You have finished the analysis on a market entry case and the CEO walks in. What is your recommendation?

My recommendation is that we enter the Mexican market. We should do it through a local distribution partner. I'd start next year, and I wouldn't open our own stores. There are three reasons. First, the market is big and growing. It's worth about $2 billion a year and growing 8%. Second, we can compete there. Our prices are competitive and customers seem to like the product. Third, the financials look good. With a partner we'd invest about $20 million and break even in year three. There are some risks. The main one is that we'd depend on a partner for sales and service. We'd need to choose that partner carefully. The second is the peso, since we'd import the products. For next steps, I'd start talking to potential partners and plan a pilot before we commit the full investment.

My recommendation is that we enter the Mexican market. We should do it through a local distribution partner. I'd start next year, and I wouldn't open our own stores. There are three reasons. First, the market is big and growing. It's worth about $2 billion a year and growing 8%. That's four times the 2% we see at home. Second, we can compete there. Our mid-range appliances would sell about 15% below the two leading brands, and 60% of the buyers we surveyed said they'd consider us. Third, the financials look good. With a partner we'd invest about $20 million and break even in year three. A 5% share of today's market is $100 million in sales, and at our usual margin that's about $12 million in profit a year. There are some risks. The main one is that we'd depend on a partner for sales and service. I'd manage that with a three-year contract, sales targets and an option to buy them out. The second is the peso, since we'd import the products. A weaker peso cuts our margin, so I'd build a cushion into prices. For next steps, I'd shortlist three partners in the next month and run a pilot in Mexico City and Monterrey with our ten best-selling products. Then I'd come back to you in six months with real sales numbers, before we commit the full $20 million.