the company’s profit and revenues from the last three years?
- What is the company’s product mix?
- How strong is the brand? Is it market leader?
- Do we have a brand advantage?
- Do we have product patents?
- What constitutes success?
- Do we have the capacity to enter the market?
6
Q
Is the market attractive? (Would) (5)
A
- What is the size of the current and future market?
- What is the growth rates? (Trends)
- Where is the industry in its life cycle?
- Who are the customers, and how are they segmented?
- What role does technology play in the industry, and how quickly will it change?
7
Q
Are we able to compete? (Could) (9)
A
- Who are the competitors, and what size market share do they have?
- How do they respond to our entry?
- How do their products differ from ours?
- How will we price our products or services?
- Are substitutions available?
- Are there barriers to entry?
- Are there barriers to an exit?
- How do we exit if this market sours?
- What are the risks?
8
Q
How should we enter the market? (4)
A
- Start from scratch and grow organically
- Acquire an existing player from within the industry
- Form a joint venture/strategic alliance with another player with a similar interest
- Outsourcing. Let someone else produce, but market and distribute the product itself.
9
Q
What is the alternative to entering the market? (1)
A
- Consider other markets
10
Q
Two most important factors of mergers
A
- Does it increase shareholder value?
2. Do the 2 cultures mesh well?
11
Q
What to ask if the buyer of the M&A is a private equity? (3)
A
- Why does the PE firm want to buy the company?
- What else does it own?
- What does it plan to do with it?
12
Q
What to ask if the buyer of the M&A is a company? (3)
A
- Why does it want to buy the company?
- What other products do they sell?
- What are the synergies involved?
13
Q
Reasons to purchase (9)
A
- Increase market access, boost the brand, and increase market share
- Diversify the company’s holdings
- Pre-empt the competition from acquiring the company
- Target company is threat
- Inherit management talent
- Obtain patents or licenses or products
- Gain from synergies, cost savings, cultural integration, expansion of distribution channels and customer base, cross-sell products
- Gain tax advantages
- Increase shareholder value
14
Q
Due diligence (9)
A
- What kind of shape is the target company in?
- How secure are its markets, customers, and suppliers
- What are the margins like?
- How is the industry doing overall? Compare to the company
- How will competitors respond?
- Are there any legal reasons that we cannot or should not acquire the company
- Are there technology risks?
- How much will it cost? Will the client overpay?
- Does the buyer have enough cash or access to capital markets?
15
Q
What kind of shape is the target company in? (7)
A
- How is the management performing?
- How are products performing?
- What is the profitability?
- What is the brand value?
- What is the stand alone value?
- What has been the growth rate?
- Why is it in the market?
