01 · Recognize
Market entry
Should we enter this market, and how?
You are in this case when
- A new country, city, segment or channel is on the table.
- The client has a product and wants to know whether the market wants it.
02 · Structure
Which drivers matter?
- 01
Attractiveness
Who needs this?Size reachable demand; assess competition, substitutes and barriers.
- 02
Economics
Can it pay back?Estimate contribution, entry costs and the ramp-up period.
- 03
Ability to win
Why us, how now?Test differentiation, distribution and entry mode: build, partner, license or acquire.
Break-even units = fixed costs ÷ (price − variable cost per unit)
03 · Solve
Work the scratch sheet.
Illustrative practice scenarioA retailer considers a new city. Annual fixed operating costs would be $300,000. Each order brings $50 of revenue and $30 of variable cost.
- Contribution per order$50 − $30 = $20
- Break-even orders$300,000 ÷ $20 = 15,000 orders a year
- Reachable demand test15,000 orders ÷ 365 trading days ≈ 41.1 a day on average: at least 42 whole orders daily. Can reachable demand support that?
The store needs 15,000 orders a year to cover its operating costs. Upfront investment still needs a separate return test, and ramp-up losses count.
Work backward from an answer
To compare a partner with an owned store, estimate both at the same sales volume. Subtract partner fees and retained costs, then compare upfront capital, launch timing and control. A partner may also change reachable demand.
04 · Recommend
Make the call in three buckets.
Pilot first. At 365 trading days, at least 42 orders a day cover annual operating costs; investment returns still need testing.
Break-even is 15,000 orders a year; the reachable customer base decides, not the market’s headline size.
Validate daily demand with one pilot location; price the upfront investment separately. Risk: ramp-up losses and a local incumbent’s response.
“I would test market demand, entry economics and our ability to win, starting with reachable customers.”
Watch for: A large market is not reachable demand. Keep ramp-up losses and initial capital separate from the operating break-even.
Special sauce
Bring a real company into the room.
For a seasonal retailer, when would renting capacity cost less than owning it? Calculate the utilization rate at which the two total-cost curves intersect.
Read the story →pricing · Membership retailCostcoIf Costco added 1,000 SKUs, what incremental sales would cover the extra inventory and handling costs? Start with sales per SKU, gross margin and inventory days; then test whether customers switch from existing products.
Read the story →Three terms to use
- Serviceable available market (SAM)
- Annual demand from customers the proposed offer and distribution can serve. Specify the geography, customer segment, product and units.
Apply in a case
Size reachable demand. If 10,000 eligible households in the delivery area each buy four $50 orders a year, SAM is $2m a year. A 10% obtainable share means 4,000 orders, below the 15,000-order break-even. Test that share; do not assume it.
- Barriers to entry
- Obstacles that make entry costly, slow or difficult. Identify the mechanism: a required license, exclusive distribution or a customer’s cost of switching.
Apply in a case
Test feasibility before forecasting sales. If a permit takes 12 months, revenue cannot start immediately. Ask about approval timing, fees and costs incurred while waiting; include those costs in the entry cash-flow forecast.
- Entry mode
- The ownership and operating arrangement used to enter: build your own business, partner, license your offer or acquire an existing operator.
Apply in a case
Compare like-for-like economics. A partner charging $5 per order reduces contribution from $20 to $15. If it removes $100,000 of annual fixed costs, break-even becomes $200,000 ÷ $15 ≈ 13,334 orders. Compare demand, control and upfront capital too.
Original Harper practice examples; every figure is illustrative. Adapt the questions to the client’s objective, timing and constraints.