Basic, lesson 1 of 3
Is the market worth entering?
A big market is not the same as an attractive one. Size, growth, profit pool, and structure each answer a different part of the question.
8 min, 3 checks
1Four tests
| Test | Question | Data to ask for |
|---|---|---|
| Size | Is it big enough to matter to this client? | Revenue or units today |
| Growth | Is it getting bigger, and why? | Growth rate and its drivers |
| Profit pool | Do players make money? | Margins of current competitors |
| Structure | How hard is it to get in and stay in? | Share of the top players, barriers, buyer and supplier power |
A $200M market growing 20% with 25% margins can beat a $5B market growing 1% where everyone earns 3%. Say which of the four tests decides it for this client.
Check 1
A market grew from $625M to $900M over two years. What is the annual growth rate, in percent?
2Reading structure
Concentration tells you who you would fight. If the top three hold 70% of the market, entry means taking share from large, defended players. If no one holds more than 5%, entry is easier but scale advantages are probably small.
Check 2
The top three competitors hold 30%, 25%, and 15% of a market. What share do they hold together, in percent?
Check 3
Which market is most attractive for a mid sized entrant with no brand?
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