Market Entry Case Interviews: Should the Client Enter?

What is a market entry case?

A market entry case asks whether a client should enter a new market, and if so, how. The new market can be a country, a customer segment or an adjacent product category. The case tests whether you can weigh opportunity against capability and turn the result into a numerical go or no-go.

Official firm cases use the format often. McKinsey's sample cases include Electro-Light, a reduced-sugar electrolyte drink launch, and Talbot Trucks, where a European truck maker considers electric trucks. Bain's Coffee Shop Co. asks whether opening a coffee shop makes sense. Our case interview questions page lists more prompts by type.

The four questions every entry decision must answer

Any entry decision reduces to four questions. Asked in this order, they form a MECE structure that works for a bakery or a bank.

1. Is the market attractive? Size, growth, profitability and competitive intensity.
2. Can the client win there? Customer needs, the client's capabilities and any advantage it brings over incumbents.
3. Do the economics work? Upfront investment, contribution per customer, fixed costs, breakeven and payback against the client's hurdle.
4. What could go wrong? Competitor reaction, regulation, execution and cannibalization of the existing business.

Questions 1 and 2 decide whether the opportunity is real for this client. Question 3 decides whether it pays. Question 4 decides how confident the recommendation can be. Bain says it looks at how candidates structure and build on ideas, so tailor each branch to the client before you present it. Our MECE guide explains how to keep branches from overlapping.

Why most expansions fail

Base rates are against the client. Chris Zook of Bain estimated in Harvard Business Review (2015) that only about one in four adjacency initiatives succeeds. Bain's earlier research on nearly 200 companies put the odds for major adjacency moves at about 20%, and the odds fell the further a move sat from the core business.

That gives a strong candidate a sharp opening question: what makes this client the exception? Ask which capability, customer relationship or cost advantage travels to the new market. If the answer is none, the case leans toward no-go before any math.

Entry modes: build, partner, acquire

The mode of entry often decides whether the economics clear the hurdle.

Test at least two modes with numbers. Interviewers often build the case so that the obvious mode fails and a second one works.

Worked example: a Dutch meal-kit company entering Germany

Prompt (fictional): Kookbox sells weekly meal kits to 150,000 Dutch households. It wants to enter Germany, starting with North Rhine-Westphalia. The board requires payback within five years and wants a go or no-go.

Issue tree:

• Should Kookbox enter North Rhine-Westphalia?
  • Market attractiveness
    • Addressable urban households and meal-kit penetration
    • Growth and price levels
    • Competition, including a large German incumbent
  • Ability to win
    • Recipe and sourcing capabilities that transfer
    • German-language recipes, customer service and brand
    • Payment habits (iDEAL is a Dutch habit; German shoppers expect other methods)
  • Economics
    • Customers and orders per year
    • Contribution per order
    • Fixed costs and upfront investment, by entry mode
  • Risks
    • Incumbent price response
    • Packaging and food-labeling compliance
    • Distraction from the Dutch business

Data from the interviewer: the addressable market is 4.0M urban households. Kookbox expects 5,000 active customers in year 1, 12,000 in year 2 and 20,000 from year 3 (0.5% penetration). Each customer orders 25 times a year.

Year-by-year profit:

Payback:

• Option A: cumulative cash after year 2 is -8.0 - 3.6 - 1.0 = -€12.6M. At €2.0M a year from year 3, recovery takes 12.6 / 2.0 = 6.3 more years, so payback lands in year 9. That fails the five-year hurdle.
• Option B: cumulative cash is -2.0 - 1.0 = -€3.0M after year 1 and -3.0 + 1.1 = -€1.9M after year 2. Year 3 adds €3.5M, so payback arrives about halfway through year 3 (1.9 / 3.5 = 0.54).

Recommendation: "Enter North Rhine-Westphalia through a logistics partner. The partner model breaks even at about 8,300 customers, half the organic model's threshold, and pays back in under three years against the board's five. The main risk is the incumbent cutting prices, so I would cap year-1 marketing and review penetration after 12 months. Building an own hub becomes worth testing once volume passes 15,000 customers."

Breakeven and payback math for entry cases

Two formulas cover most entry economics:

1. Breakeven volume = annual fixed costs / contribution per unit (or per customer).
2. Simple payback = upfront investment / annual profit, adjusted for a ramp-up as in the example above.

Interviewers accept round numbers. Keep units consistent (customers per year, euros per order) and say each step aloud. Our case interview math guide has drills for the division and percentage work these formulas need. For estimating the customer base in the first place, the same top-down logic used in the McKinsey case interview market-sizing questions applies.

Stephan's note: The most persuasive sentence in an entry case puts the breakeven number next to a realistic penetration rate. It turns a long discussion into a decision the interviewer can test.

Five market entry prompts to practice

1. A Danish wind-turbine service firm considers entering Poland. Hint: check which capabilities travel and who owns the turbines.
2. A Spanish fashion retailer plans its first Dutch stores. Hint: compare store rent and sales per square meter with online-only entry.
3. A Belgian chocolate maker considers selling in Japan through department stores. Hint: price positioning and gifting seasons drive volume.
4. A French insurer wants to sell pet insurance in Germany. Hint: estimate insured pets, then claims cost per policy.
5. A Dutch e-bike brand considers entering the UK. Hint: price per bike against local subsidies and dealer margins.

Cracking the Case covers three business-case frameworks and three fully worked candidate cases, a useful next step once you can run the four questions above without notes.